REC Power Distribution Company Limited

(A wholly owned subsidiary of REC, a ‘Navratna CPSE’ under the Ministry of Power, Govt of India)

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RECPDCL Corporate Social Responsibility &

Sustainability Policy

Corporate office

Website: www.recpdcl.in Email: csr.delhi@recpdcl.in

4th Floor, KRIBHCO Bhawan,Sector-1, Noida (UP)

Aligned with Section 135 and other applicable provisions of Companies Act, 2013, and The Companies (Corporate Social Responsibility Policy) Rules, 2014, vide Notification dated 27th February, 2014 of Ministry of Corporate Affairs including subsequent amendments clarifications issued till 23rd May 2016, and Guidelines on Corporate Social Responsibility and Sustainability for Central Public Sector Enterprises issued by Department of Public Enterprises, Ministry of Heavy Industries & Public Enterprises notified vide OM No. F.No. (13) 2013-DPE (GM) dated 21st October, 2014.

Effective from 12.10.2015Revised on 19.05.2017

Index

Sl. No.

Particulars Page

1. Introduction 01

2. Local area concepts 05

3. Approach 05

4. Strategy 06

5. Thrust area 08

6. Allocation of funds (Budget) 10

7. Base line survey and documentation

11 8. Implementation

9. Monitoring 12

10. Impact assessment mechanism

13 11. General

12. RECPDCL format for suggestion from stakeholder/s on CSR & Sustainability aspects

14

13. Format for the annual report on CSR activities to be included in the Board’s report

15

14. Provisions of sections 135 of the Companies Acts, 2013

17

15. Companies (CSR Policy) Rules 2014

19

16. DPE Guidelines

28

17. Clarification issued by Ministry of Corporate Affairs

36

18. Gazette notification dated 6th Aug. 2014

43

19. Gazette notification dated 24th Oct. 2014

45

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Introduction 1.1 Preamble:

Ministry of Corporate Affairs (MCA), in exercise of its powers under sub-section (3) of

Section 1 of the Companies Act, 2013 ("the Act') and vide Notifications dated 27 February

2014, has appointed 1st April, 2014 as the date, on which Section 135 and Schedule VII of

the Act shall come into force. Further, MCA vide Notification dated 27.2.2014, has notified

Companies (Corporate Social Responsibility Policy) Rules, 2014 ('the Rules'), to be effective

from 1st April, 2014. In line with RECPDCL ('the Company'), shall comply with the

provisions of Section 135 of the Act and the Rules. Further, MCA had also notified

amendments &clarifications vide General Circular No. 21/2014 dated 18 June, 2014 and

Notification dated 6th August 2014 & 24th October. 2014. In addition to the above,

Ministry of Heavy Industries & Public Enterprises Vide OPE OM No. F. No. (13) 2013-DPE

(GM) dated 21st October, 2014 had circulated guidelines for CPSEs for CSR and

Sustainability.

RECPDCL will aligned its CSR & SD policy to that of REC, its parent company.

1.2 Mission of RECPDCL:

Promote and Leverage green technologies to produce goods and services that contribute to social and environmental sustainability.

Take up projects that provide energy, Water and Sanitation facilities to the

communities.

Take up activities to support “Differently abled persons” and the “health sector”.

Contribute to inclusive growth and integrated development in society through education, capacity building measures, empowerment of the marginalized and underprivileged sections/communities.

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To act as a competitive, client-friendly, development-oriented organization for promoting projects covering power generation, power conservation, power transmission and power distribution network in the country. 1.3 CSR Vision and Objective: Corporate Social Responsibility encompasses the basic responsibility of the company making projects to support the society at large to the self-sustainable, to conserve environment, to engage stakeholders of the society in a transparent manner for common good. REC POWER DISTRIBUTION COMPANY LIMITED (RECPDCL), through its Corporate Social Responsibility and Sustainable Development initiatives, shall continue to undertake projects for Sustainable Development, mainly focusing on fulfillment of Power and Energy needs of the society. The aim of the Corporate Social Responsibility Policy (CSR Policy) is to ensure that the Company becomes a socially responsible corporate entity committed to improving the quality of life of the society at large. As a socially responsible corporate entity, RECPDCL would endeavor to:

The objective of the RECPDCL CSR policy is to:

Ensure an increased level of commitment at all levels in the organization, to operate its business in a socially & environmentally sustainable manner, while recognizing the interests of its stakeholders.

Generate goodwill in the society for RECPDCL through CSR activities and help reinforce a positive & socially responsible image of RECPDCL as a corporate.

Further external legal opinion on the provisions of the Companies Act, 2013 has been obtained and the opinion clarifies that compliance with the requirements as laid down under Section 135 is mandatory. Opinion on Taxation issues is also obtained from external expert. As per the opinion the expenditure on CSR activities will not be considered as business expenditure under section 37 of the Income Tax Act. However, if the expenditure is covered under section 30 to 36 the expenditure actual incurred may be

claimed as deduction under the respective section.

1.4 Sustainability:

a) Towards ensuring 'Sustainability' the company would commit itself to building a sustainable enterprise for the benefit of present and future generation of stakeholders and shall endeavour to integrate responsible practices into its business strategies and operations.

b) RECPDCL shall act in a socially, economically and environmentally sustainable manner at all times. In normal business activities also RECPDCL shall try to promote sustainable development through sustainability initiatives by conducting business in a manner that is beneficial to both, business and society.

d) As a part of the sustainability initiatives, RECPDCL shall make efforts to give importance to environmental sustainability even in normal mainstream activities by ensuing that internal operations and processes promote renewable sources of energy, reduce/ re-use /recycle waste material, replenish ground water supply, protect' conserve' restore the ecosystem, reduce carbon emissions and help in greening the supply chain.

f) The amount spent on sustainability initiatives in the pursuit of sustainable development while conducting normal business activities would not constitute a part of the CSR spend from 2% of profits as stipulated in the Act and the CSR rules. Nevertheless, RECPDCL may consider to take up such sustainability Initiatives from their normal budgetary expenditure as it would demonstrate the commitment to sustainable development.

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c) The Company shall not lose sight of social and environmental responsibility and commitment to sustainable development even in activities undertaken in pursuance of their normal course of business. National and global sustainability standards which promote ethical practices, transparency and accountability in business may be referred to as guiding frameworks to plan, implement, monitor and report sustainability initiatives.

In the context of 'Sustainability', the Company recognizes the importance of adopting an

enduring and balanced approach to economic activity, social progress and environmental responsibility and accordingly commits itself to conduct its business operations with minimal Impact on the environment and natural resources. For this purpose, the company may undertake projects and' or make investments in activities which mitigate the environmental impact of Its business operations.

e) RECPDCL shall behave in a responsible manner by producing goods and services which are safe and healthy for the consumers and the environment, resources efficient, consumer friendly, and environmentally sustainable throughout their life cycles i.e. from the stage of raw material ex1ractionto production, use' consumption, and final disposal.

g) Sustain ability Initiatives would also include steps taken to promote welfare of

employees, especially women, physically challenged, SC/ST/ OBC categories, by addressing their concerns of safety, security, professional enrichment and healthy working conditions beyond what is mandated by law. However, expenditure on such sustainability initiatives would not qualify as CSR spend.

the Act, RECPDCL shall give priority to the issues which are of foremost concern in the national development agenda. The main focus of CSR and Sustainability policy of RECPDCL shall be on sustainable development and inclusive growth, and to address the basic needs of the deprived, under privileged, neglected and weaker sections of the society which comprise of SC, ST, OBC, minorities, BPL families, old and aged, women/girl child, physically challenged, etc.

2. Local area concepts: RECPDCL by the very nature of its business has no specific geographical area of

commercial operations, may take up CSR activities/ projects at any location of their

choice within the country. As RECPDCL's activities are spread pan India across all the

states and union territories with offices strategically located at all major state

headquarter scattering to the power sector financing requirements of all the local areas

under the jurisdiction of field offices. In the light of such wide spread operations across

the country, RECPDCL may take up CSR and Sustainability activities any wherein the

country and while doing so shall make conscious efforts to make equitable contribution

to all geographical locations with emphasis on backward areas to the extent possible.

3. Approach: The approach of the Company towards Corporate Social Responsibility and Sustainability would be as under

a) RECPDCL shall strive to fully exploit their core competence and mobilize their

resource capabilities in the implementation of CSR activities/projects, as also to

align CSR and Sustainability policy with their business policies and strategies to

the extent possible, and shall select such CSR activities/ projects which can be

better monitored through in-house expertise,

b) The Company may build CSR capacities of their own personnel as well as those of

their implementing agencies through institutions with established track record of

at least three financial years but such expenditure, including expenditure on

administrative overheads shall not exceed five percent of total CSR expenditure of

the company in one financial year,

c) The philosophy and spirit of CSR and Sustainability shall be endeavored to

be understood and imbibed by the employees at all levels and get embedded in

the core values of the company,

d) RECPDCL shall endeavor to extend the reach and oversight to the entire

supply chain network to ensure that as far as possible suppliers, vendors, service

providers, clients, and partners are also committed to the same principles and

standards of Corporate Social Responsibility and Sustainability as the company

itself. RECPDCL shall also endeavor to Initiate and implement measures aimed at

greening the supply chain.

