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Csr in a public sector undertaking in india – a case study
1. International Journal of Management (IJM), – 6502(Print), ISSN 0976 – 6510(Online) International Journal of Management (IJM), ISSN 0976 Volume 1, Number 2, July - Aug (2010), © IAEMEISSN 0976 – 6502(Print), ISSN 0976 – 6510(Online) IJMVolume 1, Number 2, July - Aug (2010), pp. 129-140© IAEME, http://www.iaeme.com/ijm.html ©IAEME CSR IN A PUBLIC SECTOR UNDERTAKING IN INDIA – A CASE STUDY P.Babu Rao Director (Personnel) Neyveli Lignite Corporation Limited, India V.Balakrishnan Professor –Former Director Anna University of Technology Coimbatore, India ABSTRACT: Neyveli Lignite Corporation Limited – a Central Public Sector operating in the backward region of Tamilnadu, has been aggressively pursuing Corporate Social Responsibility since its inception in 1956. What impact its social development initiatives had made on sustainable development in this region was not evidently ascertained for long. The study on Social Sector Activities of Neyveli Lignite Corporation compiled, collated data on NLC’s spending on social infrastructure development in the project area and its spending on promotion of education and health in this region. The study also measured the Human Development Index for this region as an outcome of sustained CSR initiatives taken by this company for over 50 years. Assessment of life expectancy, adult literacy and per capita GDP for this region indicated a higher Human Development Index (HDI) of 0.81 which is higher compared to 0.531 achieved for the state. This finding conclusively portrait the significant contributions made by Neyveli Lignite Corporation towards Human development in this backward region through aggressive CSR strategies. INTRODUCTION The concept of social responsibility of Business – popularly termed “Corporate Social Responsibility” – is by no means a recent phenomenon but many observers agree that the globalization has spurred its growth and prominence. Aaronson argues, Europe has taken the lead in shaping global CSR debates1.The term CSR includes environmental, social , and human-rights based impacts and initiatives of companies, Ward and Fox 129
International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 – 6510(Online)Volume 1, Number 2, July - Aug (2010), © IAEMEelucidate 2, and many countries in both industrialized and the third world take the conceptand practices seriously, explains Hopkins3. The definition of CSR, therefore, is still beingdebated and there is no consensus among academicians or practitioners, Mohan observes4 . Ward and Fox 5argue, whatever the language used, the basic idea is to understandbusiness as part of society – not somehow separate from it.NEED FOR THE STUDY Neyveli Lignite Corporation which sprang to life in the year 1956 as CentralGovernment owned Public Sector Undertaking, in the backward region of the then SouthArcot District, embarking on mining and power generation activities in a remote placecalled Neyveli – 200 Kms South east off Chennai, the capital of Tamilnadu State, hascome a long way. From modest beginning to attaining growth of mammoth proportion, ina span of more than 50 years, Neyveli Lignite Corporation has consistently contributed tothe development of the local region while making big strides in its core businessactivities. As a model Central public sector employer and responsible corporate citizen,Neyveli Lignite Corporation has developed resources and infrastructure namely a 369bed secondary level hospital, Health Centres, Schools, sports infrastructure, School forthe rehabilitation of mentally challenged for supporting social causes of health,education, rehabilitation and community development. With the help of thesesinfrastructures, NLC has undertaken projects on community health, reproductive health,family welfare, Prevention of transmission of HIV/AIDS from mother to child duringante-natal period, promotion of literacy, sports and overall community developmentactivities. Neyveli Lignite Corporation, which is committed to initiation and implementationof Corporate Social Responsibility with its mission articulating the concept of socialresponsibility business behavior in a progressive way, has created an increasing impacton the surrounding villages. Against the above background, this article attempts to bring out compendiousaccount of NLC’s involvement in social development initiatives and measure the socialimpact of such initiatives on sustainable development of the area in which it operates. 130
