For Cos, it's
Mera Gaon, Mera Growth (My village, My growth)
This headline from Economic Times yesterday (Aug 23, 2013) caught my attention. It made me once again don my thinking hat. The news report says: Even as city dwellers tighten their purse strings, 700 million rural Indians are ready and willing to spend. Knowing that rural market is still growing at 10-14 per cent, industry majors have either shifted or plan to launch a new marketing strategy luring the poor in the villages to spend more, and spend on non-essential goods.
This report comes at a time when the Indian Government is getting ready to provide subsidised food to 75 per cent of the rural population under the Food Security bill.
For a country which is caught in the matrix of growth, where growth is the new economic superstition that has been sold very effectively and widely, everyone believes that if growth happens, their lives would be better. After having sold this mantra, the trend is now to measure everything in terms of growth. If India Inc manages to extract whatever little remains in the pockets of rural poor, it becomes growth. If you empty your family silverware in the market, and become a pauper in turn, it adds to country's growth. Strange, isn't it?
I have seen Cafe Coffee Day and Barrista and the likes opening up new joints in the mofussil towns. Instead of offering me lassi, I am surprised when some farmers offer to take me to these joints for a cup of coffee. Not that they have enough money to splurge, but by inviting me to the new coffee joint where a cup pf coffee costs not less than Rs 150, they are trying to show they too have arrived. It is a symbol of prosperity (howsoever hollow it may be) that they want to demonstrate. Of course, while the farmers pocket gets empty, it adds to country's growth. Hindustan Lever, for instance, has launched an 'Operation Bharat' to tap the rural markets for fairness cream, toothpaste, Clinic Plus shampoo, Ponds cream etc etc. ITC's much publicised e-chaupals have now turned into a rural marketing chain for most FMCG products. The list is endless.
All these years, economists tell us that the terms of the trade for rural areas had been negative. The rural Current Account Deficit (CAD) had always been in red. Which means more money was being taken out of the villages than what was being invested. But over the last few years, I am sure economists must be thinking of a new terminology to correctly depict the virtual day light robbery that is taking place in the rural areas. Poor are poorer, and the share prices of India Inc have been on an upswing. Isn't this a massive transfer of money from the rural to a few in the urban areas? How can it be called growth if it makes more people relatively more poor? Time to think.
I am waiting for the day when the Economic Times headline is rewritten as: Mera Gaon, Gaon ki Growth (My village, it's growth). Till then, growth is another name for exploitation.
Showing posts with label ITC. Show all posts
Showing posts with label ITC. Show all posts
Will India's Corporate Social Responsibility (CSR) norms lead to a Company Raj?
I haven't read the finer print of the Companies Bill. But what I have so far gathered from news analysis in various newspapers, the Companies Bill calls for companies having a net worth of Rs 500-crore or more, or a turnover of Rs 1,000-crore or more, or a net profit of Rs 5-crore or more to have a Corporate Social Responsibility (CSR) spending of at least 2 per cent of their average net profits of the past three years. In an interview with The Times of India (Aug 12, 2013) the Corporate Affairs Minister Sachin Pilot calls it a "positive, forward-looking, reform-oriented, and investor-friendly legislation."
A day later, news agency PTI said that given the criteria that has been spelled out in the Companies Bill, only 1 per cent of the active companies need to follow CSR spending norms. Further, what is peculiar to India's new law is that the 2 per cent spending on CSR is not mandatory but reporting about it is mandatory. "Now the essence of the bill is self-reporting and self-disclosure. At no point it is my objective to create an inspector Raj where the government is the sole authority and we decide what is right and what is wrong. That's the company's money. They have full freedom to choose how they want to spend that money," Sachin Pilot said in an interview (Companies have full freedom in spending CSR money: Sachin Pilot TOI Aug 12, 2013. bit.ly/15sm70Z ).