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h) While selecting CSR activities/projects from the activities listed in Schedule VII of

e) To address social, economic and environmental concerns, and in the selection

of activities, the focus would be on the social, economic and environmental

impact thereof, rather than mere output or outcomes. Activities which are ad-

hoc and philanthropic in nature would be avoided.

f) To identify and formulate projects in response to felt societal needs in diverse

areas and to implement them with full involvement and commitment in a time

bound manner.

g) The Company would strive to owe responsibilities with respect to corporate performance measured in terms of economic, social and environmental impact called Triple Bottom line.

h) The Company, with a view to maximizing the shareholders' wealth, would adopt appropriate business processes and strategies which enable the creation and distribution of wealth for the betterment of its both external as well as internal stakeholders through the implementation and integration of ethical systems and sustainable management practices.

i) The Company would make sustained efforts to put balance emphasis on all aspects of CSR and Sustainability equally with regard to their internal operations activities and processes, as well as in their response to externalities.

j) The Company would strive to undertake one or more major project(s) in chosen focus area(s) for development of one or more backward district(s), thus contributing In the long run to socio-economic growth in the backward regions of the country.

k) This Policy would also focus on capacity building, empowerment of communities, inclusive socio-economic growth, environment protection, promotion of green and energy efficient technologies, development of backward regions in the given chosen focus areas and up-liftment of the marginalized and under privileged sections of society.

l) The Company would focus on collaboration and partnership in cases where other agencies/organizations are involved and will act as an agency to ensure delivery of services satisfying strongly felt social and community needs. The Company may also provide financial assistance in the form of grant-In-aid assistance, interest free loans, corpus fund support and soft loan support etc., wherever considered required in order to meet its given objectives.

4. Strategy:

Policy, as projects or programs or activities (either new or ongoing), excluding activities undertaken in pursuance of its normal course of business.

one project for the development of a backward district in the country and at least one project of environmental sustainability.

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a) As a responsible corporate entity, RECPDCL shall consistently strive to meet the

expectations of the society by supporting initiatives for improving infrastructure/ quality of life of society/ community without compromising on ecological issues on sustainable basis. It shall not support activities which may create dissatisfaction within the society and which may affect social harmony in any manner.

b) The CSR activities shall be undertaken by the Company, as per its stated CSR

c) While implementing the CSR projects, RECPDCL shall strive to undertake at least

d) RECPDCL shall constantly endeavour for up-liftment of women and support persons with disabilities particularly in the skill development initiatives.

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Provided that- if, the Board of a company decides to undertake its CSR activities through a company established under section 8 of the Act or a registered trust or a registered society, other than those specified in this sub-rule, such company or trust or society shall have an established track record of three years in undertaking similar programs or projects; and the company has specified the projects or programs to be undertaken, the modalities of utilization of funds of such projects and programs and the monitoring and reporting mechanism.

budget allocated for Corporate Social Responsibilities and Sustainable Developments activities.

Eligible registered trusts/societies/other specialized agencies desirous of seeking funding from CSR for specific projects may submit their detailed proposals addressed to Chairman, RECPDCL, along with details of their credentials (legal status with supporting documents, financials, past track record for similar works undertaken. association with other PSUs/Government bodies, etc. If any) and of the project (project objectives. details of proposed activity along with applicable regulatory approvals/NOC, project location, number of expected beneficiaries, need for the project activity in the proposed location, detailed costing, procurement methodology, sustainability plan, implementation mechanism. timeline, milestones based cash-flow requirement. expected outcomes and impacts, visibility to RECPDCL. parameters to be captured for baseline reporting/periodic progress reporting/outcome reporting. proposed MIS reporting format/ frequency), Projects would be taken up for funding by the Company, subject to

compliance of RECPDCL CSR Policy, availability of budget, especially for the project head, due diligence of the agency, financial and technical appraisal, fund requirement of on-going projects etc.

e) RECPDCL shall endeavour to take up long gestation, high impact projects from the

f) RECPDCL shall support and provide resources for undertaking joint ventures in

Public- Private Partnership/ corporate partnership mode for greater social impact.

g) RECPDCL shall ensure that the surplus arising out of the CSR Projects or

programmes or activities shall not form part of the business profit of the Company.

h) RECPDCL shall support NGOs /non-profit organizations working for welfare of

the marginalized/destitute /underprivileged.

i) The Board of a company may decide to undertake its CSR activities approved by the Corporate Social Responsibility Committee of the Board, through:

(a) A company established under section 8 of the Act or a registered trust or a registered society established by the company, either singly or along with any other company, or

(b) A company established under section 8 of the Act or a registered trust or a registered society, established by Central Government or State Government or any entity established under an Act of Parliament or a State legislature.

j) The Board of Directors may authorize Charmian, RECPDCL to approve, in principle, the proposals for funding under this CSR Policy, formulate new schemes / modify existing schemes wherever required; take decision on the budget broad categories, and to take any action required in order to implement the Company's CSR initiatives. The details of such proposals be submitted to Corporate Social Responsibility Committee of the Board and to the Board, for their review/ratification/approval from time to time.

5. Thrust area: In line with the Schedule-VII of the Companies Act 2013 wherein the activities to be undertaken by the Company are specified, RECPDCL shall take up the activities in the following areas. The items listed below are broad based and must be interpreted liberally so as to capture the essence of the subjects enumerated below:

i. Projects or programs relating to activities specified in Schedule VII to the Act, or

ii. Projects or programs relating to activities undertaken by the Board of Directors of the Company ('the Board') in pursuance of recommendations of CSR Committee of the Board as per declared CSR Policy of the company.

i. Eradicating hunger, poverty and malnutrition, promoting preventive health care and sanitation, including contribution to the Swachh Bharat Kosh set-up by the Central Government for the promotion of sanitation and making available safe drinking water;

ii. Promoting education including special education and employment enhancing vocation skills, especially among children, women, elderly and differently-abled and livelihood enhancement projects;

iii. Promoting gender equality, empowering women, setting up homes and hostels for women and orphans; setting up old age homes, day care centres and such other facilities for senior citizens and measures for reducing inequalities faced by socially and economically backward groups;

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a) The Company would endeavor to adopt an integrated approach to address the

community, societal & environmental concerns by taking up a range of the

following activities, which shall be taken up strategically, in project mode, in a

focused manner to the extent possible.

5.1 A. '’Corporate Social Responsibility (CSR)" means and includes but is not limited to:-

b) Although the Company may select CSR projects from a vast range of available

options, priority would be accorded to activities pertaining to inclusive growth of

society, with special attention to the development of weaker sections of society

and the backward districts of the country in the given chosen/focus area(s) and

environment sustainability.

c) The initiatives under CSR category would focus on capacity building, skill

development and infrastructural development generally for the benefit of the

marginalized and under privileged sections of the local communities and also in

the select backward regions so that avenues are created for their employment

and Income generation, and they also experience empowerment and inclusion in

the economic mainstream.

d) The backward districts are those which have been identified by the Planning

Commission, Government of India for its Backward Region Grant Fund (BRGF) Scheme.

e) Weaker sections would include SC, ST, OBC, minorities, women and children, BPL families, old and aged, physically challenged, etc.

f) CSR projects shall generally be targeted to benefit society/ people at large. However,special focus may be given to people from weaker section of society, women, SC/ST/OBC, children, old age person, persons with disabilities, armed forces veterans, war widows & their dependents and other deprived section of society etc.

g) Assets acquired/ created under the CSR projects may generally be created/ handed over to the Government authority/ agencies/ institutes etc., public authorities, general public, and special focus beneficiaries given in f) etc.

B. In line with the above, the Company shall ensure carrying out CSR projects/ programs in line with activities prescribed under Schedule VII of the said Act, namely:-

and sites of historical importance and works of art; setting up public libraries; promotion and development of traditional art and handicrafts,

vi. Measures for benefit of armed forces veterans, war widows and their dependents;

viii. Contribution to any fund set up by the Central Government for socio-economic

development and relief and welfare of the Scheduled Castes, Scheduled Tribes,

other backward classes, minorities and women;

ix. Contributions or funds provided to technology incubators located within academic institutions which are approved by the Central Government;

i. While activities under taken must be relatable to Schedule VII of the Companies

Act 2013, the entries in the Schedule VII must be interpreted liberally so as to

capture the essence of the subjects enumerated in the said Schedule;

ii. CSR activities should be undertaken by the companies in project/programme

mode. One-off events such as marathons/Awards/charitable

contribution/advertisement/ sponsorship of TV programmes etc. would not be

qualified as part of CSR expenditure

i. Activities undertaken in pursuance of normal course of business of the Company.

ii. Activities that benefit only the employees of the company and their families.

iii. Activities undertaken outside India.

iv. Expenses incurred for the fulfillment of any Act / Statute of regulations (such as

Labour Laws, Land Acquisition Act etc.) would not count as CSR expenditure.

v. Contribution of any amount, directly or indirectly, to any political party under

5.2 The company will abstain from carrying out following activities under CSR:

i. Activities concerned with religion like construction of temple/mosque etc. ii. Activates disturbing social harmony in any manner.

