It is not clear if it is a bureaucratic slip up or something more sinister, but while India Inc can make donations to the PM Cares out of its CSR budget, it cannot contribute to various corona funds run by states. While West Bengal chief minister Mamata Banerjee brought this up with Prime Minister Narendra Modi in the April 11 video-conference, the issue was not fixed, so the state’s finance minister Amit Mitra has now written to Nirmala Sitharaman in her capacity as corporate affairs minister. According to Mitra, the move “will severely jeopardise” his state’s efforts to raise resources to combat the pandemic.
According to Mitra, the West Bengal State Emergency Relief Fund, a sub-facility set up to fight the pandemic under the Chief Minister’s Relief Fund, was receiving encouraging response from common people and businesses, until a set of FAQs released by the Union corporate affairs ministry (MCA) on April 10 played spoilsport. In its answer to one FAQ, the ministry clarified that CM’s Relief Funds and other state-level Covid-19 funds do not qualify as CSR.
The same ministry had, in a March 23 circular, stated clearly that “spending of CSR funds for Covid-19 is eligible CSR activity”, Mitra recalled.
Corporate contributions to the PM Cares Fund and state disaster management authority (SDMA) funds qualify as CSR expenditure. Though SDMAs operate at the state level, 75% of the contribution to these funds are being made by the Centre; in case of the special-category states, the Centre’s SDMA share is even higher at 90%.
Analysts and auditors are divided over the controversy. AMRG & Associates chief executive officer Gaurav Mohan said that in the light of the Schedule VII of Companies Act, 2013, CSR expenditure has always been directed towards funds set up by the Centre, be it Prime Minister National Relief Fund or Clean Ganga Fund or the Swachh Bharat Kosh.
“Centralised control of CSR funds may be necessary so as to enable optimum utilisation for worst affected states. If CSR expenditure in state-administered funds is allowed, it may create disparity, as industrialised states will have more corpus compared to non-industrialised states. Excess funds may not be utilised to fight the pandemic but may go towards some other development work of the state concerned,” he said.
Nangia Andersen Consulting director Shailesh Kumar, however, said that considering representation from many states and certain states having many hotspots and requiring additional funds to fight and contain the pandemic, the Centre would do well to allow contributions to CM/state relief funds as eligible CSR expenditure. Around 20,000 companies meet CSR obligations every year with the annual contribution by them (as 2% of average profit in the preceding three financial years) hovering around Rs 15,000 crore.
As per the corporate affairs ministry’s FAQ, in addition to contribution towards PM Cares Fund (notified on March 28), contributions made by companies to SDMAs and to Covid-19 related activities such as preventive healthcare, sanitation, disaster management, etc. as well as ex-gratia payment made to any casual/ daily wage worker over and above their regular wages, shall qualify as ‘eligible CSR spend’. However, contributions made to CMs’/ State Relief Funds for Covid-19 and regular salaries/ wages paid by companies to their employees during lockdown period do not qualify as CSR spend.