t is widely acknowledged that rapid urbanisation will be one of India’s largest transitions in the years to come, with the urban population estimated to increase from 300 million to 600 million by 2030. Policymaking in India, however, has failed to keep up with this changing reality. This is illustrated in the ministry of corporate affairs’s approach to corporate social responsibility (CSR) under the Companies Act, 2013. The clause mandating CSR has raised public debates ever since it was introduced earlier this year. The ministry took a welcome step by offering some clarity on what is considered CSR under the act, issuing a circular on June 18.
Schedule VII of the new law requires companies in a certain bracket to spend 2 per cent of net profits on CSR and outlines areas in which this money can be spent. The Centre for Ethical Life and Leadership estimates that the new mandate will inject close to Rs 12,000 crore into the domestic development landscape. The move would imply that the corporate sector will be poised to play a greater role in the nation’s socio-economic development, through a targeted infusion of funds into the development sector. As first steps go, it is in the right direction, but the legislation and its interpretation suffer from a crucial blind spot.
In its current form, the law and its interpretation through subsequent rules have an extremely parochial view on areas of development. The list of eligible CSR activities is surprisingly restrictive and shortsighted. While Schedule VII explicitly refers to “rural development projects”, India’s urban development has been overlooked.
The ministry’s latest circular reiterates that petitions regarding sustainable urban development, urban public transport systems as well as capacity building of government officials and elected representatives in public-private partnerships (PPP) and urban infrastructure have gone unheeded. While the new circular encourages that Schedule VII be “interpreted liberally” by registrars of companies, regional directors and stakeholders, it goes on to state that city-development activities don’t fall under the purview of CSR. Slum redevelopment and affordable housing are the only areas specifically related to the urban that the ministry says will be considered CSR.
While the government has many legitimately competing development priorities, cities and towns can no longer be left out. There is no denying that our cities need fixing. Many of us experience the impact of crumbling infrastructure, chaotic road networks, inconsistent garbage collection and erratic supply of urban services, whether it is electricity or water, on a daily basis.
Burden-sharing between key stakeholders in the urban space is key to tackling the need for urban transformation. The onus of urban development cannot rest on the government alone. National initiatives likethe Jawaharlal Nehru National Urban Renewal Mission have done the “heavy-lifting” in our cities in the past, especially by meeting the infrastructural needs. But much more needs to be done. It is unwise to leave out the private sector, which would want to improve the future of our cities for its own growth and profitability.
The exclusion of urban development from Schedule VII ignores the reality of many non-governmental organisations and corporates that work towards urban reforms. The restrictive mandate will coerce the private sector to channel its funds into a tightly delineated set of interventions, leaving a large number of worthy causes and organisations excluded from the reach of corporate funding.
Voices in the new government have spoken about the cause of improving India’s cities. Prime Minister Narendra Modi demonstrated during his tenure as chief minister of Gujarat that “inclusive urban development” was at the top of his agenda. His efforts to fortify cities in Gujarat led to a massive influx of international companies. Soon after taking charge, Urban Development Minister Venkaiah Naidu had emphasised the urgent need for urban upliftment and quality public transport. He reposed faith in PPPs to meet the agenda of housing for all by 2020.
The government’s rhetoric needs to be reflected in the policies and regulations it puts forth. The purview of CSR needs reconsideration to accommodate a broader spectrum of development work. Making Schedule VII more inclusive, especially from an urban standpoint, would be one of the first steps in building economically vibrant cities. By forcing companies to give to certain areas of philanthropy alone, we risk inhibiting numerous other interventions that are crucial to the development of a nation riddled with a multitude of problems.