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vii. Training to promote rural sports, nationally recognized sports, paralympic sports and Olympic sports;

xii. Any other activity permitted under any Act/Guidelines issued by Ministry of

Corporate Affairs / Department of Public Enterprises, Government of India / any other statutory authority, as may be amended from time to time.

Section 182 of the Act

vi. Prohibited Activities under CSR

iii. Contribution to Corpus of a Trust/ Society/ Section 8 Companies, established by Central Government or State Government or under an Act of Parliament or a State legislature, will qualify as CSR expenditure, as long as (a) a trust/ society/ section 8 Company etc. is created exclusively for undertaking CSR activities or (b) where the corpus is created exclusively for a purpose directly relatable to a subject covered in Schedule VII of the Act.

x. Rural development projects.

xi. Slum area development.

v. Protection of national heritage, art and culture, including restoration of buildings

iv. Ensuring environmental sustainability, ecological balance, protection of flora and fauna, animal welfare, agro forestry, conservation of natural resources and maintaining quality of soil, air & water; including contribution to the Clean Ganga Fund set-up by the Central Government for rejuvenation of river Ganga;

C. Interpretation of activities prescribed under Schedule VII of the said Act:

D. Provided further that the following will not be included in CSR activities:

6. Allocation of funds (Budget): At least 2% of the average Net Profit of the company earned during the three immediately preceding financial years shall be allocated every financial year for CSR activities. RECPDCL may build CSR capacities of its own personnel as well as those of Implementing Agencies through Academic/Training Institutions with established track record of at least three financial years but such expenditure shall not exceed five percent of its total CSR budget of RECPDCL in one financial year. 6.2 Allocation of budget:

The un-utilized amount if any, will not lapse, if not spent that year and w11ibe carried over to the next year which may accumulate for expenditure on CSR activities, which were planned for implementation in the previous year, but could not be completed due to some reason.

The Company shall endeavor to spend the unutilized/budget of any year within the next two financial years. In case the Company is unable to spend the unutilized budget within the next two financial years, the unspent amount would be utilized/allocated as per extant guidelines on the subject. 6.4 Approving Authorities (Delegation of Power):

Every proposal under CSR activity shall be put up to the CSR committee of Directors after following the usual approval process within RECPDCL. Proposals approved and recommended by the CSR Committee shall be put up to the Board of Directors.

All the CSR project proposals shall be approved by the Board of Directors before award / implementation.

All programmes approved in terms of the above delegation to be subsequently brought to the notice of the CSR Committee of Directors.

For organizing Capacity Building Programmes for employees such as Training programmes, workshops, etc., RECPDCL's internal approval procedure shall be followed. 6.5 Roles and Responsibilities:

1. CSR Unit CSR Unit shall evaluate the project(s)/ scheme(s) and put up its

recommendations after due approval process in RECPDCL to the CSR Sub Committee.

2. CSR Sub

Committee

CSR Sub-Committee shall consider the recommendations of the

CSR Unit for approval and recommend the same to the Board of

Directors (BoD).

3. Board of Directors

BoD shall consider the recommendations of CSR Sub-committee for approval.

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A total annual budget allocation for CSR, as prescribed in the Companies Act, 2013 and as approved by the Board (on recommendation of CSR Committee) shall be earmarked every year for implementation of CSR programmes. The overall expenditure under CSR activity for a single project in a single State shall not be more than 25% of the total budget under CSR activity for that year. 6.3 Un-utilized amount if any:

7. Base line survey & documentation:

a) Before taking up a CSR project, baseline survey/need assessment study may be

carried out by the Company. The Company shall have the flexibility to opt for

other methods, including use of its own in-house expertise and resources for need

assessment studies.

b) The Company may get baseline survey done through their own resources, or

through some specialized agency or having accessed reliable data from recognized

authoritative secondary sources to assess the needs of the intended

beneficiaries for a realistic assessment of the resource inputs required for the

expected level of social/economic / environmental impact through the

implementation.

c) Documentation relating to CSR initiatives shall be put in public domain viz. the Company's annual report.

8. Implementation: While identifying the initiatives under this Policy, the Company would consider the following broad parameters in identification / selection of schemes/projects:

a) RECPDCL shall take steps to implement the CSR agenda within the organization through the active involvement of the employees, who are important internal stakeholders.

b) RECPDCL shall device internal communication strategies to spread awareness of

CSR amongst the employees, providing them with education and training necessary for attitudinal change and their conversion to socially and environmentally sustainable methods and practices of doing business, and adopting motivational tools to provide just the right momentum to push all such initiatives.

c) States/areas/regions where there is shortage of resources, mainly in regard to the

defined thrust areas in the CSR Policy, shall be identified. The assistance should be project-based with a thrust on creating sustainable and replicable models.

d) The Company may take up the implementation of CSR activity with its manpower and resources or may engage external specialized agency to execute such projects

and monitoring may be done by internal manpower and/or by external agency.

e) CSR activities should be undertaken only through Govt. implementing agencies, and deviations, if any, in this regard should be submitted for approval of Board of Directors on case to case basis. In case of need based project required to be executed through implementing agencies other than Govt. implementing agencies, CSR unit shall invite Expression of Interest (EOI). However, the condition of inviting EOI shall not be applicable where the Implementing Agencies are Govt. /Semi Govt. Bodies. Similar condition shall prevail in case of Baseline Survey/DPR & Impact Assessment Studies.

f) CSR Unit should identify and obtain suitable proposals in the identified thrust

areas from various sources i.e. Central govt. agencies, State govt. agencies, PSUs, reputed organizations etc.

g) At any stage, if the CSR Unit feels the need, they can engage the services of an outside expert in the field to assist them in evaluation or selection of projects etc.

h) A suitable mechanism shall also be developed to identify and screen the proposals

from time to time.

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i) CSR proposals shall be first examined by the CSR Sub- Committee. After obtaining approval CSR Sub Committee, the proposals shall be put up for consideration & approval of the Board of Directors (BoD).

k) Efforts shall be made to the extent possible to define the following while identifying the CSR projects:

Programme objective Baseline survey Implementation schedule

Responsibilities and Authorities Payment terms Major results expected and measurable

outcome 9. Monitoring:

a) In terms of the Rules under Companies Act, 2013, the Corporate Social

Responsibility Committee of the Board shall institute a transparent monitoring

mechanism for implementation of the CSR projects or activities undertaken by

the company.

b) As most of the CSR initiatives are taken up by the Company in the chosen

areas/locations in project mode, in association with select specialized agencies and

the disbursements of CSR funds for implementing the projects are linked to

achievement of prescribed milestones, there is critical need for implementation

progress/ monitoring of project from time to time, so as to ensure achievement of

project objectives in line with disbursement of grant funds. Monitoring is also

essential to assess if the progress is on expected lines in terms of timelines,

budgetary expenditure and achievement of physical targets. Monitoring should be

done periodically with the help of identified key performance indicators; the

periodicity being determined largely by the nature of performance indicators.

c) The Company shall carry out implementation/monitoring of the CSR projects in

line with Implementation Progress/Monitoring Guidelines for CSR Projects as noted

and approved by the Board.

d) The Company may conduct, through its own manpower or by an external agency,

periodic monitoring of CSR projects concurrently with implementation, or

otherwise, to assess if the progress is on expected lines in terms of timelines,

budgetary expenditure and achievement of physical targets with the help of

identified key performance indicators; the periodicity being determined largely by

the nature of performance indicators. The Company may ensure that monitoring

shall be done in project mode with continuous feedback mechanism, and recourse

always available for mid-course correction in implementation, whenever required.

e) The Implementing Agency shall be responsible for monitoring the project and shall

provide periodic reports to RECPDCL on the implementation part. The agency shall

ensure that the project gets completed within the specified time period. RECPDCL

may appoint specialized agency/consultants for monitoring the projects, if

required.

The progress report of the activities undertaken shall be reported as under:

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j) A Memorandum of Agreement (MOA) and other legal documents to safeguard the interest of the Company shall be signed with the implementation/ coordinating

agency. Legal documentation shall be carried out by CSR Unit, after the same is duly vetted by L&D Unit.

i) Quarterly report to CSR Committee.

ii) Annual Report of CSR to Board of Directors.

10. Impact assessment mechanism:

a) Specialized agencies such as Govt./ Semi govt. organizations/ PSUs/ NGOs/

Reputed Institutions and Academic Organizations etc. shall be work as Impact

assessment agency to RECPDCL.

