CORPORATE SOCIAL RESPONSIBILITY IN CENTRAL PUBLIC SECTOR ENTERPRISES OF INDIA

1. Academic Associates– IIM Ahmedabad
KALPESHKUMAR GUPTA
RACHNA ARORA
INTERNATIONAL
CONFERENCE ON
COPORATE GOVERNANCE
MARCH 14-15, 2014

2. Outline of the presentation :-
1.Introduction
2.Objectives of the study
3.Research Methodology
4.Findings
5.Managerial Implications
6.Research limitation
7.Scope of future study
8.Q & A

4. • CSR is concerned with treating the internal and external
stakeholders of the firm ethically or in a socially responsible
manner and the wider aim of corporate social responsibility
is to create higher and higher standards of living, while
preserving the profitability of the corporation, for its
stakeholders (Hopkins 2003).
• Stakeholders include employees, investors, shareholders,
customers, business partners, clients, civil society groups,
Government and non-government organisations, local
communities, environment and society at large.

6. Objectives of Study :-
To study the existing Corporate Social Responsibility
practices in Public Sector Enterprises of India.

8. Type of paper :-
Descriptive Paper
Companies chosen for study :-
Maharatna Companies
1. Bharat Heavy Electricals Limited
2. Oil & Natural Gas Commission
3. Steel Authority of India Ltd.
4. National Thermal Power Corporation
Navratna Companies
1. Oil India Ltd.
2. Rashtriya Ispat Nigam Limited
3. Power Grid Corporation of India

9. Maharatna
- Three years with an annual net profit of over Rs. 5000 crore
- Average annual Net worth of Rs. 15,000 crore for 3 years
Navratna
A score of 60 (out of 100), based on six parameters which include
net profit, net worth, total manpower cost, total cost of
production, cost of services, PBDIT (Profit Before
Depreciation, Interest and Taxes), capital employed, etc.
A company must first be a Miniratna and have 4 independent
directors on its board before it can be made a Navratna.
Miniratna Category-I
Have made profits continuously for the last three years or earned
a net profit of Rs. 30 crore or more in one of the three years.
Miniratna Category-II
Have made profits for the last three years continuously and
should have a positive net worth.

11. CSR in Public Sectors Enterprises
CPSEs are governed by guidelines issued by Department
of Public Enterprise.
New Guidelines on CSR and Sustainability for CPSEs came
into effect on April 1, 2013.
According to the new guidelines, a company is now
expected to disclose even its most routine business
activities and operations, and CPSEs are asked to
formulate their policies with a balanced emphasis
on all aspects of CSR and sustainability – both
internally and externally.
While the earlier guidelines focused mainly on CSR
activities for external stakeholders, the revised
guidelines take internal stakeholders, particularly
employees, into account in a much more serious way. To
fortify and sustain this trend, sustainability
reporting has been made mandatory for all public
sector enterprises in India.

12. Driven by DPE Guidelines issued on
9-4-2010

13. Section 135 of Companies Act
2013
The new legislation requires certain class of companies
to spend at least 2% of their three-year average
annual net profit towards CSR activities.

14. Source : - Krishnakant & M, Saraswathy (2013)

15. CSR
• Listed companies would be liable to spend Rs 8,100 crore in all on
corporate social responsibility (CSR) for 2012-13, with the new
Companies Act making it mandatory for them to earmark two per
cent of their net profit (the average of the past three years) on
such activities.
• For FY14, the first full year of the law‟s implementation, the spend
could go up to nearly Rs 8,700 crore, given that India Inc‟s
profitability has grown at a compounded 7.5 per cent annually in
the past three years.
• With the implementation of this law, Oil and Natural Gas
Corporation will be India‟s biggest spender on CSR, contributing
nearly Rs 500 crore, based on the past three years‟ numbers. It
will be followed by energy and petrochem giant Reliance
Industries, which will have to fund CSR projects worth Rs 400
crore to meet the guidelines.

17. CSR
• There are various parameters to assess the performance of CPSEs
in terms of corporate governance. The government evaluates
their performance on a scale of 1 to 100. Higher score
translates into better compliance with corporate
governance. If any CPSE fails to submit the self-evaluation
or compliance report by the cut-off date, it is graded and
considered as equivalent to ‘Poor‟. During FY12, out of the
total 248 CPSEs, 78 CPSEs (31.5%) received „Excellent‟ score
compared with 61 CPSEs in FY11, as they complied well with the
corporate governance guidelines.