International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 – 6510(Online)Volume 1, Number 2, July - Aug (2010), © IAEMESTUDY METHOD Comprehensive data on the social sector activities of NLC was collected from thevarious departments like CSR division, Hospital Care Delivery System and Educationstudying secondary sources like records, reports and registers maintained by therespective CSR areas and financial data by referring the Annual Report of the Hospitaland Township administration for social overheads. The information/data sought forpertained to NLC’s spending on social sector, community development projects,utilization of medical care service by rural population in the last 5 years, enrolment ofrural children in NLC run schools and the overall impact of such development initiativeson the quality of life of the local population. Secondary data available in the Annualreport of the company was also accessed to make analysis of NLC’s commitment towardssocial development initiatives.OBJECTIVES • To evaluate NLC’s spending on social sector which cover areas like provision of Housing, lighting, water supply, health, education, development of sports, recreational facilities like library, wellness centres, clubs, parks, gardens, roads, water supply, public health measures, public sanitation, roads, transport that have huge bearing on the quality of life of employees and their dependants and other general population. • To analyse NLC’s overall spending on Community Development activities as percentage of net profit in the last 5 years from 2004-05 to 2008-09. • To assess utilization of medical services by rural population in the last 5 years from 2004-05 to 2008-09. • To compute the Human Development Index( HDI) for this region as a measure of impact which NLC created on the overall social development of this regionHypothesisH0 : Human Development Index for Neyveli and the surrounding rural area is not in thehigh HDI categoryH1: Human Development Index for Neyveli and the surrounding rural area is in the highHDI category 131
International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 – 6510(Online)Volume 1, Number 2, July - Aug (2010), © IAEMEStatistical Analysis Spending as percentage of net profit was calculated to verify if spending on socialdevelopment, community development, health initiatives and education was on sustainedbasis over the last 5 years. A five year analysis of Percentage of pass achieved by rural students whoappeared for the 10th and 12th Standard public examinations was analysed to examine thesuccess rate of NLC run schools in promoting higher secondary level education in thisrural area. Impact of NLC’s spending on community development, health and education wasmeasured in terms of Human Development Index for Neyveli to infer if Neyveli wasbetter off compared to the State of Tamilnadu.RESULTS AND DISCUSSIONCommitment to development of services in the Social Sector Mining data available in the Township Administration on various facilitiesdeveloped and maintained by Neyveli Lignite Corporation that contribute to improvedstandard of living of around 3.0 population residing in and around the well developedTownship reveal the following: Table 1 – Social development infrastructure facilities available in the Township Facilities Facilities Facilities1 Residential 21,029 11 College 1 21 General Hospital 1 quarters2 Shops 1530 12 Library 4 22 Peripheral 5 Dispensaries3 Sub-Stations 3 13 Reading 6 23 Community Halls 9 Rooms4 Fuse-off call 16 14 Auditorium 3 24 Vegetable Market 35 Water supply 9 15 Theatres 3 25 Guest Houses 36 Public Health 13 16 Stadium 1 26 Lodges 3 Centres7 Roads 450 17 Swimming 1 27 Temples 59 Kms. pool8 Bore wells 28 18 Clubs 3 28 Mosques 69 Overhead Tanks 15 19 Parks 3 29 Churches 2110 Schools 40 20 Golf Course 1 30 Burial/Cremation 1 ground 132
International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 – 6510(Online)Volume 1, Number 2, July - Aug (2010), © IAEME Analyzing the above data it could be inferred that Neyveli Lignite Corporationwhich had created 30 development infrastructure in the Township and sustain thefacilities through maintenance had contributed significantly for improving the quality oflife of people residing in this region through provision of holistic environment that meetout Housing, health, educational, recreational, social and spiritual needs of employeecommunity and other general public. The study further revealed the provision of subsidized housing, water andelectricity, public health, sanitation, drainage, lighting, gardens, lawns, recreationalfacilities, solid waste management system and free medical care services which theresiding population in this Township enjoy, could lead to enhancement of their quality oflife to a great extent. The following data dwelt on NLC’s spending on development of a modelTownship with all amenities and infrastructure facilities that promote humandevelopment in this Neyveli and surrounding villages. Table 2 – NLC’s spending on Social Development (Rs.in Crore) Medical Spending on Township care Net profit social sector