Well, Sachin Pilot has reasons to have unlimited faith in the Corporates. After all, he is the Corporate Affairs Minister. But left to the Corporates, India would have been gobbled up by now. The widening economic inequality across the globe is a clear-cut pointer to the extent of greed that prevails among the rich and beautiful. Sachin Pilot therefore seems to be living in a make-believe world. He is no exception. It happens to all those youngsters whose foray into politics is just because they happen to be the sons/daughters of known politicians.
While the issue of tax-benefits for CSR spending is still to be resolved, already many suggestions have started pouring in. Says another news report (CSR spends to get Cos varying tax benefits, TOI, Aug 13, 2013): "For instance, writing a cheque towards the PMs National Relief Fund would entitle the donor company to a deduction, from taxable profits, of the entire donation amount. On the other hand, if a company has constructed a school building in a village, no tax benefit may be available -- at least not without a drawn out litigation."
Some studies point to Rs 12,000-crore (or $2 billion) of corporate money flowing into the social sector. For a sector reeling under terrible resource-crunch with less money available across the globe for social, voluntary and charitable activities, and with the Indian Government tightening the FCRA rules to stifle NGO activity, the clamour for CSR funding will increase in the days to come. In my understanding, CSR funding will change the direction of social activities, driving more towards activities that actually end up benefiting the Corporate sector. In the absence of clearly defined guidelines, CSR money will come in handy to lay out a strong foundation for the Corporates to encash on eventually.
Let me illustrate. Schedule VII of the Companies Bill (as per a news report) prescribes wide-ranging activities that could be part of a company's CSR policy, such as eradicating hunger and poverty, promotion of education, women empowerment, reducing child mortality and improving maternal health, environmental sustainability, employment enhancing vocational skills or contributions to central or state government set-up funds, including the PMs Relief Fund. These activities look perfectly suitable for CSR activities. But when it comes to actual operations, it is the way the programme is structured/designed that is going to matter. Company's underlying commercial interests will always remain the primary focus.
Take the case of of hunger and poverty. Let us assume Mahyco/Monsanto, the agribusiness technology giants in India, launch a CSR project on improving agricultural practices to fight hunger and malnutrition. Without doubt, it is going to focus on bringing in genetically-modified seeds, chemical fertilisers/pesticides and thereby encourage an industry-driven farming model of agriculture. It will be in the name of eradicating hunger. Since more money will be available for this kind of initiatives, I can see NGOs making a beeline before the company. At no stage will Mahyco/Monsanto promote ecological farming or ask farmers to go in Low External Input Sustainable Agriculture (LEISA) practices. Take another example. The much hyped e-Chaupal initiative of ITC was aimed at laying the foundations for terminal markets for corporate agriculture. Of course, there are some honourable exceptions. But the number of such companies is very limited.
My suggestion therefore would be to have a clause in the CSR rules that ensures no company can make CSR spending in a domain of its own commercial interests. There has to be a strict regulatory regime established (no IAS please, and no ex-Corporate honcho) that oversees the working of the CSR projects to ensure that companies follow the norms that the regulatory body spells out for sustainable development. If you leave it free for all, as Sachin Pilot is suggesting, a majority of the companies will go on rampage, and we will actually end up creating conditions, knowingly and unknowingly, for the emergence of another Company Raj. Corporate funding has to be therefore very strictly regulated and monitored.
CSR spending however should not be seen as an open license to exploit the natural resources. It is not a license to loot, and then demonstrate social responsibility by opening a school or a hospital somewhere. It is for this aspect that the setting up of a National Investment Board is a bad precedence. It must be scrapped as soon as possible. Corporates too have to be made socially and environmentally responsible in their basic business operations. CSR is not a route for social repentance for the sins the companies normally indulge in.
A day later, news agency PTI said that given the criteria that has been spelled out in the Companies Bill, only 1 per cent of the active companies need to follow CSR spending norms. Further, what is peculiar to India's new law is that the 2 per cent spending on CSR is not mandatory but reporting about it is mandatory. "Now the essence of the bill is self-reporting and self-disclosure. At no point it is my objective to create an inspector Raj where the government is the sole authority and we decide what is right and what is wrong. That's the company's money. They have full freedom to choose how they want to spend that money," Sachin Pilot said in an interview (Companies have full freedom in spending CSR money: Sachin Pilot TOI Aug 12, 2013. bit.ly/15sm70Z ).
