The revised Companies Act, 2013 brought a simple change in the CSR rules for Indian companies. According to the new provisions, any company having a net worth of INR 500 Cr or more or a turnover of INR 1,000 Cr or more or a net profit of INR 5 Cr or more is mandated to spend 2% of their profits on CSR activities specified in Schedule VII of the Act. Whether this has increased CSR spending or broadened companies’ outlook towards CSR is still to be seen, as the changes have only come into effect in April, 2014 and 2 years is certainly too soon to take a call. However, what it has necessarily done is brought under its ambit inconspicuous sporting sectors like Paralympic or Olympic Sports, historically looked over by corporate philanthropic activities.
In its original form, the CSR section of the Act only spoke about spending for “training to promote rural sports, nationally recognized sports, Paralympic sports and Olympic sports”. However, in 2015, the Ministry of Corporate Affairs (MCA) approved bringing sectors such as sports infrastructure (construction, renovation, maintenance of stadiums, gymnasiums and rehabilitation centres) under the permissible CSR activities in the Act . This was widely welcomed by all stakeholders as capital investments have more long-term potential for the development of a sector. This provides the chance for more athletes and sportspersons to train for and engage in sporting activities for generations to come, rather than getting last minute freebies from corporates looking to round up their CSR spending or piggyback on large sporting events such as the Olympics by coming out in support of athletes just months before big tournaments .
However, the question still remains – can CSR be an effective tool to help India excel in sports? A 2015 publication presents a list of the major corporate entities that have been engaged in sports. A cursory look would tell us that some of the largest companies in India are actively involved in sports-related CSR, whether it be Tata Steel spending on residential and training infrastructure for football, athletics and archery or Jindal Steel and Power Ltd. setting up multiple facilities and camps for a myriad of sports, also helping host tournaments for cricket, volleyball and kabaddi. Surprisingly, PSUs also find (worthy) mention in the list with Coal India, Oil India, ONGC and Indian Oil all working towards the promotion and development of sports through CSR activities.
This year, India massively underperformed at the Olympics, or so was perceived by the tally of 1 Silver and 1 Bronze medal which stood behind at least 59 different countries who had won at least a Gold each. There were various news articles and media reports which directly linked India’s lack of medals at the Olympics, and in association their historical underperformance in sports in general, to the lack of domestic spending on the development of sports and sportspersons. A recent Parliamentary Standing Committee report found that India spends a meagre 3 paise per capita per day on sports, whereas countries such as the USA lead the way with a spending of Rs. 22. The UK stands at 50 paise while even a country like Jamaica stands at 19 paise. Even converting for PPP, these disparities are large and often the differences are in an order of magnitude.
Gaps such as these cannot be plugged by CSR alone and the government needs to overhaul its own spending on sports if we’re to develop, and consequently excel, as a nation in the world sporting arena. While the Government has taken the right steps by mandating CSR and including a wide variety of sports related activities for which companies can contribute by way of CSR spending, this will only encourage development in regional pockets, in particular sports that have popularity among the masses and at points of time coinciding with major tournaments. Expecting the corporate sector to reinvent the Indian sports sector at large just through CSR would be foolhardy. Scouting of talent, setting up of professional leagues, bringing in foreign coaching and training talent for knowledge transfer and long-term infrastructure development are just some of the things that the Government needs to focus on, so that it can then invite participation from the private sector in a more significant and effective manner.
Written By : Nikhil Kajaria
Nikhil Kajaria is a PGP Second year student at IIM Ahmedabad