Year Library Transport maintenance expenditure Rs. In Cr. as % of Net Rs. In Cr. profit2004-05 36.98 0.51 7.84 30.78 1215.006.262005-06 38.20 0.55 8.72 33.86 702.35 11.572006-07 42.19 0.62 9.57 33.36 566.75 15.122007-08 49.44 0.80 11.21 47.52 1101.579.892008-09 84.53 0.98 12.52 67.37 821.09 20.15 Average 12.59 The above analysis revealed that NLC had spent an average of 13 % of its netprofit on maintenance of Township which is spread over 50 sq.kilometer with 30residential blocks that house 21,029 residential quarters provided to around 19,000 NLCregular employees and another around CISF personnel, which was significant finding.The Township is home for around 3.0 population which include contract workmen andgeneral public who consist of businessmen, Bank/Insurance personnel and otherGovernment personnel who render commercial services to NLC project. It could beconcluded that the standard of living of employee population, their families, contract 133
International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 – 6510(Online)Volume 1, Number 2, July - Aug (2010), © IAEMEworkmen and their families and the surrounding population who have access to qualityhousing, sanitation, public hygiene, drinking water, electricity , road, medical care,education, sports facilities, wellness centres, recreation, pollution free environmentensured by green belt which serve as pollution sink would be higher plane as impacted bysustainable social development initiatives of Neyveli Lignite Corporation.COMMITMENT TO COMMUNITY DEVELOPMENT INITIATIVES Neyveli Lignite Corporation has institutionalized community developmentinitiatives by which this CPSU contributes to sustainable development of the surroundingvillages in the areas of health, education, irrigation, drinking water and otherinfrastructure needs required for development like access roads. Based on data collectedfrom CSR department in NLC Limited, the CPSU’s spending as percentage of net profitwas worked out to analyze the contributions made towards community development forachieving sustainability in peripheral villages. The four major areas of infrastructuredevelopment taken up for study included education, health, irrigation, roads and drinkingwater. The following explains NLC’s spending on peripheral development in terms ofbuilding infrastructure for achieving sustainable development between 2004-05 and2008-09. Table 3 – NLC’s spending on community development initiatives Period School Health Irrigation Road Drinking Net Spending as Infra. Infra. Infra. Infra. water Infra profit % of Net Dev Dev. Dev. Dev. Dev. In Cr. profit 2004- 1.20 0.25 - 2.19 1.03 1215.00 0.38 05 2005- 0.25 0.25 0.24 1.52 0.70 702.35 0.42 06 2006- 0.66 0.55 0.13 0.76 0.44 566.75 0.45 07 2007- 0.80 0.25 0.18 1.51 0.95 1101.57 0.33 08 2008- 0.78 0.25 0.16 0.93 0.49 821.09 0.32 09 Total 3.69 1.55 0.71 6.91 3.61 4406.76 0.38 NLC on an average had spent 0.38 percent of its income towards development ofkey infrastructure like school building, laboratories, libraries, Primary health centres,Reproductive and child health centres, irrigation canals, check dams, desilting of tanks 134
International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 – 6510(Online)Volume 1, Number 2, July - Aug (2010), © IAEMEroads, bore wells, and overhead tanks for improving accessibility to safe drinking waterwhich were considered catalyst for determining growth sustainability in the surroundingvillages. NLC in the last 5 years had helped peripheral villages achieve sustainability ineducation through augmentation of facilities like libraries, laboratories, computer labs,Toilet and drinking water facilities in schools located in the local area where it operates.Development of such facilities aided in upgrading the existing schools so that ruralchildren could gain access to education up to high school level in their own environment. Health Infrastructure provided by NLC in the peripheral villages includedrenovation of Primary Health Centres by which NLC had complemented the efforts ofState Government in meeting Millennium Development Goal of Health for All in therural areas. NLC had developed adequate irrigation infrastructure like canal for continuousirrigation of 23,000 hectares of land for sustaining perennial crops in this region. Theimpact of sustained irrigation could be seen in raising of 3 major crops per annum oncontinuous basis as against 1 or 2 two crops which farmers in other areas could hope toraise in the absence of continuous irrigation. Analysed in this perspective, it could beconcluded that NLC had contributed to improving percapita GDP agriculture productleading to sustainable livelihood in this region. Building access roads which NLC focused on priority basis had facilitated accessof the surrounding rural population to Neyveli- the centre of