Scaling up skilling by using CSR funds: Any takers?

Employment & Skilling has been identified as one of the top priorities for Vikshit Bharat in the Union Budget, 2024. To this end, the Govt has proposed a scheme that looks novel and innovative, and would supposedly encourage top 500 companies to use their CSR funds for providing internships to eligible youth. However, even if a large company takes 100 interns, it will use only Rs 6 lakh [100 X Rs 5000 X 12 – 90% govt. share] out of its CSR budget, which is trivial for a company of that size.

More details will possibly be rolled out over time, from whatever is available, it seems there is quite a lot of procedure for companies, who may opt for this scheme only at their discretion. 

Highlights of the Scheme

• Applicability
  • Top 500 companies in India may participate in the Scheme. Usually, identification of such companies is done based on market cap; if SEBI Regulations are a cue, then it would be market cap on either of the stock exchanges. 
  • Participation is voluntary; hence it is an open question whether the permitted use of CSR and a booster for “social image” of the company will tempt companies to pick up the option.
  • As an interesting example of flexibility, working experience may also be provided in the group companies, or companies in the forward and backward supply chain of the company using its CSR funds.
• Expense eligible as CSR expenditure
  • Training cost to eligible youth [as per modalities of the Scheme]

    Eligible youth	Ineligible youth (indicative list)
    •Youth aged between 21 and 24 will be eligible to apply •who are not employed and not engaged in full time education	•Candidate has IIT, IIM, IISER, CA, CMA etc. as qualification •Any member of the family is assessed to Income Tax •Any member of the family is a government employee, etc.

  • 10% of yearly allowance (i.e., Rs. 6000) per individual
    • Because this will be a specific permitted use under expected amendment of CSR rules, it appears that the usual bar on expenditure incurred on business activities will not be applicable in this case. After all, the interns work with the company, and for the company, and may potentially be absorbed by the company too.  
    • Apparently, 90% of the costs are taken by the Govt; hence, the Company’s 10% portion to be eligible as CSR expenditure
  • Reasonable administrative expenses may be claimed as CSR expenditure
    • For companies , this should be subject to the limit of 5% as per CSR Rules unless there are any changes in the provisions
• Government’s cost: Remaining 90% of the yearly (i.e., Rs. 54,000) and one-time Rs. 6,000 per individual to be borne by Govt
• Motivation for companies to avail the Scheme
  • Expenditure is booked towards fulfillment of statutory obligations under Companies Act
  • Contributes to social image of the company; may lead to a brownie point under the BRSR disclosure
  • May potentially lead to identification of new skilled staff

Besides this, there has been a mention of another scheme of skilling programme and upgradation of ITIs under which it has been proposed to have an outlay of around 60,000 crores with companies/ industries contributing around 10,000 crores (including their CSR funds). However, the said activity has already been there under the present list of activities under clause (ii) of Schedule VII of the Companies Act, 2013