There is unlikely to be a flood of money coming into the hands of NGOs, said Mr Noshir Dadrawala, philantrophy expert addressing a seminar on legal compliances required under Corporate Social Responsibility (CSR) mandated by the new Companies Bill.
MrDadrawala pointed out that the government and corporate India had already revised downwards to Rs 16,000 crore, the estimate of CSR funds that were likely to be available from companies that fall in the target bracket. This is down from the earlier estimate of Rs20,000 crore. India is the first country in the world to make CSR spending mandatory for the private sector and Mr Dadrawala narrated how the new government was continuously grapplying with the definition of what activities fall under the ambit of CSR under the act. The list was constantly changing and the rules were still evolving.
Mr Dadrawala also pointed out that while this wasn’t great news for NGOs, there wouldnt be a hefty business opportunity for innumerable self-styled CSR experts that had sprung up in India.
Mr Dadrawala was addressing a packed audience at Moneylife Foundation, comprising largely of NGOs and corporte offcials on the provisions of the act and legal compliance required under it.
Mr Dadrawala gave a general introduction to the CSR environment as it stands today.
He spoke about the prevailing optimism among NGOs and NPOs about the possible flood of charity money that the semi- mandatory CSR norms under the Comapnies Act 2013 would bring. He dispelled any notions that the audience had that a whole lot of money would be coming their way and that fund-raising would suddenly become a cake-walk.
Considering the mandated nature of the CSR norms, Mr Dadrawala said that in spite of the hurried drafting of the act during its initial passage, there were still frequent notifications that keep modifying the application of the law. “Ministry of Corporate Affairs (MCA) is the most confused entity CSR today. If you think the corporates and NGOs are confused, the government is even more confused than them. They have issued 3 notifications with back and forth regarding just the Schedule 7 of the law, and that too in just 6 months.”
Mr Dadrawala is the Chief Executive of Mumbai-based Centre for Advancement of Philanthropy, an NGO specialising in charity laws, CSR compliance for companies and good governance for non-profits. Among his various other achievements and work, is one of Directors of Asia Pacific Philanthropy Consortium (APPC), member of the Coordinating Committee of Worldwide Initiatives & Network of Grant-makers (WINGS), Fellow of the Centre for Study of Philanthropy (New York), and member of the advisory council of the International Centre for Not-for-profit Law. His work has also included teaching and educating in the field of philanthropy and has written numerous books on the subject too.
He spoke about the different kind of NGOs that can be registered and the ways to go about this. However, in the matter of exemptions, “Exemptions under 80 (g) alone are not really attractive to corporates. 80 (g) may be said to be a graduation degree, 35 (a) (c) could be considered a post-graduation and an exemption under 35 (1) (2) is like a PhD. If you have a 35 (1) (2) exemption, corporates will tend to look at funding you seriously.”
He took questions from a very active audience all through the session and was more than forthcoming in his replies. The topic of registering as a trust, society and a Section 8 entity was also discussed, while speaking about the various pros and cons of each type of NGO.
He said that, “some corporates are still under the impression that section 135 amd by extensio nthe CSR rules apply to them from some time in the future, but the section is enforceable since this assessment year itself.” He explained that to better understand definitions and other things under the law, allied laws like FCRA rules are a good guide.
Taking the audience through the stages of evolution of philanthropy itself, to the motivations behind philanthropy, he then came down to the nitty gritty of the act and its various provisions. In terms of CSR, Section 135 (1) decides whether a corporate must conform to the CSR spend requirements.
“Any experimenting that you want to do under CSR and the expenditure ofthe money, do it this year,” he said. His point was that the list of negative exclusions of what ‘shall not’ qualify as CSR will only grow as Indian companies look for ways to wriggle out of spending money on real and important CSR activities. The liberal interpretations of the Schedule 7 meant that a wide range of issues and projects could be taken up under the CSR mandate of a corporate.
Then there was the thorny issue of CSR reporting to consider. He explained that there was a serious amount of responsibility at the feet of the directors who would form a part of the CSR committee of the corporate. As such, reporting is one of the most legally important provisions. He explained that punitive action under the CSR law is reserved for non-disclosure, which is why the great importanc to reporting. There is little punishment in response to mis-application of the monies spent under the act yet.
With the background of the MCA’s projections under CSR spends that will soon be needed under the law, Mr Dadrawala took on questions once again in the end and tried to resolve as many questions as possible.