19. CSR IN MAHARATNA &
NAVRATNA COMPANIES

20. CSR in Maharatna & Navratna
Companies
• Adoption of Villages
• Free Medical Camps 7 health care
• Construction of Roads
• School for the underprivileged& Handicapped Children
• Ban on child Labor
• Diaster aid
• Employment generation
• Pollution Checking Camps
• Irrigation using treated Sewage
• Plantation of trees
• Conservation of Natural Resources
• Entrepreneurship schemes
• Women‟s empowerment,Girl Child Development
• Sponsership of Seminars,Conference,Workshops

21. CSR in Maharatna & Navratna
Companies
• Promoting Sports
• Providing drinking water access
• Women Literacy Programmes
• Assistance in Mid day meal Programme,etc

22. Awards
• PSE Excellence Award in 2013-won by SAIL
• Golden Peacock Award in 2013 –won by ONGC
• Golden Peacock Award in 2012 –won by NTPC
• Golden Peacock Award in 2010 –won by BHEL
• Greentech CSR Award 2012-won by NTPC
• Greentech CSR Award 2011-won by PGCI

23. • PSUs are facing numerous challenges and limitations while
implementing CSR programs. They largely relate to the
organizational level issues such as absence of a dedicated CSR
team, active involvement of key stakeholders, budgetary
issues and identifying apt CSR projects and their
beneficiaries. Survey findings revealed that identifying
appropriate CSR projects as the top-most challenge of the
PSUs.
• Around 28% of the companies surveyed, feel that identifying
appropriate social projects and their beneficiaries is their biggest
concern. This was followed by lack of active involvement of all
stakeholders and beneficiaries as the other major challenge. Data
has already shown that Maharatna and Navratna public sector
undertakings (PSUs) have not been able to fully spend their CSR
budget.

24. • Data released by the ministry of Heavy Industries & Public
Enterprises show that the 5 Maharatnas - ONGC, Coal India,
IOC, NTPC and SAIL - managed to spend just 49% of the
combined budget for three years beginning 2009-10. The
spending budget for most PSUs is updated till end September
2011. The combined spending of the Navratnas was higher at
65%. But at least five of these 21 PSUs managed to spend less
than 25% of the CSR budget of the three years.
• Coal India spent only 27% of the budget, according to
information released. National Aluminum Ltd (NALCo) was
the only one that managed to fully spend its Rs 31.55 crore
budget. ONGC spent 49% of the budget in the three years.
Whereas Coal India, its performance in the third year was
disappointing. It spent only 6% of the budget till
September 2011. Indian Oil Corporation spent 85% of the Rs
264.4 crore it set aside and SAIL 72% of the Rs 179.68 crore.
(Tina Edwin, 2012)

26. • PSUs are not taking much CSR initiatives as they don‟t see any
support from the governments. Some kind of financial incentives
should be given to PSUs so that they can feel motivated and
undertake more and more CSR activities. Around 60% of the
surveyed PSUs feel some kind of recognition such as receiving an
award would push the level of their CSR activities. Further, about
19% of the surveyed PSUs feel CSR expenditure should be liable
for a tax deduction, which would act as a major incentive for
carrying out CSR projects.

28. Present research paper will help corporate to make a
comprehensive business strategy considering important
aspects of Corporate Social Responsibility.
Earlier CSR was voluntary act but now it‟s an obligation for
them. For sound Corporate Governance, CSR has become
salient part of it.
Government can make some robust policies as taken in
other countries. In nutshell we can say that we need
collective efforts for fulfilling obligation of CSR.
Companies will have to constitute a CSR committee of the
board of directors, consisting of three or more, of
which at least one director shall be independent.

30. Study is based on secondary data available
from various sources.

32. New Companies Act, 2013 mandated CSR as an
obligation under Section 135 now.
One can study the CSR in India before this new
law and after its implementation and how it will
affect the companies which are already involved
in CSR activity and on those companies which
are doing nothing about CSR or doing at minimal
level? These thoughts can be served as the basis
for future research on the related topics.

33. References :-
References
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34. References :-
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Cont..

35. Cont..
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Cont..

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Cont..

37. Kalpeshkumar Gupta
Rachna Arora
(c) K L Gupta