CSR Contribution Based on Net Profit

India’s Ministry of Corporate Affairs stated that the Department of Public Enterprises and the Ministry of Heavy Industries and Public Enterprises have issued complete guidelines on corporate social responsibility (CSR) for central public sector enterprises (CPSEs) in April 2010.

In these guidelines, CPSEs are obligated, through a board resolution, to generate a CSR budget as a percentage of net profits from the preceding year. A CSR expenditure range of 3 percent to 5 percent is expected within the financial year if the CPSE recorded profit of less than Rs.100 crores in the previous year; 2 percent to 3 percent (subject to minimum of Rs.3 crores) if the profit ranges from Rs.100 crores to Rs.500 crores; and 0.5 percent to 2 percent if a CPSE has a net profit of more than Rs.500 crores in the previous year.

CSR guidelines for CPSEs additionally offer that loss making companies are not obligatory to assign specific funding for CSR activities. Presently, similar directions have not been issued by the Ministry of Corporate Affairs.

Execution of CSR guidelines by CPSEs is checked by the respective ministries/departments concerned with CPSEs and the MoU Task Force at the time of MoU negotiation meetings between the CPSE and the administrative ministry, where the performance of the CPSE on CSR will be assessed. Out of the 50 marks owed for non-financial parameters for the annual MoU assessment of each CPSE, five marks are assigned for execution of CSR projects by the CPSE.

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