CSR for Agriculture Sustainability

• 18 Nov 2024

For Prelims: Corporate Social Responsibility (CSR), Small and Marginal Farmers, Fertilisers, Irrigation Systems, Cyclones, Livestock Farming, Precision Agriculture, Solar Power, Wind Energy, Biogas, Genetically Modified Organisms (GMOs), Grain Banks, Water Conservation, Companies Act, 2013, NGOs, Companies (CSR Policy) Rules, 2014, Supply Chains. 

For Mains: Role of Corporate Social Responsibility (CSR) in development of agriculture.

Source: TH 

Why in News? 

With increasing contributions, the focus is on how Corporate Social Responsibility (CSR) can support Indian agriculture to become both economically viable and ecologically sustainable. 

Why is CSR Needed for Agriculture Sustainability? 

• High Dependence on Agriculture: Nearly 47% of India's population depends on agriculture for employment, compared to a global average of 25%. 
  • CSR can reduce agricultural dependency by promoting skill development, supporting rural entrepreneurship, infrastructure, allied activities, and non-agri business ventures.
• Small and Marginal Farmers: Over 70% of rural households rely primarily on agriculture for their sustenance. Of this, 82% of farmers are classified as small and marginal. 
  • By providing access to knowledge and hands-on experience with modern farming practices, farmers can be better equipped to increase productivity, and reduce risks.
• Poor Access to Finance: High Interest rates and the lack of formal credit sources often prevent farmers from purchasing necessary equipment, seeds and fertilisers, limiting their growth and productivity.
  • Companies can collaborate with Small finance banks (SFB)  and micro-finance institutions (MFIs) to offer low-interest loans and subsidies to facilitate access to affordable financing and credit.
• Building Market Linkages: Poor rural infrastructure, such as inadequate storage facilities, transportation, and irrigation systems, leads to post-harvest losses, inefficient supply chains, and reduced access to markets.
  • CSR can help create market linkages by creating Farmer Cooperatives and promoting E-Commerce Platforms.
• Environmental Challenges: Unpredictable weather patterns lead to crop failures, loss of livestock, and increased vulnerability to natural disasters like floods, droughts, and cyclones. 
  • CSR can provide relief materials (seeds, fodder, equipment), and partner with insurers for affordable crop and livestock insurance to minimise losses.
• Soil Degradation: Improper irrigation practices and excessive use of chemical fertilisers and pesticides have led to soil degradation leading to reduced soil fertility, lower crop yields, and environmental damage.
  • CSR can promote organic farming, bio-fertilizers, nano fertilisers and natural pest control.
• Water Scarcity: Water scarcity threatens both crop production and livestock farming, making irrigation and water management a critical issue.
  • Companies can invest in rainwater harvesting, water-efficient irrigation (e.g., drip irrigation), and watershed management to conserve water in farming communities.

Note

"Environment and sustainability" is the second priority for companies with healthcare, water, sanitation, and hygiene being the top priority. 

• Examples of CSR-supported initiatives include grain banks, farmer schools, water conservation, and energy-efficient irrigation.

What are the Challenges Related to CSR Implementation in Agriculture Sustainability?

• No Clear Demarcation: CSR activities to Agriculture are not clearly demarcated and well-defined.  
  • Under Schedule VII of the Companies Act, 2013, activities targeting agricultural sustainability could fall under 11 of the 29 development sectors of CSR. E.g., gender equality, poverty, technology incubators, animal welfare etc. 
• Short-Term Focus: CSR programs often focus on short-term goals and deliverables, while agriculture requires long-term investments and sustained support to yield significant outcomes. 
• Measurement of Social Impact: The social impact of CSR in agriculture is often harder to measure, especially in rural areas.  
  • Evaluating improvements in farmers' incomes, livelihoods, or well-being due to CSR projects can be subjective and complex.  
• Not-Aligned with Business Goals: Many companies may find it difficult to integrate CSR in agriculture with their business strategies in a way that is mutually beneficial. E.g., Cosmetic companies have little incentive to invest in farming practices. 
• Ignorance of Agriculture: Education and health dominate CSR funding leaving agricultural initiatives with limited focus. 
  • Also, a major CSR fund is diverted to other purposes like the PM CARES Fund which leads to a dip in CSR expenditure in specific sectors. 
• Fragmented Approach: CSR initiatives often focus on isolated aspects of agriculture such as providing training, technology, missing broader challenges like climate change, market access, and financing. 
• Lack of Suitable NGOs: Corporations often struggle to find NGOs in rural areas that align with their CSR objectives, leading to challenges in identifying the right partners for project implementation. 
• Disparity in CSR Spending: A significant portion of CSR funds (more than 30%) is directed to more industrialized states like Maharashtra, Karnataka, Gujarat, and Tamil Nadu. This leaves less funding for less-developed regions. 
• Inefficient Allocation: Many companies focus their CSR efforts in regions where they have existing operations or deeper ties, rather than strategically directing funds to areas with the most significant need. 