11. General:

a) The CSR Policy and report on CSR shall be displayed on the Company's website.

b) The Company may publish a Corporate Brochure from time to time, highlighting

the CSR initiatives undertaken, for dissemination to various stakeholders.

c) CEO, RECPDCL is empowered to make any supplementary rules/orders to

ensure effective implementation of the CSR policy.

d) Amendment in the policy may be done jointly with the approval of CSR Sub-Committee and Board of Directors.

e) The policy will be reviewed or amended based on the circulars issued by Ministry of Corporate Affairs (MCA) from time to time.

f) Any or all provisions of the CSR policy would be subject to revision/amendment in

accordance with the guidelines on the subject as may be issued by the

Government / DPE, from time to time.

h) The policy will supersede/override all previous policies on Corporate Social Responsibility and Sustainable Development.

i) In case of any doubt with regard to any provision of the policy and also in respect of matters not covered herein, a reference shall be made to CSR Unit. In all such matters, the interpretation and decision of the Board of Director of CSR shall be final.

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b) To the extent possible, RECPDCL may get a baseline/ need assessment survey

done prior to the selection of any CSR activity. Similarly, RECPDCL may get an

impact assessment study done by external agencies of the CSR activities / projects

undertaken by them. Impact assessment is mandatory for mega projects, the

threshold value of which shall bean overall Implementation cost of Rs. 100 lakhs

on the CSR funding done by RECPDCL in project mode. However, the expenditure

incurred on baseline survey and impact assessment study should be within the

overall limit of 5% of administrative overheads of CSR spend as provided for under

the CSR Rules.

g) The Company reserves the right to modify, add, delete or amend any of the

provisions of this Policy.

Appendix-I

RURAL ELECTRIFICATION CORPORATION LIMITEDFORMAT FOR SUGGESTION FROM STAKEHOLDERIS ON

CSR & SUSTAINABILITY ASPECTS

1. Name of the stake holder

(Name, designation and name of theOrganisation in cases other thanindividual beneficiaryl ies)

2. Address

3. Contact details:- Phone & Mobile No.

4. Category of Stakeholder-Govt. I NGOI Beneficiary I Any otherstakeholder (To Specify)

5. Relevant practice of REC CSR & ."

Sustainability on which suggestion ismade

6. Suggestion

Date:

Place:

(Signature)*,.'

*with stamp in cases other than individual beneficiary/ies.21

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Enclosure I

FORMAT FOR THE ANNUAL REPORT ON CSR ACTIVITIES TO BE INCLUDEDINTHE BOARD'S REPORT

1. A brief outline of the company's CSR policy. including overview of projects or programsproposed to be undertaken and a reference to the web-link to the CSR policy and projectsor programs.

2. The Composition of CSR Committee.

3. Average net profit of the company for last three financial years.

4. Prescribed CSR expenditure (two percent of the amount as in item 3 above)

5. Details of CSR spent during the financial year.

(a) Total amount to be spent for the financial year;

(b) Amount unspent, if any;

(c) Manner in which the amount spent during the financial year is detailed below.

(1) (2) (3) (4) (5) (6) (7) (8)S.No CSR Sector Projects or programs Amount Amount spent on the Cumulative Amount

project or in which (1) Local area or outlay projects or programs expenditure spent:activity the other (budget) Sub-heads: upto the Direct oridentified. project (2) Specify the State project or reporting through

is " (1) Direct period. implemenand District programscovered where projects or wise expenditure ting

programs were on projects agency*.undertaken or program.

(2) Overheads:

1

2

3

TOTAL

* Give details of implementing agency:

6. In case the company has failed to spend the two per cent of the average net profit of thelast three financial years or any part thereof, the company shall provide the reasons for notspending the amount in its Board report.

22

15/46

7. A responsibility statement of the CSR Committee of the Board that the implementation andmonitoring of CSR policy, is in compliance with CSR objectives and Policy of thecompany.

Sd/- Sd/- Sd/-,

(Chief Executive Officer or (Chairman, CSR Committee (Person specified underManaging Director or of the Board) clause (d) of sub-section (1)Director) of section 380 of the Act)

(wherever applicable)

23

16/46

Enclosure II

Text of Section 135 of the Companies Act, 2013

135. Corporate Social Responsibility

(1) Every company having net worth of rupees five hundred crore or more, or turnover ofrupees one thousand crore or more or a net profit of rupees five crore or more during anyfinancial year shall constitute a Corporate Social Responsibility Committee of the Boardconsisting of three or more directors, out of which at least one director shall be anindependent director.

(2) The Board's report under sub-section (3) of section 134 shall disclose the compositionof the Corporate Social Responsibility Committee.

(3) The Corporate Social Responsibility Committee shall,-

(a) formulate and recommend to the Board, a Corporate Social ResponsibilityPolicy which shall indicate the activities to be undertaken by the company asspecified in Schedule VII;

(b) recommend the amount of expenditure to be incurred on the activities referredto in clause (a); and

(c) monitor the Corporate Social Responsibility Policy of the company from timeto time.

(3)The Board of every company referred to in sub-section (1) shall,-

(a) after taking into account the recommendations made by the Corporate SocialResponsibility Committee, approve the Corporate Social Responsibility Policy forthe company and disclose contents of such Policy in its report and also place iton the company's website, if any, in such manner as may be prescribed; and

(b) ensure that the activities as are included in Corporate Social ResponsibilityPolicy of the company are undertaken by the company.

(5) The Board of every company referred to in sub-section (1), shall ensure that thecompany spends, in every financial year, at least two per cent. of the average net profitsof the company made during the three immediately preceding financial years, inpursuance of its Corporate Social Responsibility Policy:

Provided that the company shall give preference to the local area and areas around itwhere it operates, for spending the amount earmarked for Corporate SocialResponsibility activities:

Z4

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Provided further that if the company fails to spend such amount, the Board shall, in itsreport made under clause (0) of sub-section (3) of section 134, specify the reasons fornot spending the amount.

Explanation.-For the purposes of this section "average net profit" shall be calculated inaccordance with the provisions of section 198.

25

18/46

\\

[To be published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section -(ii))

Government of India

Ministry of Corporate Affairs

Notification

New Delhi the 2.., It f~, ----'

5.0. {E).- In exercise of the powers conferred by sub-section (3) of section 1 of the

Companies Act, 2013 (18 of 2013), the Central Government hereby appoints the 1'( day of April,

2014 as the date on which the provisions of section .135 and Schedule VII of the said Act shall come

into force.

[File No. 1 /15 /2013-CL. V]

tL.RENUKA KUMAR,

Joint Secretary to the Government of India

19/46

[TO BE PUBLISHED IN THE GAZETTE OF INDIA, EXTRAORDINARY, PARTII, SECTION 3, SUB-SECTION (i)l

Government of IndiaMinistry of Corporate Affairs

Notifica tion

New Delhi, dated27f t~2014

G.S.R. __ (E). - In exercise of the powers conferred under section 135 and

sub-sections (1) and (2) of section 469 of the Companies Act, 2013 (18 of

2013), the Central Government hereby makes the following rules, namely: -

1. Short title and commencement. - (1) These rules may be called the

Companies (Corporate Social Responsibility Policy) Rules, 2014.

(2) They shall come into force on the 1st day of April, 2014.

2. Definitions.- (1) In these rules, unless the context otherwise requires,

(a) "Act" means the Companies Act, 2013;

(b) "Annexure" means the Annexure appended to these rules;

(c) "Corporate Social Responsibility (CSR)" means and includes but

is not limited to :-

(i) Projects or programs relating to activities specified In

Schedule VII to the Act.; or

(ii] Projects or programs relating to activities undertaken by

the board of directors of a company (Board) in pursuance of

recommendations of the CSR Committee of the Board as per

declared CSR Policy of the company subject to the condition

20/46

that such policy will cover subjects enumerated in Schedule

VII of the Act.

(d) "CSR Committee" means the Corporate Social Responsibility Committee

of the Board referred to in section 135 of the Act.

(e) "CSR Policy" relat.es t.o t.he activities to be undertaken by the company

as specified in Schedule VII to the Act and the expenditure thereon,

excluding activities undertaken in pursuance of normal course of

business of a company;

(f) "Net profit" means the net profit of a company as per its financial

statement prepared in accordance with the applicable provisions of the

Act, but shall not include the following, namely :-

(i) any profit arising from any overseas branch or branches of the

company, whether operated as a separate company or otherwise;

and

(ii) any dividend received from other companies in India, which are

covered under and complying with the provisions of section 135

of the Act:

Provided that net profit in respect of a financial year for which the

relevant financial stat.ements were prepared in accordance with the

provisions of the Companies Act, 1956, (1 of ]956) shall not be required

to be re-calculated in accordance wit.h the provisions of the Act:

Provided further that in case of a foreign company covered under

these rules, net profit means the net profit of such company as per

profit and loss account prepared in terms of clause (a) of sub-section

(1) of section 381 read with section 198 of the Act.

