The government can remove or lower many vehement opposition voices and instead generate support if it incorporates social cause into the bill. This Parliament session will see introduction of the Companies Bill which specifies mandatory spending of two per cent of net profit of every company on CSR (corporate social responsibility).
And, CSR activities in specific welfare sectors should form part of FDI bill as this will address some of the concerns of regional and communist parties. The regional parties can interact multi-national companies at local levels and suggest the way Indian business is undertaken. Those in Communist parties can look forward to labour welfare under the CSR schemes.
It will not be difficult to build consensus on FDI provided the government lands it softly and the CSR component seems to be most cost effective and readily available law to make FDI acceptable and holistic. This will also bring Leader of Opposition Sushma Swaraj around as she was unhappy that the government has not tried to arrive at a consensus. The BJP would surely not oppose social responsibility component that benefit a vast majority.
In fact, many companies are not averse to compulsory CSR and are asking for tax break as an incentive.
Sachin Pilot, Minister of State holding independent charge of Corporate Affairs, says that the corporates should systematically plan and execute their CSR initiatives to achieve visible, measurable results within a short time frame. He said, "We need to give priority to hygiene and sanitation in rural areas particularly for provision of toilets in girls' schools... with water conservation technologies."
Pilot had a meeting on the issue with senior executives of industry on Tuesday, Dec 4. While such a tax break will not require any amendment to the Companies Bill, the provisions will have to be provided through the Finance Bill in the annual Budget.
A Central government analysis shows that, in the year 2010-11, 66,347 companies reported Rs 9,46,731 crore as profits before taxes as per their books, which makes 2 per cent of that figure, Rs 18,935 crore.
As the economy keeps growing, big companies will see swelling profits and eventually the CSR amount will be significant and substantial. Time to rethink on FDI and how to make it work for us.