The new Companies Bill passed by the Indian parliament requires companies with a market capitalisation of more than 5 billion rupees (around 82 million dollars) to spend 2% of their annual net profits on corporate social responsibility (CSR) activities, which include social programmes or charitable work in the community.
According to the Reuters news agency, the government’s Public Information Bureau said in a statement about the approval of the Companies Bill by the upper house of parliament, that it would provide “modern legislation” in the corporate sector. Certainly, by approving the bill, India may be the first country in the world to include mandatory corporate giving in its legislation.
India has one of the world’s largest economies and yet the country is home to more hungry people than in all of sub-Saharan Africa, with around 500 million people living below the official poverty line. These Indians are reliant on free public services, though many are currently poorly managed and delivered.
State-owned companies are already obliged to pay between 0.5–5% of their profits to social welfare projects. However, campaigners have long called for greater involvement by the private sector in schemes to help raise living standards among the country’s poor. Many campaigners have welcomed the new bill, which only requires the signature of the president to become law.
However some observers have warned that the impact of the bill may not be as great as expected unless CSR spending is targeted at sectors such as health and education, or communities in most need. A representative for the Poorest Areas Civil Society told Reuters that to work well, CSR programmes should be linked to “experience of civil society and government entitlements”.
Meanwhile, the Indian parliament continues to debate another momentous bill tabled to assist the country’s poor, the Food Security Bill. This would commit the government to providing around two-thirds of the population with monthly subsidised food at a possible cost of more than 24 billion dollars annually. If approved, this could become one of the largest social welfare schemes in the world.