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(2) Words and expressions used and not defined in these rules but defined

in the Act shall have the same meanings respectively assigned to them in the

Act.

3. Corporate Social Responsibility ..

(1) Every company including its holding or subsidiary, and a foreign company

defined under clause (42) of section 2 of the Act having its branch office or

project office in India, which fulfills the criteria specified in sub-section (1) of

section 135 of the Act shall comply with the provisions of section 135 of the

Act and these rules:

Provided that net worth, turnover or net profit of a foreign company of

the Act shall be computed in accordance with balance sheet and profit and

loss account of such company prepared in accordance with the provisions of

clause (a) of sub-section (1) of section 381 and section 198 of the Act.

(2) Every company which ceases to be a company covered under sub-

section (1) of section 135 of the Act for three consecutive financial years shall

not be required to -

(a) constitute a CSR Committee; and

(b) comply with the provisions contained in sub-section (2) to (5) of the said

section,

till such time it meets the criteria specified in sub-section (1) of section 135.

4. CSR Activities.-

(1) The CSR activities shall be undertaken by the company, as per its

stated CSR Policy, as projects or programs or activities (either new or ongoing),

excluding activities undertaken in pursuance of its normal course of

.business.

(2) The Board of a company may decide to undertake its CSR activities

approved by the CSR Committee, through a registered trust or a registered

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society or a company established by the company or its holding or subsidiary

or associate company under section 8 of the Act or otherwise:

Provided that-

(i ) if such trust, society or company is not established by the company or

its holding or subsidiary or associate company, it shall have an

established track record of three years in undertaking similar programs

or projects;

(ii) the company has specified the project or programs to be undertaken

through these entities, the modalities of utilization of funds on such

projects and programs and the monitoring and reporting mechanism.

(3) A company may also collaborate with other companies for undertaking

projects or programs or CSR activities in such a manner that the CSR

Committees of respective companies are in a position to report separately on

such projects or programs in accordance with these rules.

(4) Subject to provisions of sub-section (5) of section 135 of the Act, the

CSR projects or programs or activities undertaken in India only shall amount

to CSR Expenditure.

(5) The CSR projects or programs or activities that benefit only the

employees of the company and their families shall not be considered as CSR

activities in accordance with section 135 of the Act.

(6) Companies may build CSR capacities of their own personnel as well as

those of their Implementing agencies through Institutions with established

track records of at least three financial years but such expenditure shall not

exceed five percent. of total CSR expenditure of the company in one financial

year.

(7) Contribution of any amount directly or indirectly to any political party

under section 182 of the Act, shall not be considered as CSR activity.

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5. CSR Committees.-

(i) an unlisted public company or a private company covered under sub-

(1) The companies mentioned in the rule 3 shall constitute CSR Committeeas under.-

section (1) of section 135 which is not required to appoint an independent

director pursuant- to sub-section (4) of section 149 of the Act, shall have its

CSR Committee without such director;

(ii) a private company having only two directors on its Board shall

constitute its CSR Committee with two such directors;

(iii) with respect to a foreign company covered under these rules, the CSR

Committee shall comprise of at least two persons of which one person shall

be as specified under clause (d) of sub-section (1) of section 380 of the Act

and another person shall be nominated by the foreign company.

(2) The CSR Committee shall institute a transparent monitoring

mechanism for implementation of the CSR projects or programs or activities

undertaken by the company.

6. CSR Policy.-

(1) The CSR Policy of the company shall, inter-alia, include the following,

namely:-

(a] a list of CSR projects or programs which a company plans to

undertake falling within the purview of the Schedule VII of the Act,

specifying modalities of execution of such project or programs and

implementation schedules for the same; and

(b) monitoring process of such projects or programs:

Provided that the CSR activities does not include the activities

undertaken in pursuance of normal course of business of a company.

24/46

Provided further that the Board of Directors shall ensure that activities

included by a company in its Corporate Social Responsibility Policy are related

to the activities included in Schedule VII of the Act.

(2) The CSR Policy of the company shall specify that the surplus arising out

of the CSR projects or programs or activities shall not form part of the

business profit of a company.

7. CSR Expenditure.- CSR expenditure shall include all expenditure

including contribution to corpus for projects or programs relating to CSR

activities approved by the Board on the recommendation of its ~SR

Committee, but does not include any expenditure on an item not in conformity

or not in line with activities which fall within the purview of Schedule VII of

the Act.

8. CSR Reporting.-

(1) The Board's Report of a company covered under these rules pertaining to

a financial year commencing on or after the 1SI. day of April, 2014 shall include

an annual report on CSR containing particulars specified in Annexure,

(2) In case of a foreign company, the balance sheet filed under sub-clause

(b) of sub-section (1) of section 381 shall contain an Annexure regarding

report on CSR.

9. Display of CSR activities on its website. -The Board of Directors of the company shall, after taking into account the

recommendations of CSR Committee, approve the CSR Policy for the company

and disclose contents of such policy in its report and the same shall be

displayed on the company's website, if any, as per the particulars specified in

the Annexure.

(File No. Ij16!2013-CL.V)

(Renk-Joint Secretary to the Government of India

25/46

ANNEXURE

FORMAT FOR THE ANNUAL REPORT ON CSR ACTIVITIES TO BE

INCLUDED IN THE BOARD'S REPORT

1. A brief outline of the company's CSR policy, including overview of

projects or programs proposed to be undertaken and a reference to

the web-link to the CSR policy and projects or programs.

2. The Composition of the CSR Committee.

3. Average net profit of the company for last three financial years

4. Prescribed CSR Expenditure (two per cent. Of the amount as in item 3

above)

5. Details of CSR spent during the financial year.

(a) Total amount to be spent for the financial year;

(b)Amount unspent, if any;

(c) Manner in which the amount spent during the financial year is

detailed below.

(l) I (3) I (5) (6)_ ..

(7) I(2) (4) II

S. CSR Sector Projects Amount Amount Curnu l-

No project in or outlay spent on ativewhich (budget) the expendor the programs -iture

activity Project (1) Local project projects upto toidentified. is area or or orcovered other programs the

wiseprograms I report-

i ing(2) Spe Sub- period.cify the heads:,State anddistrict (l)Directwhere expenditure

projects or onprograms projects

Iwas orundertaken programs.

I(2)Overhead

.... c--- s·1

(8)---------jAmount spent:Direct or throughimplemen tingagency

26/46

*Give details of implementing agency:

6. In case tb.e company has failed to spend the two per cent. of the

average net profit of the last three financial years or any part thereof,

the company shall provide the reasons for not spending the amount in

its Board report.

7. A responsibility statement of the CSR Committee that the

implementation and monitoring of CSR Policy, is in compliance with

CSR objectives and Policy of the company .

.----------------------~----------~-------------~~------------~Sd/- Sd/- Sd/-

(Person specified under clause (d)

of sub-section (1) of section 380

of the Act)

(Chief Executive Officer or (Chairman

Managing

Director)

Director or CSR

Committee)

(wherever applicable)

27/46

r:t:::.NC.LO St. R-£ - tv-

F. No.15 (13)/2013-DPE (GM)Government of india

Ministry of Heavy Industries & Public Enterprises(Department of Public Enterprises)

*******Public Enterprises 8hawan

Block No. 14, C.G.O. ComplexLodhi Road, New Delhi- 110 003

Dated the 21st October, 2014

OFFICE MEMORANDUM

Subject: Guidelines on Corporate Social Responsibility and Sustainability for CentralPublic Sector Enterprises.

The undersigned is directed to enclose the "Guidelines on Corporate SocialResponsibility and Sustainability for Central Public Sector Enterprises". These guidelineswill supersede the guidelines on Corporate Social Responsibility and Sustainability issuedby DPE vide OM No. 15 (7)/2012-DPE (GM)-GL-104 dated the iz" April, 2013. Theguidelines would supplement CSR Rules (under Companies Act, 2013) notified byMinistry of Corporate Affairs and are issued in consultation with them

2. These guidelines have the approval of Minister (Heavy Industries & PublicEnterprises) and are effective from 1.4.2014.

3. All the administrative Ministries I Departments are requested to bring theseguidelines to the notice of CPSEs under their respective jurisdiction for necessary action.

\ ~, .\~~)M'J

(Umesh Dongre)Director

Telefax 24363066

To,

Secretaries of all administrative Ministries! Departments concerned with CPSEs.

Copy to: Chief Executives of all CPSEs.)

.' .',

28/46

Guidelineson

Corporate Social ResponsibilityAnd

SustainabilityFor

Central Public Sector Enterprises

w.e.f. 01.04.2014

Department of Public Enterprises

29/46

1.0. Background

1.1. The Government of India enacted the Companies Act 2013 in August2013. Section 135 of the Companies Act 2013 (hereinafter referred to as 'the Act')deals with the subject of Corporate Social Responsibility (CSR). It lays down thequalifying criteria based on net worth, turnover, and net profit for companies whichare required to undertake CSR activities and, interalia, specifies the broad modalitiesof selection, implementation and monitoring of the CSR activities by the Boards ofDirectors of companies. The activities which may be included by companies in theirCSR policies are listed in Schedule VII of the Act. The provisions of Section 135 ofthe Act and Schedule VII of the Act apply to all companies, including CPSEs.

