Csr in a public sector undertaking in india – a case study

International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 – 6510(Online) Volume 1, Number 2, July - Aug (2010), © IAEME

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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

International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 – 6510(Online) Volume 1, Number 2, July - Aug (2010), pp. 129-140

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elucidate 2, and many countries in both industrialized and the third world take the concept

and practices seriously, explains Hopkins3. The definition of CSR, therefore, is still being

debated and there is no consensus among academicians or practitioners, Mohan observes

4. Ward and Fox 5argue, whatever the language used, the basic idea is to understand

business 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 Central

Government owned Public Sector Undertaking, in the backward region of the then South

Arcot District, embarking on mining and power generation activities in a remote place

called Neyveli – 200 Kms South east off Chennai, the capital of Tamilnadu State, has

come a long way. From modest beginning to attaining growth of mammoth proportion, in

a span of more than 50 years, Neyveli Lignite Corporation has consistently contributed to

the development of the local region while making big strides in its core business

activities.

As a model Central public sector employer and responsible corporate citizen,

Neyveli Lignite Corporation has developed resources and infrastructure namely a 369

bed secondary level hospital, Health Centres, Schools, sports infrastructure, School for

the rehabilitation of mentally challenged for supporting social causes of health,

education, rehabilitation and community development. With the help of theses

infrastructures, NLC has undertaken projects on community health, reproductive health,

family welfare, Prevention of transmission of HIV/AIDS from mother to child during

ante-natal period, promotion of literacy, sports and overall community development

activities.

Neyveli Lignite Corporation, which is committed to initiation and implementation

of Corporate Social Responsibility with its mission articulating the concept of social

responsibility business behavior in a progressive way, has created an increasing impact

on the surrounding villages.

Against the above background, this article attempts to bring out compendious

account of NLC’s involvement in social development initiatives and measure the social

impact of such initiatives on sustainable development of the area in which it operates.


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STUDY METHOD

Comprehensive data on the social sector activities of NLC was collected from the

various departments like CSR division, Hospital Care Delivery System and Education

studying secondary sources like records, reports and registers maintained by the

respective CSR areas and financial data by referring the Annual Report of the Hospital

and Township administration for social overheads. The information/data sought for

pertained to NLC’s spending on social sector, community development projects,

utilization of medical care service by rural population in the last 5 years, enrolment of

rural children in NLC run schools and the overall impact of such development initiatives

on the quality of life of the local population. Secondary data available in the Annual

report of the company was also accessed to make analysis of NLC’s commitment towards

social 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 region

Hypothesis

H0 : Human Development Index for Neyveli and the surrounding rural area is not in the

high HDI category

H1: Human Development Index for Neyveli and the surrounding rural area is in the high

HDI category


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Statistical Analysis

Spending as percentage of net profit was calculated to verify if spending on social

development, community development, health initiatives and education was on sustained

basis over the last 5 years.

A five year analysis of Percentage of pass achieved by rural students who

appeared for the 10th and 12th Standard public examinations was analysed to examine the

success rate of NLC run schools in promoting higher secondary level education in this

rural area.

Impact of NLC’s spending on community development, health and education was

measured in terms of Human Development Index for Neyveli to infer if Neyveli was

better off compared to the State of Tamilnadu.

RESULTS AND DISCUSSION

Commitment to development of services in the Social Sector

Mining data available in the Township Administration on various facilities

developed and maintained by Neyveli Lignite Corporation that contribute to improved

standard of living of around 3.0 population residing in and around the well developed

Township reveal the following:

Table 1 – Social development infrastructure facilities available in the Township

Facilities Facilities Facilities

1 Residential quarters

21,029 11 College 1 21 General Hospital 1

2 Shops 1530 12 Library 4 22 Peripheral Dispensaries

5

3 Sub-Stations 3 13 Reading Rooms

6 23 Community Halls 9

4 Fuse-off call 16 14 Auditorium 3 24 Vegetable Market 3

5 Water supply 9 15 Theatres 3 25 Guest Houses 3

6 Public Health Centres

13 16 Stadium 1 26 Lodges 3

7 Roads 450 Kms.

17 Swimming pool

1 27 Temples 59

8 Bore wells 28 18 Clubs 3 28 Mosques 6

9 Overhead Tanks 15 19 Parks 3 29 Churches 21

10 Schools 40 20 Golf Course 1 30 Burial/Cremation ground

1


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Analyzing the above data it could be inferred that Neyveli Lignite Corporation

which had created 30 development infrastructure in the Township and sustain the

facilities through maintenance had contributed significantly for improving the quality of

life of people residing in this region through provision of holistic environment that meet

out Housing, health, educational, recreational, social and spiritual needs of employee

community and other general public.

