Uttar Pradesh to Tap into CSR Funds for Development Projects | 24 Feb 2024

Why in News?

The Uttar Pradesh government will turn towards corporates to enlarge the state’s Corporate Social Responsibility (CSR) reserves for socioeconomic development.

Key Points

  • Uttar Pradesh is among the top five states who corner most of the CSR funds from companies. Others include Maharashtra, Karnataka, Gujarat and Tamil Nadu.
  • Section 135 of the Companies Act, 2013 mandates certain companies to allocate 2% of their average profits from the preceding three financial years towards CSR activities.
  • The state has also acknowledged the contribution of leading private sector companies on a large scale through CSR funds.
    • In 2014-15, UP garnered only about Rs 148 crore that grew to Rs 435 crore in 2017-18. In 2021-22, UP saw a CSR spending of Rs 1,321 crore that surged to around Rs 1,500 crore in 2022-23.

Corporate Social Responsibility (CSR)

  • The concept of CSR is the idea that companies should assess and take responsibility for their effects on the environment and on social welfare, and to promote positive social and environmental change.
  • The four main types of corporate social responsibility are:
    • Environmental Responsibility
    • Ethical Responsibility
    • Philanthropic Responsibility
    • Economic Responsibility
  • The CSR provisions within Companies Act, 2013 is applicable to companies with an annual turnover of 1,000 crore and more, or a net worth of Rs. 500 crore and more, or a net profit of Rs. 5 crore and more.
    • The Act requires companies to set up a CSR committee which shall recommend a Corporate Social Responsibility Policy to the Board of Directors and also monitor the same from time to time.

Companies Act, 2013

  • It is an Act of the Parliament which was enacted in 1956. It enables the companies to be formed by registration, sets out the responsibilities of companies, their executive director and secretaries.
  • In 2013, the Government amended the Indian Companies Act, 1956 and added a new Act called as Indian Companies Act, 2013.
    • The Companies Act, 1956 was replaced partially by the Indian Companies Act 2013.
    • It became an act and finally it came into force in September 2013.
  • In 2020, the Parliament of India passed the Companies (Amendment) Bill, 2020 to further amend the Companies Act and decriminalise various compoundable offences as well as promote ease of doing business in the country.
  • Reduction in penalties for certain offences as well as in timeline for rights issues, relaxation in CSR compliance requirements and creation of separate benches at the National Company Law Appellate Tribunal (NCLAT) are among the proposed changes too.