What is CSR? 

• About: CSR is a business practice in which companies voluntarily integrate social, environmental, and ethical concerns into their operations and interactions with stakeholders. 
  • E.g., environmental sustainability, poverty reduction, education, and healthcare etc. 
• India's CSR Mandate: India became the first country to legally mandate CSR in 2013 under Section 135 of the Companies Act, 2013. 
  • From 2014 to 2023, Rs 1.84 lakh crore of CSR funds were disbursed. 
• Legislative Framework:  The CSR concept in India is governed by Section 135 of the Companies Act, 2013, Schedule VII of the Companies Act, 2013 and Companies (CSR Policy) Rules, 2014. 
  • CSR is a mandatory requirement for certain companies with effect from 1st April 2014. 

• CSR Criteria: CSR provisions apply to companies that meet any of the following criteria in the preceding financial year: a net worth of over Rs 5 billion, a turnover exceeding Rs 10 billion, or a net profit greater than Rs 50 million.  
  • Such companies must spend a minimum of 2% of their net profit over the last three years on CSR activities. 
  • For newly incorporated companies with less than three years of operations, the average net profit of available years is considered. 
• National CSR Data Portal: It is an initiative by the Ministry of Corporate Affairs to disseminate CSR-related data and information. 
• CSR Activities: Companies can include the following activities in their CSR policies, as specified in Schedule VII. 

Way Forward 

• Mandatory CSR for Agriculture: Introduce mandatory CSR on the lines of Priority Sector Lending for agriculture and allied activities, particularly in rural and vulnerable regions.
• Centralised Tracking Portal: Create a government-monitored, centralised digital platform to track agriculture-specific CSR contributions. 
  • The platform should offer real-time data on fund utilisation and project outcomes, ensuring transparency and accountability.
• Cross-Sectoral Collaboration: Foster partnerships with NGOs, Krishi Vigyan Kendra, and farmer cooperatives (Indian Farmers Fertiliser Cooperative (IFFCO)) to implement innovative and localised solutions for agricultural challenges.
• Address Climate Change Impacts: Leverage CSR funds to build climate-resilient infrastructure such as drought-resistant seed banks, rainwater harvesting systems, and early-warning systems for weather risks.
• AgriTech Startups: Encourage CSR investments in startups that focus on AgriTech innovations, such as precision farming, IoT-based irrigation systems, and blockchain-based supply chains.
• Aligning CSR with Government Initiatives: Align CSR contributions with key government initiatives like Paramparagat Krishi Vikas Yojana (PKVY), National Mission for Sustainable Agriculture (NMSA), and Soil Health Card Scheme to avoid duplication and maximise impact.

Drishti Mains Question: 

Discuss the role of CSR in promoting agricultural sustainability and the challenges faced in its implementation.

UPSC Civil Services Examination, Previous Year Question 

Prelims 

Q. Which of the following is issued by registered foreign portfolio investors to overseas investors who want to be part of the Indian stock market without registering themselves directly? (2019)

(a) Certificate of Deposit 

(b) Commercial Paper 

(c) Promissory Note 

(d) Participatory Note 

Ans: (d)

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Mains 

Q. With a consideration towards the strategy of inclusive growth, the new Companies Bill, 2013 has indirectly made CSR a mandatory obligation. Discuss the challenges expected in its implementation in right earnest. Also discuss other provisions in the Bill and their implications. (2013)