The study further revealed the provision of subsidized housing, water and

electricity, public health, sanitation, drainage, lighting, gardens, lawns, recreational

facilities, solid waste management system and free medical care services which the

residing population in this Township enjoy, could lead to enhancement of their quality of

life to a great extent.

The following data dwelt on NLC’s spending on development of a model

Township with all amenities and infrastructure facilities that promote human

development in this Neyveli and surrounding villages.

Table 2 – NLC’s spending on Social Development (Rs.in Crore)

Year Township

maintenance Library Transport

Medical care

expenditure Rs. In Cr.

Net profit Rs. In Cr.

Spending on social sector as % of Net

profit

2004-05 36.98 0.51 7.84 30.78 1215.00 6.26

2005-06 38.20 0.55 8.72 33.86 702.35 11.57

2006-07 42.19 0.62 9.57 33.36 566.75 15.12

2007-08 49.44 0.80 11.21 47.52 1101.57 9.89

2008-09 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 net

profit on maintenance of Township which is spread over 50 sq.kilometer with 30

residential blocks that house 21,029 residential quarters provided to around 19,000 NLC

regular employees and another around CISF personnel, which was significant finding.

The Township is home for around 3.0 population which include contract workmen and

general public who consist of businessmen, Bank/Insurance personnel and other

Government personnel who render commercial services to NLC project. It could be

concluded that the standard of living of employee population, their families, contract


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workmen and their families and the surrounding population who have access to quality

housing, sanitation, public hygiene, drinking water, electricity , road, medical care,

education, sports facilities, wellness centres, recreation, pollution free environment

ensured by green belt which serve as pollution sink would be higher plane as impacted by

sustainable social development initiatives of Neyveli Lignite Corporation.

COMMITMENT TO COMMUNITY DEVELOPMENT INITIATIVES

Neyveli Lignite Corporation has institutionalized community development

initiatives by which this CPSU contributes to sustainable development of the surrounding

villages in the areas of health, education, irrigation, drinking water and other

infrastructure needs required for development like access roads. Based on data collected

from CSR department in NLC Limited, the CPSU’s spending as percentage of net profit

was worked out to analyze the contributions made towards community development for

achieving sustainability in peripheral villages. The four major areas of infrastructure

development taken up for study included education, health, irrigation, roads and drinking

water. The following explains NLC’s spending on peripheral development in terms of

building infrastructure for achieving sustainable development between 2004-05 and

2008-09.

Table 3 – NLC’s spending on community development initiatives

Period School Infra. Dev

Health Infra. Dev.

Irrigation Infra. Dev.

Road Infra. Dev.

Drinking water Infra Dev.

Net profit In Cr.

Spending as % of Net profit

2004-05

1.20 0.25 - 2.19 1.03 1215.00 0.38

2005-06

0.25 0.25 0.24 1.52 0.70 702.35 0.42

2006-07

0.66 0.55 0.13 0.76 0.44 566.75 0.45

2007-08

0.80 0.25 0.18 1.51 0.95 1101.57 0.33

2008-09

0.78 0.25 0.16 0.93 0.49 821.09 0.32

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 of

key infrastructure like school building, laboratories, libraries, Primary health centres,

Reproductive and child health centres, irrigation canals, check dams, desilting of tanks


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roads, bore wells, and overhead tanks for improving accessibility to safe drinking water

which were considered catalyst for determining growth sustainability in the surrounding

villages. NLC in the last 5 years had helped peripheral villages achieve sustainability in

education 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 rural

children could gain access to education up to high school level in their own environment.

