Shama Karkal

Will Health Benefit From India’s New CSR Rules?: Impact of the new law, which kicks in April 1, still being debated

There has been a buzz in the past few months about funds that will be available starting next fiscal year through India’s corporate social responsibility (CSR) programs. There has been so much talk that I’ve been curious about what is realistically possible.

To understand what is in store, I’ve been a part of two different meetings on CSR. I was fortunate to be able to hear Bhaskar Chatterjee speaking at a session in New Delhi in September. Chatterjee is the director general and CEO of the Indian Institute of Corporate Affairs (IICA), within the Ministry of Corporate Affairs, and reviewed the key aspects of Clause 135 in Companies Act 2013, with regard to corporate social responsibility.

Following are the answers I found to some key questions:

Which companies must now contribute to CSR causes?

The reporting requirement on CSR spending comes into effect starting April 1. The requirement pertains to companies which have a net worth of 500 crore rupees (about US $80 million), turnover of 1,000 crore rupees, or a net profit of 5 crore rupees or more (about $800,000). Companies that meet any of these criteria will need to ensure that they set up a three-member CSR committee. The details of this committee would need to be on the company’s and the Ministry of Corporate Affairs’ websites – with individual members identified by name. The CSR committee would be responsible for monitoring the activities identified on the CSR policy of the company, including the amount spent. Not only are committees required to ensure that activities identified take place, the individual members are liable for them.

How are companies exchanging best CSR practices?

The IICA is developing a database of CSR good practices, which would facilitate cross-learning among organizations. In addition, they are launching a nine-month certificate program to train professionals on CSR. The IICA is also considering empanelment of nonprofit organizations to facilitate connection with the CSR committees of different companies. The Tata Institute of Social Sciences currently manages the national CSR hub for public sector companies. IICA is also in the process of creating a CSR index, which tracks companies on the Bombay Stock Exchange based on their CSR practices.

How much money will the law generate for the social sector?

As the new fiscal year in India is just a few months away, the buzz around CSR spending by companies is getting louder. It is estimated that as a result of Clause 135 (Chapter 9) in the Companies Act, which suggests that 2 percent of the company’s average net profit of the previous three financial years be used for CSR activities, approximately 18,000 to 25,000 crore rupees could become available to the social development sector (about $3 billion to $4 billion U.S.).

“Social business projects” is one type of activity that is suggested under this clause and bodes well for social entrepreneurs and anyone wanting to innovate in trying to reach people at the bottom of the pyramid. Obviously, availability and accessibility of the money are not the same. The proposed draft CSR rules per Clause 135 were open for public comment and the final set are yet to be unveiled, so there is still debate on what the implementation of this clause will involve and what impact there is likely to be.

However, my interactions with some CSR representatives as well as organizations working as CSR facilitators leads me to believe that there is an appetite for developing models that have the potential to scale and create impact. There is growing recognition among corporates that unless we address current health challenges, the demands of the future will make business difficult. This is what excites me as we look not only toward innovations to address the complex development challenges we face in India, but also grapple with how to take innovations to scale for greatest impact.

Shama Karkal leads the Center for Health Market Innovations team at Swasti.

Editor’s note: This blog also appears on the Center for Health Market Innovations website. Read more about the new rules in this Forbes India article.

Health Care
corporate social responsibility, governance, public health, public-private partnerships, scale