How public sector companies perform on the corporate social responsibility (CSR) front would no longer be a matter of individual choice. The government is planning to set up a national CSR hub for central public sector enterprises (CPSEs). The hub would be funded out of mandatory contributions from profit-making CPSEs. The CPSEs will have to transfer the earmarked money into a CSR fund, which would accumulate if not spent. Starting this fiscal, it will be obligatory for all profit-making CPSEs to spend 0.5-3% of their net profit on CSR programmes.

For companies with net profits of Rs 500 crore and above, the minimum CSR contribution is fixed at 0.5% of net profit, while it is 2% for firms with net profits of Rs 100-500 crore, and 3% for others. Back-of-the-envelope calculations suggest that CPSEs will be collectively required to spend as much as Rs 5,000 crore on CSR activities this fiscal. Apart from being mandatory expenditure, CSR will also be a key parameter during the annual performance appraisal of these companies by the administrative ministry.

This provision has been included in the annual performance memorandum of understanding (MoU) signed by the CPSEs with the administrative ministry for 2010-11, carrying a 5% weightage. The CSR corpus of CPSEs would be used for social infrastructure projects as well as welfare programmes like employment guarantee scheme. “It (the CSR fund) has the potential to make a huge difference if it is supported by management expertise,” says Ranjan Mohapatra, president, Vision Consulting, a CSR and management consultancy firm.

The department of public enterprises (DPE) has been asked to set up the hub in conjunction with the Standing Conference of Public Enterprises (SCOPE) -- the representative body of CPSEs -- and the enterprises themselves. The hub would kick off operations with the fund to be provided by DPE, but it will be free to use funds from other sources as well – like SCOPE, central and state PSUs and government departments, besides global and multilateral agencies like World Bank and UN.

The CSR hub, sources said, will have the mandate to undertake supporting activities like nationwide compilation, documentation and creation of database, research, preparation of panels for implementation and monitoring, as well as institution of valuation agencies. The body will also act as a think-tank on CSR-related matters. Besides, the hub would also have the mandate to promote CSR...