Corporates have spent Rs 52,000 crore towards social welfare activities in the last five financial years and now making contributions to the Prime Minister's relief fund will further help them meet their obligations under the companies law, according to a senior government official.
As the country fights the outbreak of coronavirus, which has so far infected nearly 1,000 people, the government has initiated a slew of measures to deal with the situation.
The corporate affairs ministry has said contributions to the PM-CARES Fund would qualify as Corporate Social Responsibility (CSR) spending under the companies law.
Under the Companies Act, 2013 -- which is implemented by the ministry -- certain classes of profitable corporates are required to shell out at least two per cent of their three-year annual average net profit towards CSR activities in a financial year. This provision came into force on April 1, 2014.
"The macro picture is that over the last 5 years, CSR contributions amounting to around Rs 52,000 have been made against total demand of around Rs 77,000 crore.
"In other words, some are not spending and some underspending whilst a few are spending beyond their obligation. More than 50 per cent of the companies are fulfilling their CSR obligations in full," Corporate Affairs Secretary Injeti Srinivas told PTI on Sunday.
Now that PM-CARES Fund has been set up, those who have not discharged their obligation towards CSR or have underspent, can utilise this opportunity to contribute to PM-CARES Fund to make good the deficiency, he said.
The government has set up the Prime Minister's Citizen Assistance and Relief in Emergency Situations Fund (PM-CARES Fund) which would be utilised to deal with any emergency or distress situation such as the coronavirus outbreak.
It is clarified that any kind of contribution made to the PM-CARES Fund shall qualify as CSR expenditure under the Companies Act, the ministry said in a memorandum issued on Saturday.
"It would help the government rapidly scale up the capacity of the public health system to meet the current public health emergency," Srinivas said.
The corporate sector through CSR spending can play an important role in supplementing and complementing government efforts to scale up the capacity of the public health system in terms of isolation wards, personal protection equipment, ventilators, testing and other requirements, he noted.
Earlier this week, the ministry said spending by corporates to deal with the coronavirus outbreak would be considered as a CSR activity.
CSR funds could be utilised for various activities related to COVID-19, including those relating to preventive healthcare and sanitation.
Under Section 135 of the Companies Act, 2013, every company having net worth of at least Rs 500 crore, turnover of Rs 1,000 crore or more, or a minimum net profit of Rs 5 crore during the immediately preceding financial year, has to make CSR expenditure.