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India'sTopPSUs2013OverviewofCentralPublicSectorUndertakings

India'sTopPSUs2013

Preface | Foreword | ExecutiveSummary | Methodology | Definitions&calculations | OverviewofPSUs | Insights | ResponsibleBusinessPractices:APSUPerspective | PSU


Listing | LaunchEvent | EditorialTeam | Sponsors

CorporateSocialResponsibility
EvolutionfrommerephilanthropytosocialresponsibilityTherecentyearshaveseentheroleofcorporatesocialresponsibility(CSR)developingsignificantlyfor
havingapositiveimpactonsociallydiverseareasofthecommunity.
Inthecurrentscenario,CSRdoesnothaveauniversallyrecogniseddefinition.Broadly,companiesviewitasachannelforusingtheirbusinessesforaddressing
socialandenvironmentalconcernsbyintegratingCSRactivitiesintotheirvaluesandculture,thus,leadingtosocialandeconomicdevelopmentofthecountry.
Corporate social responsibility and sustainability is a companys commitment to its stakeholders to conduct business in an economically, socially
andenvironmentallysustainablemannerthatistransparentandethical.
Over the years, CSR has evolved as a significant factor in the global business scenario. Todays definition of conducting business extends beyond the scope of
existingasmereprofitmakingentities.Todaysbusinessscenariohaschangedvisiblyfromthetraditionalwayoffocusingonprofitabilitytotodayfulfillingtheir
social responsibility and contributing to the various stakeholders such as investors, customers, employees, and communityatlarge who are impacted by their
actions.Growingcompetitionandincreasingglobalizationhaspushedthecompaniestoredesigntheirstrategiesandbusinessmodelstosustainoverthelongterm
andCSRisexpectedtoplayanimportantroleinthecomingyears.

Earlier,companiesperceivedCSRaspurelyphilanthropicprocessthatisvoluntaryinnature.TheconceptofCSRhasundergoneahugetransitionovertheyears
andisgaininggreatersignificanceasasocialresponsibilitythatcompaniescarryonforasustainablebusiness.
Thus, companies have recognised the importance and immense benefits derived from implementation of a CSR strategy. Consequently, CSR has become an
integral part of todays strategic business decisionmaking process, with the goal of adding value to the business and the community at large. The benefits of
implementing an effective CSR program for companies are becoming increasingly clear and the companies have realized that CSR has a wideranging positive
impactonvariousstakeholders.
CSR:Awinwinforcompaniesandstakeholders
CSR activities, especially at the grass root levels provide opportunities to connect with specific strata of people that necessarily might not be a part of the
companysclientele.ThroughCSRactivities,beneficiariesalsogetachancetoknowmoreaboutthecompanyanditsproducts.Further,customerswhoarewell
versedaboutthecompanysCSRactivitiesmightperceivethecompanyanditsproductsinapositivelight.

Investors, to maximize the social impact of their investment, are also taking increasing interest in supporting businesses that follow effective CSR practices.
Consequently, they are seeking more information about their investee firms CSR initiatives and performance. Further, investors are realizing the importance of
CSRasamajortoolavailabletocompaniestomanageexposuretononfinancialrisks.Hence,arobustCSRprogramgoesalongwayincomplementingbusiness
strengthsinaddingvaluetoinvestmentattractiveness.

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Companies that conduct business in a socially responsible manner bring about beneficial impacts on stakeholders such as investors, customers, government,
employeesandthesocietyatlarge.Therefore,stakeholdersoftenperceivebusinessesthatdemonstrategoodCSRbehaviorinapositivelight.Thislendstangible
andintangiblebenefitstothecompaniesandaidssustainability.
PublicsectorundertakingskeycontributorstosocioeconomicdevelopmentofIndia
The government of India formed public sector undertakings (PSUs) to attain inclusive growth, considering the social as well as economic development of the
country.Thegovernmentestablishedthemwiththepurposeofbuildingindustrialcapacity,creatingemploymentopportunitiesandimprovingthesocioeconomic
condition.
Both,centralpublicsectorenterprises(CPSEs)andstatelevelPSUshaveplayedavitalroleinsupportingthesocioeconomicdevelopmentofthecountry.They
areactivelyinvolvedinvariousareasofCSRsuchaseducation,healthcare,improvinginfrastructure,socialempowerment,vocationaltrainingandenvironmental
protectionamongothers.Withahighdegreeofsupportfromthegovernment,CSPEsactsasacatalystofsocialenterprisebyprovidingsuchdiverseservicesfor
grassrootdevelopment.
RevisedCSRandsustainabilityguidelinesforCPSEsintendedtoattainthenationsaimofinclusivegrowth
India has emerged as one of the worlds strongest emerging markets and PSUs have played a vital role in achieving this growth and development. In order to
sustainthisgrowth,CSRinitiativeshavebecomeimportantastheyformacrucialpartofthecompaniesstrategicdecisionmakingprocess.Inordertointegrate
this into their business models and achieve the nations aim of inclusive growth, the revised CSR and sustainability guidelines issued by the DPE in Dec 2012
(effectiveApril2013)areexpectedtoplayacrucialrole.TherevisedguidelinehasurgedtheCPSEstoembracearobustCSRpracticethatisintheinterestofall
stakeholders.
As per the new guidelines, it is mandatory for CPSEs to disclose its various CSR initiatives and performance to stakeholders. Earlier, CSR and sustainable
development were treated as two separate subject areas and were dealt with differently for the purpose of memorandum of understanding (MoU) evaluation.
However,nowtheyarecombinedintoasinglesetofguidelinesforgreatertransparency.ThebudgetaryallocationforCSRalsostandsmodified.

