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India to set up corporate affairs institute

The institute will look at various aspects of corporate affairs, including CSR. It would not be a watch dog but an autonomous think tank with representation from various institutions.

New Delhi: The Government of India is planning to set up a national level institute on will corporate affairs that would look into the various aspects of corporate affairs, including corporate social responsibility (CSR).

Announcing this at the 2nd Confederation of Indian Industry (CII) CSR National Summit in New Delhi, India's Ministry of Corporate Affairs Secretary Anurag Goel said that the industry could partner with government in social issues and provide effective delivery systems.

He stressed that the proposed Indian Institute of Corporate Affairs (IICA) would not be a watch dog but an autonomous think tank with representation from government, corporates, institutions and organisations.

"CSR should be a part of every boardroom strategy and there should be a mechanism for effective, long term, sustainable partnership between industry and the government to take corporate social responsibility (CSR) forward," Goel said.

CSR is an effective business tool that provides returns in the long-term to both civil society and the industry, according to a panel of business and government leaders at the summit which was organised by CII in partnership with the Ministry of Corporate Affairs and the National Foundation for Corporate Governance (NFCG).

The panel discussed a range of issues from the need to bridge the gap between corporate governance and CSR, the ways to make CSR activities more accountable as well as more effective, to better delivery systems, the need to update the laws relating to these issues, and the types of partnerships involving different stakeholders in such activities.

"CSR is far bigger than just giving back to society. It is a tool for companies to understand the needs of the customer, to stay ahead of society's way of thinking," GE India President and CEO Tejpreet Chopra said.

Chopra added that CSR attracts good people who understand the values of the company and so helps build leadership for the future.

Steel Authority of India Chairman Sushil Kumar Roongta said that CSR focus should be on investment, not with an eye on returns—although returns will certainly be there in the long term.

"To ensure that CSR is effective, one should ensure that the employees see the benefit of it. It is not just a tax incentive activity," he added.

Partners Change Chief Executive Viraf M Mehta felt that the NGOs Act, dating back to the 1800s, and the Companies Act of 1956 should be amended to meet contemporary needs, so that company-based foundations can be distinguished from civil society NGOs, whose roles differ.

Pointing out that while India had very good laws, the shortcomings were in implementation and quality of regulation, he called for the need of a bridge between corporate governance and stakeholders and others that are covered by the CSR domain.

There is a need for civil society and consumers to get adequate representation in any institutions addressing such issues. Indian companies should start having global CSR strategies, he said.

The biggest challenge, according to Taylor Rubber Managing Director TT Ashok, is changing the mindset of smaller companies and convincing them that CSR is a business tool that even small and medium industries (SMEs) can benefit from it.

He also called upon companies not to focus on the same areas of CSR activities, thereby avoiding duplication of effort and a waste of resources.

"To keep a percentage of net distributable profit for CSR is an insufficient response; corporates must take more responsibility and work towards successful partnerships with government, NGOs and civil society," CNBC India Associate Editor Shereen Bhan said.
—iGovernment Bureau

It will be good if the Corporate Affairs Institute is set up by the Government as early as possible. To make CSR activities more effective a few steps should be taken immediately.

First: The Audit Report Proforma in the case of a company should be modified so that it can indicate the total amount spent by a company during the year on projects related to CSR activities of the Company.

Second: Every company should be asked to spend at least 2% of its net income after tax on the CSR activities every year.

Third: Every company should be asked to set up a Foundation or Trust to develop villages where the directors, CEOs,CFO,COO were born.

Fourth: If a company does not spend money on CSR activities or does not transfer 2% of its net income to the Trust or Foundation then tax exemption granted to the company under the Income-tax Act should not be allowed.

Fifth: Instead of heavily depending upon the corporate world, the government should take the cooperation of traders, businessmen, salary earners who are doing more constructive work to uplift the poor than our corporates under CSR activities. To encourage the non corporate world it is suggested that under the Income-tax Act "any expenditure incurred by a person to develop a village where one was born or to solve any problem of his or her ancestral village be allowed as deduction while computing income liable to tax".

Sixth: Every company should also indicate the amount spent on CSR activities during the year while publishing the annual financial results in the newspapers through advertisement.

Seventh: Data should be collected from companies through the Registrar of companies about the name and address ofthe company and the amount spent during the year on CSR activities just to have a small idea about the number of companies which are involved in the CSR activities.
S.C. Aggarwal
Founder, Poverty Trust
K-101, Sarita Vihar
New Delhi 110 076
Phone No. 2994 2933

Hope this does not turn out to be like another Government law enforcing machinery eventually opening new channels to corruption.

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