Well, Sachin Pilot has reasons to have unlimited faith in the Corporates. After all, he is the Corporate Affairs Minister. But left to the Corporates, India would have been gobbled up by now. The widening economic inequality across the globe is a clear-cut pointer to the extent of greed that prevails among the rich and beautiful. Sachin Pilot therefore seems to be living in a make-believe world. He is no exception. It happens to all those youngsters whose foray into politics is just because they happen to be the sons/daughters of known politicians.
While the issue of tax-benefits for CSR spending is still to be resolved, already many suggestions have started pouring in. Says another news report (CSR spends to get Cos varying tax benefits, TOI, Aug 13, 2013): "For instance, writing a cheque towards the PMs National Relief Fund would entitle the donor company to a deduction, from taxable profits, of the entire donation amount. On the other hand, if a company has constructed a school building in a village, no tax benefit may be available -- at least not without a drawn out litigation."
Some studies point to Rs 12,000-crore (or $2 billion) of corporate money flowing into the social sector. For a sector reeling under terrible resource-crunch with less money available across the globe for social, voluntary and charitable activities, and with the Indian Government tightening the FCRA rules to stifle NGO activity, the clamour for CSR funding will increase in the days to come. In my understanding, CSR funding will change the direction of social activities, driving more towards activities that actually end up benefiting the Corporate sector. In the absence of clearly defined guidelines, CSR money will come in handy to lay out a strong foundation for the Corporates to encash on eventually.
Let me illustrate. Schedule VII of the Companies Bill (as per a news report) prescribes wide-ranging activities that could be part of a company's CSR policy, such as eradicating hunger and poverty, promotion of education, women empowerment, reducing child mortality and improving maternal health, environmental sustainability, employment enhancing vocational skills or contributions to central or state government set-up funds, including the PMs Relief Fund. These activities look perfectly suitable for CSR activities. But when it comes to actual operations, it is the way the programme is structured/designed that is going to matter. Company's underlying commercial interests will always remain the primary focus.
Take the case of of hunger and poverty. Let us assume Mahyco/Monsanto, the agribusiness technology giants in India, launch a CSR project on improving agricultural practices to fight hunger and malnutrition. Without doubt, it is going to focus on bringing in genetically-modified seeds, chemical fertilisers/pesticides and thereby encourage an industry-driven farming model of agriculture. It will be in the name of eradicating hunger. Since more money will be available for this kind of initiatives, I can see NGOs making a beeline before the company. At no stage will Mahyco/Monsanto promote ecological farming or ask farmers to go in Low External Input Sustainable Agriculture (LEISA) practices. Take another example. The much hyped e-Chaupal initiative of ITC was aimed at laying the foundations for terminal markets for corporate agriculture. Of course, there are some honourable exceptions. But the number of such companies is very limited.
My suggestion therefore would be to have a clause in the CSR rules that ensures no company can make CSR spending in a domain of its own commercial interests. There has to be a strict regulatory regime established (no IAS please, and no ex-Corporate honcho) that oversees the working of the CSR projects to ensure that companies follow the norms that the regulatory body spells out for sustainable development. If you leave it free for all, as Sachin Pilot is suggesting, a majority of the companies will go on rampage, and we will actually end up creating conditions, knowingly and unknowingly, for the emergence of another Company Raj. Corporate funding has to be therefore very strictly regulated and monitored.
CSR spending however should not be seen as an open license to exploit the natural resources. It is not a license to loot, and then demonstrate social responsibility by opening a school or a hospital somewhere. It is for this aspect that the setting up of a National Investment Board is a bad precedence. It must be scrapped as soon as possible. Corporates too have to be made socially and environmentally responsible in their basic business operations. CSR is not a route for social repentance for the sins the companies normally indulge in.
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