CSR Funds — Creating Impact

I recently visited Asarganj Panchayat of Munger district in Bihar, for an impact assessment study of the project “Renovation of Traditional Ahar-Pyne system”. The project was initiated by a MNC under its CSR wing. The duration of the project was from 2014 to 2017. Ahar Pyne is a traditional water harvesting and irrigation system which channels river water to multiple reservoirs, placed at strategic location and connected by streams called Pynes (Ministry of Environment and Forests& Climate Change, 2017). The project was implemented by an NGO, working for more than 15 years in the region.

Our team met and surveyed about 400 farmers from the treatment group and about 120 farmers from the control group. There were significant benefits to the farmers in form of increased water availability during Rabi season. Due to timely sowing and use of hybrid seeds they were able to increase the production of paddy and wheat to 30% from the 2014 levels.

As part of the project guidelines, we need to do the assessment within the framework of the project. However, there are many significant findings beyond the framework of the project. During the focussed group discussions, when beneficiary’s fields were mapped on chart, we saw that those farmers whose fields were closer to the Ahar, only participated in the program. The person whose fields were away did not participate and hence did not get benefit. As per definition of system, if Pyne would have been connected they could also have been benefitted, but it did not happen. There was a bigger underlying issue. The caste dynamics which is still deep rooted in this part of the country was either not understood or ignored in the design aspects. The Harijan tola (community) is the one that usually cultivate in these faraway lands and thus by default they became a part of control group.

The caste dynamics should have been an important part of the design, but it was not there. The NGO has definitely done a great job with the existing works undertaken, but the NGO and the MNC did ignore the caste aspect and kept the treatment population to a limited region. May be it was to show quick and easy results which might be beneficial to the MNC’s reputation. Since the program implementing NGO’s get funds from the MNC’s, usually there is not much flexibility for them in the program design.

There is an underlying principle agent issue arising within the CSR projects. CSR activities are now day’s public relations (PR) activities for the companies. There are awards ceremonies held by private organizations and Ministries. Ministry of Corporate Affairs gives National CSR awards (Minsitry of Corporate Affairs, 2017). This is a good way to encourage them, but there should be proper assessment and accountability criteria defined, so that they can be measured on these aspects. This is currently missing in the CSR Act. One issue for the MNC’s is that many don’t have resources to delve into CSR works and may end up taking an easier route by spending in quickest and easiest possible way

As per the Ministry of Corporate Affairs data, in 2015–16 a total of Rs 9822 crores was the CSR spending of Indian companies (Ministry of Corporate Affairs, 2015–16) . In last 4 years, CSR spending in India has crossed Rs 50,000 crores (M Allirajan, 2019) which is almost equivalent to 2018–19 NREGA’s budget. This is a huge budget which can create an impact if handled and assessed correctly.

Currently, the corporates can choose the geography and domain where they want to spend their CSR funds. Instead of each individual firm taking up CSR activity, we can give option to pool this into a national level fund managed by a core group. This group can have representatives from corporates as well as development and social sector professionals. Criteria can be specified to have representations from different geographies and sectors. In this way the PR activities can also be reduced as it can’t be pointed whose funds were utilized where. Actual impact works can be done by implementing agencies when not bound by MNC’s. Anu Agha, ex-Chairperson of Thermax (N. Rana & U. Majmudar, 2017) and many corporate leader and pushing this idea forward.

Corporates can focus on their main business and let the CSR core group use the CSR funds with proper accountability to the firms investing. A part of this pooled fund can be taken for assessment of the activities as currently CSR policy does not have that aspect. This will bring accountability for the fund managers and will help in utilizing the CSR potential.

As on today 01/08/2019, new amendments to the companies Act 2019 is passed which makes penal provision for not spending on CSR activities. In 2018, Rs 1717 crore was the unspent amount out of total CSR funds of Rs 10030 crores (Times of India, 2018). The government has planned on getting the unspent 17%, however we lost focus on how better the other 83% could be utilized. I think this will not give any impetus to the act. Rather corporates will find quicker way to show usage of the funds to government. The good part is that, they are developing a National CSR fund. However, I feel that it should be managed via autonomous body under the purview of CAG rather than Ministry taking control over the funds. Just to give an example: National Health Mission (NHM) funds unspent by states as on 2018 increased by 29% (Prachi Salve, 2018) even though the public health infrastructure is in dire needs of funds. Same is the case with many departments. When this is the case, the fund utilization structure can be like that of World Bank or Asian development bank, wherein they undertake fund allocation for developmental works with accountability structures intact in their programs. In my opinion this should be the model for fund management for the CSR organizations.

References

M Allirajan. (2019, Feb 28th). The Times of India. Retrieved from https://timesofindia.indiatimes.com: https://timesofindia.indiatimes.com/business/india-business/csr-spend-crosses-rs-50000-crore-in-four-years/articleshow/68202123.cms

Ministry of Corporate Affairs. (2015–16). Ministry of Corporate Affairs, Government of India. Retrieved from http://www.mca.gov.in: http://www.mca.gov.in/MinistryV2/csrdatasummary.html

Ministry of Environment and Forests& Climate Change, G. o. (2017, March 14). C.P.R Environment Education Centre, Chennai. Retrieved from http://www.cpreecenvis.nic.in: http://www.cpreecenvis.nic.in/Database/AharPyne-TraditionalfloodwaterharvestingsysteminSouthBihar_3810.aspx

Minsitry of Corporate Affairs. (2017, May 11). Concept Note: National CSR Awards. Retrieved from Ministry of Corporate Affairs: http://www.mca.gov.in/MinistryV2/nationalcsrawards.html

N. Rana & U. Majmudar. (2017, July 4). Economic Times. Retrieved from www.economictimes.com: https://economictimes.indiatimes.com/blogs/ResponsibleFuture/anu-aga-suggests-companies-should-pool-csr-funds-to-create-deeper-impact/

Prachi Salve. (2018, August 20). India Spend. Retrieved from https://www.indiaspend.com: https://www.indiaspend.com/as-health-crises-grow-29-of-funds-with-states-not-spent-in-5-years-82058/

Times of India. (2018, Nov 27). Times of India. Retrieved from https://timesofindia.indiatimes.com: https://timesofindia.indiatimes.com/business/india-business/no-takers-for-rs-1717-cr-of-csr-funds-in-fy18-report/articleshow/66832211.cms