development in this regionand facilities available in it like Hospital, Schools, sports facilities, libraries,rehabilitation and other recreational facilities. The improved accessibility to the NLCTownship enable the surrounding rural population to engage in street vending throughsale of milk, fish, poultry, meat, vegetables, petty business, small trades like motormechanic, cycle repair and merchandise in local agriculture produce like cashew nuts,jack fruits that improve their livelihood sustenance to a significant level.COMMITMENT TO HEALTH INITIATIVES FOR IMPROVINGQUALITY OF LIFE OF SURROUNDING RURAL POPULATION NLC’s spending on provision of health care for the rural population as sourcedfrom secondary data available from the company run hospital reveal that it had treated 135
International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 – 6510(Online)Volume 1, Number 2, July - Aug (2010), © IAEMEmore than a lakh of rural patients in its 369 bed facility. Analysis of data on utilization byrural population of health care services provided by NLC explain the major role playedby the company in providing medical care to the rural population:The following table analyses the utilization of medical care service by rural population inNLC GH in lakhs and percentage share in total medical expenditure for the period from2004-05 to 2008-09. Table 4 – NLC’s spending on community health initiatives and medical care to rural population Utilization of medical service Amount spent on rural Spending as % Year Income in Cr. by rural patients population in Cr. of net profit ( in lakhs)2004-05 1.30 0.24 1215.00 0.022005-06 1.19 0.28 702.35 0.032006-07 1.37 0.37 566.75 0.062007-08 1.38 0.43 1101.57 0.042008-09 1.42 0.51 821.09 0.06Average 1.33 0.37 0.04 Analysing the above data it could be concluded that NLC had spent an average of0.04 % of its total income towards providing medical care to the surrounding ruralpopulation in the service areas of emergency, Out-patient, Maternity and Family welfare.COMMITMENT TO EDUCATIONAL INITIATIVES FORPROMOTION OF LITERACY IN THIS REGION Education is one of the major areas of social CSR which Neyveli LigniteCorporation spearheads to promote literacy in this backward region. NLC since itsinception had developed a network of 13 Schools- 3 Higher Secondary Schools, 2 HighSchools, 5 Middle schools and 3 Elementary Schools to realize the mission of providingquality education in this region. The rural children have uninhibited access to schools runby NLC at all levels of primary, high school and secondary education. With privateschools meeting the educational requirements of children of employees, NLC run schoolsin the last two decades predominantly serve rural children. Quality education in the bestof learning environment supported by quality labs, library, computer and sports facilities,which rural children enjoy free of cost had contributed to sustainable development of thesurrounding rural areas. 136
International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 – 6510(Online)Volume 1, Number 2, July - Aug (2010), © IAEME Analysis of enrolment of rural children in NLC run schools and the amount spentby NLC as percentage of its net profit on development of school facilities which ruralchildren predominantly make use of support the above hypothesis. Table 5 – NLC’s spending on education (Rs.in Crore) Annual Annual spending Income Spending as Year Enrolment spending on on sports and in Cr. % of GDP education culture2004-05 10500 3.41 0.91 1215.00 0.352005-06 10352 3.39 0.75 702.35 0.582006-07 10111 3.64 0.83 566.75 0.782007-08 10090 3.15 0.88 1101.57 0.362008-09 8774 5.40 0.11 821.09 0.67Average 0.37 0.54 The above analysis revealed that Neyveli Lignite Corporation in the last 5 yearshad spent an average of 0.54 percent of its net profit on provision of education, sports andculture which rural children predominantly utilize. The percentage of pass which NLC run schools had registered for HigherSecondary and High level education in the last 5 years further strengthened thehypothesis that the mean schooling year for this backward region to be upward of 12years.Table 6 – Percentage of pass for 10th and 12th standard rural children studying in NLC run schools 12th Standard 10th Standard No.of No.of No.of No.of Year students students % of pass students students % of pass appeared passed appeared passed2005-06 1154 788 67 1446 1067 742006-07 1252 885 67 1408 982 702007-08 1244 845 68 1365 998 742008-09 1164 882 72 1501 1110 742009-10 1141 919 77 1421 1082 76 Analysing the above data it could be concluded that Neyveli Lignite Corporationhad made significant improvements in terms of churning out no.of students who hadsuccessfully passed both 12th and 10th standard public examinations in the last 5 years. Byachieving an improved performance in education from 67 percent pass registered during2005-06 to 77 percent during 2009-10 in the case of 12th standard and 74 percent during2005-06 to 76 percent achieved during 2009-10 in the case of 10th standard public 137