Health Infrastructure provided by NLC in the peripheral villages included

renovation of Primary Health Centres by which NLC had complemented the efforts of

State Government in meeting Millennium Development Goal of Health for All in the

rural areas.

NLC had developed adequate irrigation infrastructure like canal for continuous

irrigation of 23,000 hectares of land for sustaining perennial crops in this region. The

impact of sustained irrigation could be seen in raising of 3 major crops per annum on

continuous basis as against 1 or 2 two crops which farmers in other areas could hope to

raise in the absence of continuous irrigation. Analysed in this perspective, it could be

concluded that NLC had contributed to improving percapita GDP agriculture product

leading to sustainable livelihood in this region.

Building access roads which NLC focused on priority basis had facilitated access

of the surrounding rural population to Neyveli- the centre of development in this region

and facilities available in it like Hospital, Schools, sports facilities, libraries,

rehabilitation and other recreational facilities. The improved accessibility to the NLC

Township enable the surrounding rural population to engage in street vending through

sale of milk, fish, poultry, meat, vegetables, petty business, small trades like motor

mechanic, 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 IMPROVING

QUALITY OF LIFE OF SURROUNDING RURAL POPULATION

NLC’s spending on provision of health care for the rural population as sourced

from secondary data available from the company run hospital reveal that it had treated


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more than a lakh of rural patients in its 369 bed facility. Analysis of data on utilization by

rural population of health care services provided by NLC explain the major role played

by the company in providing medical care to the rural population:

The following table analyses the utilization of medical care service by rural population in

NLC GH in lakhs and percentage share in total medical expenditure for the period from

2004-05 to 2008-09.

Table 4 – NLC’s spending on community health initiatives and medical care to rural population

Year

Utilization of medical service by rural patients

( in lakhs)

Amount spent on rural population in Cr.

Income in Cr. Spending as %

of net profit

2004-05 1.30 0.24 1215.00 0.02

2005-06 1.19 0.28 702.35 0.03

2006-07 1.37 0.37 566.75 0.06

2007-08 1.38 0.43 1101.57 0.04

2008-09 1.42 0.51 821.09 0.06

Average 1.33 0.37 0.04 Analysing the above data it could be concluded that NLC had spent an average of

0.04 % of its total income towards providing medical care to the surrounding rural

population in the service areas of emergency, Out-patient, Maternity and Family welfare.

COMMITMENT TO EDUCATIONAL INITIATIVES FOR

PROMOTION OF LITERACY IN THIS REGION

Education is one of the major areas of social CSR which Neyveli Lignite

Corporation spearheads to promote literacy in this backward region. NLC since its

inception had developed a network of 13 Schools- 3 Higher Secondary Schools, 2 High

Schools, 5 Middle schools and 3 Elementary Schools to realize the mission of providing

quality education in this region. The rural children have uninhibited access to schools run

by NLC at all levels of primary, high school and secondary education. With private

schools meeting the educational requirements of children of employees, NLC run schools

in the last two decades predominantly serve rural children. Quality education in the best

of learning environment supported by quality labs, library, computer and sports facilities,

which rural children enjoy free of cost had contributed to sustainable development of the

surrounding rural areas.


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Analysis of enrolment of rural children in NLC run schools and the amount spent

by NLC as percentage of its net profit on development of school facilities which rural

children predominantly make use of support the above hypothesis.

Table 5 – NLC’s spending on education (Rs.in Crore)

Year Enrolment Annual

spending on education

Annual spending on sports and

culture

Income in Cr.

Spending as % of GDP

2004-05 10500 3.41 0.91 1215.00 0.35

2005-06 10352 3.39 0.75 702.35 0.58

2006-07 10111 3.64 0.83 566.75 0.78

2007-08 10090 3.15 0.88 1101.57 0.36

2008-09 8774 5.40 0.11 821.09 0.67

Average 0.37 0.54 The above analysis revealed that Neyveli Lignite Corporation in the last 5 years

had spent an average of 0.54 percent of its net profit on provision of education, sports and

culture which rural children predominantly utilize.

The percentage of pass which NLC run schools had registered for Higher

Secondary and High level education in the last 5 years further strengthened the

hypothesis that the mean schooling year for this backward region to be upward of 12

years.