1.2. The Ministry of Corporate Affairs has formulated CSR Rules (hereinafterreferred to as the 'CSR Rules'), under the provisions of the Act and issued the sameon 27.2.2014. The CSR Rules are applicable to all companies, including CPSEsw.e.f. 1.4.2014.

1.3 All CPSEs shall have to comply with the provisions of the Act and the CSRRules. Any amendment notified by the Ministry of Corporate Affairs in the CSRRules, or in Schedule VII of the Act will also be binding on the CPSEs.

1.4 Prior to the notification of CSR Rules, OPE Guidelines on CSR andSustainability issued in December 2012, were applicable to CPSEs w.e.f.01.04.2013. In OPE guidelines, CSR and sustainable development were treated ascomplementary and, therefore, dealt with together. CSR was seen as an importantconstituent of the overarching framework of sustainability. The present guidelines ofOPE are also intended to reinforce the complementarity of CSR and sustainabilityand to advise the CPSEs not to overlook the larger objective of sustainable<development in the conduct of business and in pursuit of CSR agenda.

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2.0. OPE Guidelines on CSR and Sustainability for CPSEs

2.1. The CSR provisions of the Act, Schedule VII of the Act, and the CSR Rulesare inviolable. However, in addinon to the CSR provisions of the Act and the CSRRules, the Department of Public Enterprises (OPE) has formulated Guidelines onCSR and Sustainability (hereinafter referred to as 'the Guidelines') which areapplicable to CPSEs. It is clarified that the Guidelines do not supersede or overrideany provision of the Act. or Schedule VII of the Act, or the CSR Rules, but will onlysupplement them. The Guidelines are in the nature of initiatives or endeavour whichthe key stakeholders expect of CPSEs in the discharge of their Corporate SocialResponsibility. Any possible situation in which there may be a conflict between theCSR Rules and the Guidelines, is not envisaged. However, it is clarified that in caseof any perceived conflict between the CSR Rules and the Guidelines, the formershall prevail in all circumstances.

2.2 The term Sustainability has been used in conjunction with CSR in the title ofDPE Guidelines because CSR activities which are envisaged in the Act and in theCSR Rules can be supplemented with sustainability initiatives as both aim atachieving sustainable development goals. In the Guidelines the need for takingsustainability initiatives is emphasised in addition to the requirement of mandatorycompliance with the CSR Rules. The Guidelines are aimed at providing an overarching framework of Sustainability within which CSR is firmlyembedded. Therefore, CPSEs are advised to read the CSR Rules together with theGuidelines to clearly understand what is expected of them by the stakeholders.

2.3 The Act enjoins all companies to have a CSR policy, and the informationwhich needs to be furnished in the CSR policy is specified in the CSR Rules. Thereis to be no deviation from the mandatory provisions of the Act and the CSR Rules inthis regard. However, the CSR policy document of a CPSE should also include aVision and mission statement of how the CPSE proposes to comply with theGuidelines. The broad sustainability initiatives which a CSPE intends to undertakeshould also find mention therein. Since CSR and Sustainability issues arecomplementa -y in nature, and both are to be mentioned in the policy document, it issuggested that it may be referred to as 'CSR and Sustainability' policy. The changein nomenclature of the policy document and its information expanse would not in anyway detract from the CPSE's commitment to CSR. or dilute its content. Rather, itwould only indicate the willingness of the CPSE to voluntarily take a few extra stepsto address social. economic and environmental concerns, which may be beyond therealm of CSFt as envisaged in the Act and the CSR Rules, but are neverthelessworthy of attention for promotion of sustainable development in its diversedimensions.

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2.4 The following Guidelines applicable to all CPSEs are generally in the natureof guiding principles. The guidelines contain certain additional requirements asmentioned below:

i) It is mandatory for all profit making CPSEs to undertake CSR activities asper the provisions of the Act and the CSR Rules. Even the CPSEs which are notcovered under the eligibility criteria based on threshold limits of net-worth, turnover,or net profit as specified by Section 135 (1) of the Act, but which made profit in thepreceding year,would also be required to take up CSR activities as specified in theAct and the CSR Rules, and such CPSEs would be expected to spend at least 2% ofthe profit made in the preceding year on CSR activities.

ii) All CPSEs must adopt a CSR and Sustainability Policy specific to theircompany with the approval of the Board of Directors. The philosophy and spirit ofCSR and Sustainability must be firmly ingrained in the policy and it must beconsistent with the CSR provisions of the Act, Schedule VII of the Act, CSR Rules,the Guidelines, and the policy directions issued by the Government from time totime. The CSR and Sustainability policy of a CPSE should serve as the referraldocument for planning its CSR activities in accordance with Schedule VI! of the Actand give a road map for formulation of actionable plans.

iii) If the CPSEs feel the necessity of taking up new CSR activities / projectsduring the course of a year, which are in addition to the CSR activities alreadyincorporated in the CSR policy of the company, the Board's approval of suchadditional CSR activities would be treated as amendment to the policy.

iv) It would be mandatory for all CPSEs which meet the criteria as laid down inSection 135('1) of the Act, to spend at least 2% of the average net profits of the threeimmediately preceding financial years in pursuance of their CSR activities asstipulated in the Act and the CSR Rules. This stipulated percentage of average netprofits is to be spent every year In a manner specified in the Act and CSR Rules. Incase a company fails to spend such amount, it shall have to specify the reasons fornot spending it. However. in case of CPSEs mere reporting and explaining thereasons for rot spending this amount in a particular year would not suffice and theunspent CSR amount in a particular year would not lapse. It would instead becarried forward to the next year for utilisation for the purpose for which it wasallocated.

v) Wrile selecting CSR activities I projects from the activities listed inSchedule VII of the Act, CPSEs should give priority to the issues which are offoremost concern in the national development agenda, like safe drinking water for all,provision of toilets especially for girls, health and sanitation, education, etc. The mainfocus of CSR and Sustainability policy of CPSEs should be on sustainabledevelopment and inclusive growth, and to address the basic needs of the deprived,

32/46

under privileged, neglected and weaker sections of the society which comprise ofSC, ST, OBCs, minorities. BPL families, old and aged, women I girl child, physicallychallenged, etc.

vi) For CPSEs to fully exploit their core competence and mobilize theirresource capabilities in the implementation of CSR activities / projects, they areadvised to align their CSR and Sustainability policy with their business policies andstrategies to the extent possible, and select such CSR activities! projects which canbe better monitored through in-house expertise.

vii) 1\11 CPSEs are expected to act in a socially, economically andenvironmentally sustainable manner at all times. Even in their normal businessactivities, public sector companies should try to promote sustainable developmentthrough sustainability initiatives by conducting business in a manner that is beneficialto both, business and society. They are advised not to lose sight of their social andenvironmental responsibility and commitment to sustainable development even inactivities undertaken in pursuance of their normal course of business. National andglobal sustainability standards which promote ethical practices, transparency andaccountability in business may be referred to as guiding frameworks to plan,implement, monitor and report sustainability initiatives. But the amount spent onsustainability initiatives in the pursuit of sustainable development while conductingnormal business activities would not constitute a part of the CSR spend from 2% ofprofits as stipulated in the Act and the CSR Rules.

viii) As a part of their sustainability initiatives CPSEs are expected to giveimportance to environmental sustainability even in their normal mainstream activitiesby ensuring that their internal operations and processes promote renewable sourcesof energy, reduce Ire-use! recycle waste material, replenish ground water supply,protect! conserve / restore the ecosystem, reduce carbon emissions and help ingreening the supply chain. CPSEs are expected to behave in a responsible mannerby producing goods and services which are safe and healthy for the consumers andthe environment. resource efficient, consumer friendly, and environmentallysustainable throughout their life cycles i.e. from the stage of raw material extractionto production, use / consumption. and final disposal. However, such sustainabilityinitiatives will not be considered as CSR activities as specified in the CSR Rules. andthe expenditure inourred thereon would also not constitute a part of the CSRspend. Nevertheless, CPSEs are encouraged to take up such sustamabilityinitiatives from their normal budgetary expenditure as it would demonstrate theircommitment to sustainable development.

ix) Sustainability initiatives would also include steps taken by CPSEs topromote welfare of employees, especially women, physically challenged, SC I ST IOBC categories. by addressing their concerns of safety, security, professionalenrichment end healthy working conditions beyond what is mandated by

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law. However, expenditure on such sustainability initiatives would not qualify asCSR spend.

x) The philosophy and spirit of CSR and Sustainability should be understoodand imbibed by the employees at al! levels and get embedded in the core values ofthe company.