International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 – 6510(Online)Volume 1, Number 2, July - Aug (2010), © IAEMEexamination, NLC run schools which predominantly serve the surrounding ruralpopulation had contributed to promotion of higher secondary level school educationamong the rural population and in turn impacted their quality of life.HUMAN DEVELOPMENT INDEX OF NEYVELI COMPARED TOTHAT OF THE STATE NLC’s spending which averaged around 16 percent of its net profit during theperiod from 2004-05 to 2008-09 on development of social infrastructure which includemaintenance of well developed Township with all necessary facilities like Hospital,Schools, recreational facilities, provision of housing, civic amenities like water,electricity supply, gardens, lawns, clubs, sports facilities which include swimming pool,gyms, libraries, theaters, places of worship, in addition to competitive pay, perks andincentives to both regular and contract workers, provided a significant leading that itssocial CSR initiatives would have impacted the Human Development index for thisbackward region. In order to test this Hypothesis the following parameters were analysedand compared with that of the state of Tamilnadu: Table 7 Human Development Index for NeyveliSl.No Index Neyveli Tamilnadu1 Life Expectancy at birth 71.55 68.452 Infant Mortality 5.79 443 Birth rate 8.1 18.54 Death rate 3.68 7.73 Adult Literacy ( mean schooling 12 years 8.4 years)4 Combined gross enrolment 90 % 70 %5 Per capita GDP in current prices 3,79,668.00 2097.99 Social Infrastructure1 Sanitation 100% 40%2 Drainage 100% 35 %3 Safe drinking water 100% 40 %4 Over crowding 3943/Sq.km 478/sq.km5 Access to health care services 100 % 60 %6 Provision of education 0.28 High school/ 0.02 High school sq.km area /sq.km (Cuddalore)HUMAN DEVELOPMENT INDEX FOR NEYVELILife Expectancy at Birth: 25 years (Minimum) 85 years (Maximum)Life Expectancy at Birth for Neyveli is 75 years 138
International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 – 6510(Online)Volume 1, Number 2, July - Aug (2010), © IAEMELife expectancy index = 75 – 25 / 85-25 = 0.833Adult literacy rate: 0 percent and 100 percentAdult Literacy rate for Neyveli is 90 %Adult Literacy Index = 90 – 0 / 100-0 = 0.90Combined gross enrolment ratio= 0 percent and 100 percentCombined gross enrolment ratio for Neyveli is 100 %Combined gross enrolment index= 100-0/100-0 = 1.00Educational attainment for Neyveli = [ 2( 0.90) + 1(1.00) ]/3= 0.93Real GDP percapita ( PPP$) = $ 100 and $ 40,000GDP per capita for Neyveli is 5333 $GDP per capita ( PPP$) for Neyveli isLog ( 6793) – log ( 100) / log ( 40000) – log ( 100) = 0.70Human Development Index for Neyveli is 0.833 + 0.90 + 0.70 = 0.81Neyveli’s HDI of 0.81 when compared to the state HDI of 0.531 and the country’s HDIof 0.472 is bracketed in high HDI category.CONCLUSIONNeyveli Lignite Corporation, which embedded in its vision the Corporate SocialResponsibility objectives, had contributed significantly to the Human development of thisregion by spending 13 % of its net profit on development of social infrastructure likehousing, health, medical care, drinking water, electricity, education, sanitation, publichygiene, roads, recreation , sports and worship centers that promote religious harmony.The company had also spent 0.04 % and 0.54 % of its net profit for provision of medicalcare and education respectively to the surrounding rural population. The higher HDI of0.81 achieved by NLC for this region compared to 0.531 of Tamilnadu reveal thecompany’s consistent efforts towards achieving the goal of sustainable development byfully realizing its CSR vision and mission.REFERENCES 1. Aaronson, S.A. (2002) ‘How the Europeans Got a Head Start on Politics to Promote Global Corporate Social Responsibility’, PP.356-367, International Journal Corporate Sustainability. Corporate Environmental Strategy, 139
International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 – 6510(Online)Volume 1, Number 2, July - Aug (2010), © IAEME 9(4).Elsevier Science Inc.Ruth Hillary, Editor-in-Chief, Scott Wilson Kirkpatrick & Co Ltd., London UK. 2. Ward, H and T.Fox (2002) Moving the Corporate Citizenship Agenda to South, London: IIED. 3. Hopkins, M (2003) The Planetary Bargain: Corporate Social Responsibility comes of age, London: Macmillan Press. 4. Mohan .A (2001) ‘Corporate Citizenship: Perspectives from India’, Journal of Corporate Citizenship, Sheffield: Greenleaf Publishing. 5. Ward, H and T.Fox (2002) Moving the Corporate Citizenship Agenda to South, London: IIED. 140
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