Donation to PM-Cares, not states’ relief fund, to count as CSR: Govt

NEWDELHI: Companies’ contributions to the chief minister’s relief fund or the state relief fund towards the fight against the coronavirus disease (Covid-19) will not count as corporate social responsibility (CSR) spending, but those to the newly established Prime Minister ‘s Citizen Assistance and Relief in Emergency Situations (PM-CARES) fund or to the State Disaster Management Authority will, the Centre said on Saturday.

A clarification to the effect by the ministry of corporate affairs triggered opposition allegations that the Centre intended to corner all the money that companies had earmarked for CSR activities -- a charge the government brushed aside.

“If CM Relief Fund is included, CSR money will not flow outside of the industrial states such as Maharashtra, Gujarat and Andhra Pradesh. Industrial states will consume about 57% of the about ₹15,000 annual CSR funds and non-industrial states like Bihar, Bengal, Orissa and the Northeast would remain high and dry,” a government official said, requesting anonymity.

Criticising the Union government, Communist Party of India (Marxist) leader Sitaram Yechury had said: “Corner all CSR monies for his personally named fund & deny States - who are in the frontline of combatting #COVID19 -- these funds. This is “Cooperative Federalism”? Amend Schedule 7 of Companies Act to permit State govts to access these funds which could save millions of lives.”

The schedule specifies government-approved CSR activities, which include eradicating hunger, poverty and malnutrition, and promoting healthcare, education and gender equality. It also covers activities related to environmental sustainability, protection of national heritage, art and culture, training to promote sports, contributing to the Prime Minister’s National Relief Fund and disaster management.

OPPN ALLEGED THAT THE CENTRE INTENDED TO CORNER ALL THE MONEY THAT COMPANIES HAD EARMARKED FOR CSR ACTIVITIES -- A CHARGE THE GOVT BRUSHED ASIDE

Companies with a net worth of ₹500 crore or more, or a turnover of ₹1,000 crore or more, or a net profit of ₹5 crore or more in the immediately preceding financial year are mandatorily required to spend 2% of their average net profit of the preceding three years on CSR. These activities are governed by the Section 135 of the Companies Act, 2013.

In a set of frequently asked questions (FAQs) and answers, the ministry of corporate affairs said corporate donations to the Chief Minister’s Relief Fund or State Relief Fund for combating Covid-19 had not been included in Schedule VII of the Companies Act, 2013 and contributions to the funds shall not qualify as admissible CSR expenditure. “Keeping in view of the spread of novel Corona Virus (Covid-19), its declaration as pandemic by the World Health Organization (WHO), and decision of Government of India to treat this as a notified disaster, it is hereby clarified that spending of CSR funds for Covid-19 is eligible CSR activity,” the first circular on March 23 said. On March 28, MCA issued a clarification that “any contribution made to the PM CARES Fund shall qualify as CSR expenditure” under the Companies Act 2013.