xi) CPSEs should extend their reach and oversight to the entire supply chainnetwork to ensure that as far as possible suppliers, vendors, service providers,clients, and partners are also committed to the same principles and standards ofcorporate social responsibility and sustainability as the company itself. CPSEs areencouraged to Initiate and implement measures aimed at .greening' the supplychain.

xii) As mentioned in the Act, CPSEs should give preference to the 'local area'in selecting the location of their CSR activities. It is desirable that the Board ofDirectors of CPSEs define the scope of the 'Iocal area' of their commercial units Jplants / projects, keeping in view the nature of their commercial operations, theextent of the impact of their operations on society and environment, and thesuggestions I demands of the key stakeholders, especially those who are directlyimpacted by the company's commercial operations / activities. The definition of 'localarea' may form part of the CSR policy of the CPSE.

xiii) A'ter giving due preference to the local area, CPSEs may also undertakeCSR activities anywhere in the country. The Board of Directors of each CPSE mayalso decide on an indicative ratio of CSR spend between the local area and outsideit, and this may be mentioned in the CSR policy of the CPSE. CPSEs, which by thevery nature of their business have no specific geographical area of commercialoperations. may take up CSR activities / projects at any location of their choice withinthe country.

xiv) As far as possible, CPSEs should take up the CSR activities inproject, which entails planning the stages of execution in advance by fixing targets atdifferent milestones, with pre-estimation of quantum of resources requirea within theallocated budget, and having a definite time span for achieving desired outcomes.

xv) CPSEs should devise a communication strategy for regular dialogue andconsultation with key stakeholders to ascertain their views and suggestionsregarding the CSR activities and sustainability initiatives undertaken by thecompany. However, the ultimate decision in the selection and implementation ofCSR activities would be that of the Board of the CPSE.

xvi) As per the CSR Rules, all companies are required to include an annualreport on CSR in their Board's Report. The template I format for reporting CSRactivities as provided by CSR Rules should be strictly adhered to. However. CPSEsshall also have to include in the Board's Report a brief narrative on the action taken

t(I

34/46

for the implementation of the Guidelines so that the stakeholders are informed of notonly the CSI~ activities but also of the sustainability initiatives taken by theCPSEs. CPSEs are further advised to prepare an Annual Sustainability Report,which would go a long way in imparting greater transparency and accountability tothe company's operations, apart from improving the brand image.

xvii) It is desirable that CPSEs get a baseline/ need assessment survey doneprior to the selection of any CSR activity. It is also desirable that CPSEs should getan impact assessment study done by external agencies of the CSR activities /projects undertaken by them. Impact assessment is mandatory for mega projects,the threshold value of which can be determined by the Board of a CPSE andspecified in its CSR and Sustainability policy. However, the expenditure incurred onbaseline survey and impact assessment study should be within the overall limit of 5%of administrative overheads of CSR spend as provided for under the CSR Rules

xviii) Within the provisions of the Act, Schedule VII of the Act, and the CSRRules, CPSEs are encouraged to take up CSR activities / projects in collaborationwith other CPSEs for greatei social. economic and environmental impact of theirCSR activities / projects.

xix) CSR projects taken up by CPSEs in 2013-14 under OPE guidelines onCSR & Sustainability which were effective from 1st April 2013, may be continued tilltheir completion. However, CPSEs to ensure that all new CSR activities / projectsare in accordance with the CSR Rules.

xx) CPSEs which are statutory corporations should also comply with theprovisions of the Act, CSR Rules and the Guidelines.

xxi) These guidelines wit! s.ipersede the guidelines I circulars / instructionsissued earlier by OPE on the subject of CSR and Sustainability.

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General Circular No. 21/2014

No. 05/01/2014- CSRGovernment of India

Ministry of Corporate Affairs

5th Floor, 'A' Wing,Shastri Bhawan, Dr. R. P. Marg

New Delhi - 110001Dated: 18th June, 2014

To,All Regional Director,All Registrar of Companies,All Stakeholders

Subject: - Clarifications with regard to provisions of Corporate Social Responsibility under

section 135 of the Companies Act, 2013.

Sir,

This Ministry has received several references and representation from stakeholders

seeking clarifications on the provisions under Section 135 of the Companies Act, 2013 (herein

after referred as 'the Act') and the Companies (Corporate Social Responsibility Policy) Rules,

2014, as well as activities to be undertaken as per Schedule VII of the Companies Act, 2013.

Clarifications with respect to representations received in the Ministry on Corporate Social

Responsibility (herein after referred as ('CSR') are as under:-

(i) The statutory provision and provisions of CSR Rules, 2014, is to ensure that while

activities undertaken in pursuance of the CSR policy must be relatable to Schedule VII

of the Companies Act 2013, the entries in the said Schedule VII must be interpreted

liberally so as to capture the essence of the subjects enumerated in the said

Schedule. The items enlisted in the amended Schedule VII of the Act, are broad-based

and are intended to cover a wide range of activities as illustratively mentioned in the

Annexure.

Contd ....

36/46

-2-

(ii) It is further clarified that CSR activities should be undertaken by the companies in

project/ programme mode [as referred in Rule 4 (1) of Companies CSR Rules, 2014].

One-off events such as marathons/ awards/ charitable contribution/ advertisement/

sponsorships of TV programmes etc. would not be qualified as part of CSR

expenditure.

(iii) Expenses incurred by companies for the fulfillment of any Act/ Statute of regulations

(such as Labour Laws, Land Acquisition Act etc.) would not count as CSR expenditure

under the Companies Act.

(iv) Salaries paid by the companies to regular CSR staff as well as to volunteers of the

companies (in proportion to company's time/hours spent specifically on CSR) can be

factored into CSR project cost as part of the CSR expenditure.

(v) "Any financial year" referred under SUb-Section (1) of Section 135 of the Act read with

Rule 3(2) of Companies CSR Rule, 2014, implies 'any of the three preceding financial

years'.

(vi) Expenditure incurred by Foreign Holding Company for CSR activities in India will

qualify as CSR spend of the Indian subsidiary if, the CSR expenditures are routed

through Indian subsidiaries and if the Indian subsidiary is required to do so as per

section 135 of the Act.

(vii) 'Registered Trust' (as referred in Rule 4(2) of the Companies CSR Rules, 2014) would

include Trusts registered under Income Tax Act 1956, for those States where

registration of Trust is not mandatory.

Contd ....

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-3-

(viii) Contribution to Corpus of a Trust/ society/ section 8 companies etc. will qualify as CSR

expenditure as long as (a) the Trust! society/ section 8 companies etc. is created

exclusively for undertaking CSR activities or (b) where the corpus is created

exclusively for a purpose directly relatable to a subject covered in Schedule VII of the

Act.

2. This issues with the approval of Competent Authority.

Yours faithfully,

Sd/-

(Seema Rath)Assistant Director (CSR)

Phone No. 23389622Copy to:

1. PSO to Secretary2. PPS to Additional Secretary3. PS to OG (IICA)/JS (M) /JS(B)/JS(SP)/Oll (UCN)/EA/OII(POLlCY)4. 01R (AK)/Ol R (AB)/Ol R(NC)/Ol R(PS)5. e-Governance Cell for uploading on website of MCA

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Annexure referred to at para (i) of General Circular No. 21/2014 dated 18.06.2014

SI. Additional items requested to be included inNo. Schedule VII or to be clarified as already

being covered under Schedule VII of the Act

Whether covered under Schedule VII of theAct

2. Provisions for aids and appliances to the Schedule VII (i) under 'promoting health caredifferently- able persons - 'Request for inclusion including preventive health care.'

1.

(ii) Social Business Projects: (ii) Schedule VII (i) under 'promoting health care"giving medical and Legal aid, including preventive health care.'treatment to road accident victims"should be included.

Promotion of Road Safety through CSR:(i) (a) Promotions of Education,

"Educating the Masses and Promotionof Road Safety awareness in all facetsof road usage,

(b) Drivers' training,

(c) Training to enforcement personnel,

(d) Safety traffic engineering andawareness through print, audio andvisual media" should be included.

3. The company contemplates of setting upARTIIC (Applied Research Training andInnovation Centre) at Nasik. Centre will cover thefollowing aspects as CSR initiatives for the benefitof the predominately rural farming community:

(a) Capacity building for farmers covering (a) "Vocational skill" livelihood enhancementbest sustainable farm management projects.practices.

(b) Training Agriculture Labour on skill (b) "Vocational skill"development.

(a) Schedule VII (ii) under "promotingeducation".

(b) For drivers training etc. Schedule VII (ii)under "vocational skills".

(c) It is establishment functions ofGovernment (cannot be covered).

(d) Schedule VII (ii) under "promotingeducation".

Item no. (ii) of Schedule VII under the head of"promoting education" and "vocational skills"and "rural development".

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(c) Doing our own research on the field forindividual crops to find out the most costoptimum and Agri - ecologicalsustainable farm practices. (Appliedresearch) with a focus on watermanagement.