TheCPSEswouldhavetoutilizeandspendtheentireamountearmarkedforCSR,orwouldhavetodisclosethereasonsfornotutilizingthefullamount.Further,if
the CPSEs are unable to spend the earmarked amount for CSR in a particular year, it would have to spend the amount in the next two financial years, failing
which,itwouldbetransferredtoSustainabilityFund.Currently,itsimplementationmechanismisbeingformulatedseparately.
However,thegovernmenthasnotmandatedlossmakingornegativenetworthCPSEstoearmarkspecificfundsforCSRactivities.However,theyareexpectedto
pursue the same by integrating them into their business process. They can work in collaboration with other profit making CPSEs, in areas that do not require
financialsupport.
The new guideline has also focused on implementing a robust mechanism for project monitoring. In order to avoid conflict of interest, the guideline enables
companies to have a thirdparty monitoring mechanism. For instance, if a company is implementing CSR projects with the help of its own employees, then for
monitoring its implementation it would have to go through a third party and viceversa. The chart below highlights the key changes in CSR and sustainability
guidelinesforCPSEs:

CPSEsrevealimprovementinacquiringexcellentrating
Corporate governance is one of the key parameters included in the memorandum of understanding (MoU). The government uses this as a tool to evaluate the
performance of CPSEs. As a norm, CPSEs are periodically required to submit a compliance report on CSR. There are various parameters to assess the

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performanceofCPSEsintermsofcorporategovernance.Thegovernmentevaluatestheirperformanceonascaleof1to100.Higherscoretranslatesintobetter
compliance with corporate governance. If any CPSE fails to submit the selfevaluation or compliance report by the cutoff date, it is graded and considered as
equivalenttoPoor.
DuringFY12,outofthetotal248CPSEs,78CPSEs(31.5%)receivedExcellentscorecomparedwith61CPSEsinFY11,astheycompliedwellwiththecorporate
governanceguidelines.

However, 81 CPSEs failed to submit the selfevaluation reports on compliance with corporate governance norms compared with over 100 during FY11. CPSEs
engagedinthepowersectorlargelyledthispattern.Further,over10CPSEsreceivedPoorscoreduringFY12comparedwith11duringFY11.
PrimaryInsights
Dun&Bradstreet(D&B)conductedaprimarystudytoanalyzeCSRinitiativesofthePSUsandtheircontributionstowardsoverallsocioeconomicdevelopmentof
thecountry,withtheobjectivetocapturethecurrenttrendsandchallengesintheCSRpractices.Theanalysiswasbasedonthestudyofaround63PSUs.Thekey
findingsoftheprimarysurveyareasunder:
Environment protection, women empowerment and healthcare are the key focus areas of CSR As per the survey findings, environment protection, women
empowerment, and healthcare emerged as the three major CSR activities undertaken by PSUs that offered maximum benefits. Around 19% of the companies
ranked environment protection as their key focus area that offered maximum benefit. Further, women empowerment and healthcare were the next major CSR
activitiesthatofferedmaximumbenefit,whichthePSUsundertook.
Moreover, village upliftment, education, job creation, and assistance during natural calamities were the other major CSR activities implemented by PSUs that
providedmaximumbenefits.

Identifyingappropriateprojectsemergedasthekeychallenge
PSUsarefacingnumerouschallengesandlimitationswhileimplementingCSRprograms.Theylargelyrelatetotheorganizationallevelissuessuchasabsenceofa
dedicatedCSRteam,activeinvolvementofkeystakeholders,budgetaryissuesandidentifyingaptCSRprojectsandtheirbeneficiaries.
OursurveyfindingsrevealedthatidentifyingappropriateCSRprojectsasthetopmostchallengeofthePSUs.
Around28%ofthecompaniessurveyed,feelthatidentifyingappropriatesocialprojectsandtheirbeneficiariesistheirbiggestconcern.Thiswasfollowedbylack
ofactiveinvolvementofallstakeholdersandbeneficiariesastheothermajorchallenge.

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These factors results in failure to utilize allocated CSR funds fully within the stipulated period. Further, absence of a proper monitoring mechanism and lack of
skilledpeopletoimplementCSRprojectsatgroundlevelalsoleadtononutilisationofCSRfundsentirely.
However,companiesaretakingstepstoaddresssomeoftheconcerns,suchasformingadedicatedCSRteam,focusedeffortstowardsstreamliningtheprocess,
providing training, increasing engagement of employees and collaborating with various NGOs and thirdparty entities for execution and monitoring project. Our
surveyrevealedthat,around60%ofthesurveyedcompaniesaretakingthirdpartyconsultationsforimplementingCSRsmoothly.
60%ofthesurveyedcompaniesfeelrecognitionwouldencouragethemtoundertakemoreCSRprojects
Lack of financial and nonfinancial incentives have not provided encouragement to PSUS to undertake CSR projects. PSUs expect some financial and/or non
financialincentivesthatwouldactasanencouragementtoundertakeandpromoteCSRactivities.
Around60%ofthesurveyedPSUsfeelsomekindofrecognitionsuchasreceivinganawardwouldpushtheleveloftheirCSRactivities.

Further, about 19% of the surveyed PSUs feel CSR expenditure should be liable for a tax deduction, which would act as a major incentive for carrying out CSR
projects.

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