According to Section 135 of the Companies Act, 2013, both private and public limited companies (with either net worth of Rs. 500 cr., or a turnover of Rs. 1000 cr. or net profit of Rs. 5 cr.) must spend 2% of its average net profit for the immediately preceding three financial years on Corporate Social Responsibility (CSR) activities. It is primarily a legal obligation and with the proposed amendments, a penalised Act that includes fine, imprisonment or both.
As mentioned in the ‘Audit Report for the year ended in 31 March 2018’ by the Comptroller & Auditor General (CAG), the observations are :
•There is no record that industrial units ever submitted the annual reports of CSR activities to the Commerce & Industries Department (C&ID).
•There were no records of C&ID monitoring or supervising CSR activities carried by any industrial unit.
•C&ID has also not assigned any specific responsibilities to any officer/official for the supervision, review of CSR activities undertaken in the state.
From setting up a department to look after the environmental and social duties that they owe to the state, to even submitting data reporting the annual turnover, net worth and net profit, there is gross negligence by both companies and the C&ID that is supposed to monitor and review the CSR activities supposed to be undertaken by the former.
It must be mentioned that Sikkim has 15 industrial units with net profit above 5 cr. (2014-2018), all pharma companies and with the number of natural resources being used by the industries, the duties of these units is to return the favour. Non-compliance by these industrial units goes to suggest underlying incompetence, if not a shameful case of selective ignorance.
Rs. 211.57 cr. is the total sum of CSR funds from 2014-2018 that is owed by the 15 companies for assistance in developing many sectors of the society and environment, but only Rs. 35.06 cr. has been utilized.
In response to the CAG’s report, the C&ID has informed that details of CSR activities from these units are being collected and meetings were being conducted to discuss the need to fulfil legal responsibilities such as the CSR.
It becomes easy for companies to colonize on lands while not giving much thought to what their responsibility towards the affected communities are when the department created to look after CSR activities themselves are non-functional.
The funds being denied to the state by these companies could go to helping children in government schools, buying medical equipment or ambulances, contributing to the protection of biodiversity or by the simple act of community service. There are more creative ways to utilize these funds if need be, but no action has been taken yet.
The recent amendments proposed that any unspent annual CSR funds should be transferred to a specified govt. Fund within six months of the financial year and if in case there are ongoing CSR projects, these businesses have three years to utilise the funds allocated in a given year. Additionally, the government will clear all the dues of small businesses, where there are disputes.
The only question that remains now is whether this evasion will continue even after the public has found out the irresponsible conduct of these pharma companies?