(d) To do Product Life Cycle analysis from thesoil conservation point of view.

(c) 'Ecological balance', 'maintaining quality ofsoil, air and water'.

(d) "Conservation of natural resource" and'maintaining quality of soil, air and water'.

4. To make "Consumer Protection Services"eligible under CSR. (Reference received by Dr.V.G. Patel, Chairman of Consumer Education andResearch Centre).

(i) Providing effective consumergrievance redressal mechanism.Protecting consumer's health andsafety, sustainable

(ii)

consumer service,complaint resolution.

Consumer education and awareness can beconsumption, covered under Schedule VII (ii) "promotingsupport and education".

(iii)(iv)(v)

Consumer protection activities.Consumer Rights'to be mandated.all consumer protection programs andactivities" on the same lines as RuralDevelopment, Education etc.

5. a) Donations to 11M [A] for conservation ofbuildings and renovation of classroomswould qualify as "promoting education" andhence eligible for compliance ofcompanies with Corporate SocialResponsibility.

b) Donations to liMA for conservation ofbuildings and renovation of classroomswould qualify as "protection of nationalheritage, art and culture, includingrestoration of buildings and sites ofhistorical importance" and hence eligiblefor compliance of companies with CSR.

Conservation and renovation of schoolbuildings and classrooms relates to CSRactivities under Schedule VII as "promotingeducation".

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(ii) food supply can be covered undereradicating hunger, poverty andmalnutrition.

6. Non Academic Technopark T81 not located Schedule VII (ii) under "promoting education", ifwithin an academic Institution but approved and approved by Department of Science andsupported by Department of Science and Technology.Technology.

7. Disaster Relief Disaster relief can cover wide range ofactivities that can be appropriately shown undervarious items listed in Schedule VII. Forexample,

(i) medical aid can be covered under'promoting health care includingpreventive health care.'

(iii) supply of clean water can be coveredunder 'sanitation and makingavailable safe drinking water'.

8. Trauma care around highways in case of road Under 'health care'.accidents.

9. Clarity on "rural development projects" Any project meant for the development of ruralIndia will be covered under this.

10. Supplementing of Govt. schemes like mid-day Yes. Under Schedule VII, item no. (i) undermeal by corporates through additional nutrition 'poverty and malnutrition'.would qualify under Schedule VII.

11. Research and Studies in the areas specified inSchedule VII.

Yes, under the respective areas of itemsdefined in Schedule VII. Otherwise under'promoting education'.

12. Capacity building of government officials and No.elected representatives - both in the area of PPPsand urban infrastructure.

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13. Sustainable urban development and urbanpublic transport systems

Not covered.

18. US-India Physicians Exchange Program - No.broadly speaking, this would be program thatprovides for the professional exchange ofphysicians between India and the United States.

14.

15.

16.

17.

Enabling access to, or improving the delivery of,public health systems be considered under thehead "preventive health care" or "measures forreducing inequalities faced by socially &economically backward groups"?

Likewise, could slum re-development or EWShousing be covered under "measures for reducinginequalities faced by socially & economicallybackward groups"?

Renewable energy projects

(i) Are the initiatives mentioned inSchedule VII exhaustive?

(ii) In case a company wants to undertakeinitiatives for the beneficiariesmentioned in Schedule VII, but theactivit)! is not included in Schedule VII,then will it count (as per 2(c)(ii) of theFinal Rules, they will count)?

****************************

Can be covered under both the heads of"health care" or "measures for reducinginequalities faced by socially & economicallybackward groups", depending on the context.

Yes.

Under 'Environmental sustainability, ecological •balance and conservation of natural resources',

(i) & (ii) Schedule VII is to be liberallyinterpreted so as to capture the essence ofsubjects enumerated in the schedule.

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~ -;ia ita "l@a-33004/99 REGD. NO. D. L.-33004(99

~EXTRAORDINARY

'IWT II-~ 3-"3tI'-~ (i)

PART II-Section 3-Sub-section (i)mf~~~

PUBLISHED BY AUTHORITY

'ft. 408)

No. 408]

~ tzyffi, ~6fQf('1cm, 31lffif 7, 2014/.mcIUT 16, 1936

NEW DELHI, THURSDAY, AUGUST 7, 2014/SHRA VANA 16,1936

'fil (41{C: Cfil'<f ~

3f~~oq'1l

~~, 6 3l1ffif, 2014

m.CfiT.f.t 568(3f").-~ ~, ~ ~, 2013 (2013 CfiT 18) cfiT urrr 467 cfiT

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3124 GII2014 (I)

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2 THE GAZETIE OF I DIA: EXTRAORDI ARY [PARTII-SEe. 3(i)]

~ ~ VII 01 rlc1, 2014 ~ ~ g{ 3Th: ~ ~ m.CfiT.H. 130(31) ~

27~, 2014 Cf~ m.CfiT.H. 261(31) ~ 31 l1T'f, 2014 if; ~ ill"U B"!<iTfmr (01rlc1, 2014 if~) eFT 1Ii"1

MINISTRY OF CORPORATE AFFAIRS

NOTIFICATION

New Delhi, the 6th August, 2014

G.S.R. 568(E).-In exercise of the powers conferred by sub-section (I) of section 467 of theCompanies Act, 2013 (18 of 2013), the Central Government hereby makes the following further amendmentsin Schedule VII of the said Act, namely:-

(I) In Schedule VII, after item (x), the following item and entry shall be inserted, namely:-

"(xi) slum area development.

Explanation>: For the purposes of this item, the term 'slum area' shall mean any area declared as suchby the Central Government or any State Government or any other competent authority under any lawfor the time being in force."

2. This notification shall come into force on the date of its publication in the Official Gazette.

[F. No. 1/18/20 13-CL-VlAMARDEEP S. BHATIA, It. Secy.

Note.-The Schedule VII was brought into force with effect from I" April, 2014 and was amended (effectivefrom Ist April, 2014) vide notification number GSR 130(E) dated 27th February, 2014 and Corrigendanumber GSR 261 (E) dated 31st March, 2014.

Printed by the Manager. Government of India Press. Ring Road. Mayapuri, New Delhi-l 10064and Published by the Controller of Publications. Delhi-I 10054.

~I

44/46

~ 1"CLo~uy'l L!" - vITi-~

~ "Be iTe 1@'e-33004/99 REGD. NO. D. L.-33004/99

~EXTRAORDINARY

'IWT II-~ 3-'3q-~ (i)

PART II-Section 3-Sub-section (i)~~~

PUBLISHED BY AUTHORITY

~. 548]No. 548]

~~, ~,~ 24, 2014!CfiTfficf;2, 1936

NEW DELHI, FRIDAY, OCTOBER 24, 2014IKARTIKA 2, 1936

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31fS«"''11

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'[Tn p.rrRtcr~ 'lWCf criTq- ~ arl?Rl'T m~'~~ 3fct':p-nm ~ ~;

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2. ~~~if'JCfiT!?R#~<fiT~~1

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~hb~' ~1'1(> ,~

fu;qvr : ~ 7,01 m-, 2014 <fiT~ g{ m 3th: m ~ ~ m.CfiT.f.t. 130 (31) ~

27 ~,2014 Cf?lT m.CfiT.f.t. 261(31) ~ 31 11f"if, 2014 ~ ~ '[Tn 3th: B"!iITwr~ ~

rrr.CfiT.f.t. 568 (31)~ 06 3l'llTcf, 2014 em m B"~ITurrfc\:;<rr 'f7n' ?.ITI

4247 GII2014 (I)

45/46

2 THE GAZETTE OF INDIA: EXTRAORDINARY [PART II-SEC. 3(i)J

MINISTRY OF CORPORATE AFFAIRS

NOTIFICA TION

New Delhi, the 24th October, 2014

G.S.R. 741(E).- In exercise of the powers conferred by sub-section (I) of section 467 of the Companies Act,2013 (18 of 2013), the Central Government hereby makes the following further amendments to Schedule VII of the saidAct, namely:-

(i) In item (i), after the words "and sanitation", the words "including contribution to the Swach Bharat Koshset-up by the Central Government for the promotion of sanitation" shall be inserted;

(ii) In item (iv), after the words "and water", the words "including contribution to the Clean Ganga Fund set-up by the Central Government for rejuvenation of river Ganga;" shall be inserted.

2. This notification shall come into force on the date.of its publication in the Official Gazette.

[F. No. 1/l8/2013-CL-VJ

AMARDEEP SINGH BHATIA, Jt. Secy.

Note: The Schedule VII was brought into force with effect from 1st April, 2014 and was amended(effective from1st April, 2014) vide notification number GSR 130(E) dated 27th February, 2014 and Corrigenda number GSR 261(E)dated 31 st March, 2014 and also vide amendment notification number GSR 568(E) dated 6th August, 2014.

Printed by the Manager, Government of India Press, Ring Road, Mayapuri, New Delhi-II 0064and Published by the Controller of Publications, Delhi-I 10054.

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