CSR Liable Companies

It was observed by the Parliamentary Standing Committee on Finance that annual statutory disclosures on CSR required to be made by the companies under the Act would be a sufficient check on noncompliance. It is a decade since Corporate Social Responsibility (CSR) was introduced as a mandatory requirement for the corporate sector in India. However, the number of companies that meet the criteria for mandatory CSR spending has remained very small. Further, not all companies that are liable for CSR come forward to comply with their CSR obligations.

Size of the Corporate Sector

The total number of companies registered under the Companies Act was about 25 lakhs, as on January 31, 2023, as per the data of the Ministry of Corporate Affairs (MCA). There were 15.17 lakh active companies, including 2.59 lakh companies which were incorporated within the preceding eighteen months and were not due for Annual Statutory Filings, as on January 31, 2023. Keeping apart the companies incorporated within the preceding eighteen months, the active companies operating in the country can be estimated as 13 lakhs.

CSR Eligible Companies

The total number of CSR eligible companies was 16,548 in FY 2014-15. The number increased to 25,181 in FY 2019. However, there has been a gradual decline in the number of CSR eligible companies ever since and it reached a low level with 18,623 companies in FY 2022. The CAGR in the growth of CSR liable companies is 1.49%.

Table 1. ACTIVE COMPANIES IN INDIA AND CSR ELIGIBLE COMPANIES: FY 2015 TO FY 2022

Year	Number of Active Companies	Paid Up Capital (Rs. Crores)	Nos. of CSR Eligible Companies	CSR Eligible Companies As Per Cent Of Active Companies
2014 - 2015	10,15,601	22,95,969	16,548	1.6
2015 - 2016	10,82,029	26,05,482	18,292	1.7
2016 - 2017	11,62,181	31,54,013	19,556	1.7
2017 - 2018	11,59,945	35,95,064	21,525	1.9
2018 - 2019	11,49,167	35,99,095	25,181	2.2
2019- 2020	11,91,892	77,65,551	22,985	1.9
2020 - 2021	13,36,234	82,63,717	20,840	1.6
2021 - 2022	14,28,372	49,16,476	18,623	1.3
Compound Annual Growth Rate (CAGR)	4.36%	9.99%	1.49%	-2.56%

Source: MCA Annual Report 2022 & other MCA sources

Drop in CSR Liable Companies

CSR eligible companies, as per cent of the total active companies in the country, was 1.6% in FY 2015. The CSR mandated companies have come down to 1.3% of the total active companies by FY 2022. The CAGR has been negative. The reasons for the decline in the number of CSR eligible companies are not obvious. The reduction in the number of CSR eligible companies implies that the profitability of the corporate sector has come down during the period. Available evidence gives some indications to this.

However, in the case of CSR eligible companies, the numbers do not tally with the trend in profitability. The number of CSR eligible companies increased from 16,548 in FY 2015 to 25,181 in FY 2019. This is the time when corporate profitability was declining. The number of eligible companies dropped when corporate profits suddenly increased in the last few years. Obviously, factors beyond corporate profits need to be probed to find an answer to the dilemma of declining number of CSR eligible companies. It is pertinent to note that a major chunk of the CSR eligible corporates has been making zero CSR spending over the years.