An Explorative Study on Mandatory CSR Spending with Reference to Section 135 of Companies Act, 2013

Abstract

This paper tries to explore the present status of CSR spending mandated by section 135 of the Companies Act, 2013 by NSE Nifty 200 companies by using simple percentage analysis. It is found that most of the selected companies are adhering to the CSR policy of allocating 2% of their average three years’ pretax profits. Overall an average of Rs. 6054.02 that is (1.86%) out of 2% limit has been spent; whereas, remaining Rs.1023.93 (0.31%) is kept unspent. Some companies like GAIL India Ltd. even spend more than 2% of their Average pretax profits and some companies had CSR amount unspent. The state wise classification, of CSR activities, showed most of the companies concentrated their CSR activities only on few developed States like Maharashtra, Tamil Nadu etc. showing region wise disparity in the implementation of CSR activities. Industry wise, analysis of CSR activities showed that electricity and manufacturing industries spent more than the actual CSR expenditure to be incurred. Whereas, other industries like financial service, mining, constructions and real estate, services (other than financial) left part of their CSR amount unspent. Manufacturing industries tops the contribution on a broad set of issues like education, health care and sanitization, sustainable livelihood, social causes and others. Out of NSE 200 companies, Reliance Industries Ltd. tops the list with highest CSR spending. Reliance Industries Ltd. had allocated had allocated 0.34% and 84% more than the two percent of CSR expenditure to be incurred as per the Companies Act, 2013. The study tries to put forward the need for the compulsory spending of the allocated CSR amount and also the proportionate distribution of CSR amount and activities among all states and union territories without sticking to the local areas where they operate. The paper suggests policy changes and amendment to the section 135 of the Companies Act in order to promote balanced regional growth and development throughout Indian States and Union territories.