CSR spending may become mandatory for large companies

The government may soon make it mandatory for the larger companies to invest 2 per cent of their net profit in corporate social responsibility (CSR) activities.

The ministry of corporate affairs plans to incorporate this proviso in the new companies bill, an official announcement on Friday said. The petroleum and natural gas ministry has already made this mandatory for state-run oil companies such as ONGC, IOC, BPCL and HPCL.

The new provisions may apply to companies having a net worth over Rs500 crore, or a turnover over Rs1,000 crore, or a net profit of over Rs5 crore in a year. While the idea to mandate a minimum spending on CSR front is still being debated, what appears certain is that companies will have to make specific disclosures of their social spends in their annual report.

The proposal of the ministry is tabled in the Parliamentary Standing Committee. It will be debated threadbare as private companies have opposed the idea of any mandatory social spending limit. They want the contribution to remain voluntary.

The ministry's statement comes after the standing committee on finance, chaired by BJP leader Yashwant Sinha, presented its report on the new companies bill in the Lok Sabha. The revised bill is expected to be presented in parliament for passage in its winter session.

''Every year at least 2 per cent of its (companies') average net profits during the three immediately preceding financial years shall be spent on CSR activities,'' the ministry said in an statement.