Table 6 – Percentage of pass for 10th and 12th standard rural children studying in NLC run schools

12th Standard 10th Standard

Year No.of

students appeared

No.of students passed

% of pass No.of

students appeared

No.of students passed

% of pass

2005-06 1154 788 67 1446 1067 74

2006-07 1252 885 67 1408 982 70

2007-08 1244 845 68 1365 998 74

2008-09 1164 882 72 1501 1110 74

2009-10 1141 919 77 1421 1082 76

Analysing the above data it could be concluded that Neyveli Lignite Corporation

had made significant improvements in terms of churning out no.of students who had

successfully passed both 12th and 10th standard public examinations in the last 5 years. By

achieving an improved performance in education from 67 percent pass registered during

2005-06 to 77 percent during 2009-10 in the case of 12th standard and 74 percent during

2005-06 to 76 percent achieved during 2009-10 in the case of 10th standard public


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examination, NLC run schools which predominantly serve the surrounding rural

population had contributed to promotion of higher secondary level school education

among the rural population and in turn impacted their quality of life.

HUMAN DEVELOPMENT INDEX OF NEYVELI COMPARED TO

THAT OF THE STATE

NLC’s spending which averaged around 16 percent of its net profit during the

period from 2004-05 to 2008-09 on development of social infrastructure which include

maintenance 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 and

incentives to both regular and contract workers, provided a significant leading that its

social CSR initiatives would have impacted the Human Development index for this

backward region. In order to test this Hypothesis the following parameters were analysed

and compared with that of the state of Tamilnadu:

Table 7 Human Development Index for Neyveli

Sl.No Index Neyveli Tamilnadu

1 Life Expectancy at birth 71.55 68.45

2 Infant Mortality 5.79 44

3 Birth rate 8.1 18.5

4 Death rate 3.68 7.7

3 Adult Literacy ( mean schooling years)

12 years 8.4

4 Combined gross enrolment 90 % 70 %

5 Per capita GDP in current prices 3,79,668.00 2097.99

Social Infrastructure

1 Sanitation 100% 40%

2 Drainage 100% 35 %

3 Safe drinking water 100% 40 %

4 Over crowding 3943/Sq.km 478/sq.km

5 Access to health care services 100 % 60 %

6 Provision of education 0.28 High school/ sq.km area

0.02 High school /sq.km (Cuddalore)

HUMAN DEVELOPMENT INDEX FOR NEYVELI

Life Expectancy at Birth: 25 years (Minimum) 85 years (Maximum)

Life Expectancy at Birth for Neyveli is 75 years


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Life expectancy index = 75 – 25 / 85-25 = 0.833

Adult literacy rate: 0 percent and 100 percent

Adult Literacy rate for Neyveli is 90 %

Adult Literacy Index = 90 – 0 / 100-0 = 0.90

Combined gross enrolment ratio= 0 percent and 100 percent

Combined gross enrolment ratio for Neyveli is 100 %

Combined gross enrolment index= 100-0/100-0 = 1.00

Educational attainment for Neyveli = [ 2( 0.90) + 1(1.00) ]/3= 0.93

Real GDP percapita ( PPP$) = $ 100 and $ 40,000

GDP per capita for Neyveli is 5333 $

GDP per capita ( PPP$) for Neyveli is

Log ( 6793) – log ( 100) / log ( 40000) – log ( 100) = 0.70

Human Development Index for Neyveli is 0.833 + 0.90 + 0.70 = 0.81

Neyveli’s HDI of 0.81 when compared to the state HDI of 0.531 and the country’s HDI

of 0.472 is bracketed in high HDI category.

CONCLUSION

Neyveli Lignite Corporation, which embedded in its vision the Corporate Social

Responsibility objectives, had contributed significantly to the Human development of this

region by spending 13 % of its net profit on development of social infrastructure like

housing, health, medical care, drinking water, electricity, education, sanitation, public

hygiene, 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 medical

care and education respectively to the surrounding rural population. The higher HDI of

0.81 achieved by NLC for this region compared to 0.531 of Tamilnadu reveal the

company’s consistent efforts towards achieving the goal of sustainable development by

fully 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,


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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.

Documents

Csr in a public sector undertaking in india – a case study