The implementation of 26 per cent profit sharing clause with people displaced by mining activities proposed in the new mining act was likely to have an adverse impact on corporate social responsibility spends. Miners, including public sector undertakings, have said that they would be forced to cut costs and maintain profitability.
Metals and mining sector is one of the most aggressive industries as far as CSR spending is concerned, with an industry average of around 2 per cent of profits earmarked for the purpose. That, however, may see a complete nullification.
“The clause will definitely have a bearing on future CSR spends,” said R.K. Sharma, secretary general, Federation of Indian Mineral Industries. “Snatching 26 per cent of net profit will sap a miner of his energy and entrepreneurship and deprive him of the surplus required to plough back in the development of his mine, further exploration and scientific extraction.”
Government-owned companies such as Steel Authority of India Ltd, Coal India ltd and National Mineral Development Corporation have traditionally been more pro-active in CSR. This has been the primary reason for the steel minister to lobby for concessions for PSUs.
“PSUs have been investing in tribal areas long before it became fashionable to do so,” said a senior SAIL executive.
“If our expendable surplus is reduced, it will translate into a resource crunch for us and our CSR activities will suffer. I doubt if state governments will be able to match what we have been doing for the society with the revenue generated from the new mining act.”