Paucity of funds must not dampen NRF’s effectiveness

For National Research Foundation to be effective, contributions to its corpus by companies should qualify as admissible CSR expenditure

The proposed National Research Foundation (NRF) — India's equivalent of the US National Science Foundation — carries with it many hopes and expectations regarding the significant role that the organisation can play in India’s growth and development.

That said, it would help if authorities could consider contributions made by companies (private and public sector) to the corpus of the NRF being eligible for recognition as admissible CSR expenditure under the CSR norms of the Companies Act, 2013. With effect from January 22, 2021, the contribution to the corpus of any entity is no longer an admissible CSR expenditure.

Authorities making an exception on the CSR front for companies contributing to the corpus of the NRF could have multiple benefits. It could ensure year-on-year increased fund availability for the NRF to achieve the objectives for which the organisation is being formed. Taking such a step would also reduce the NRF's financial dependence on the government, thereby enabling authorities to deploy more money to other areas too where funds must be made available. Higher corporate profitability arising out of a likely uptick in the Indian economy would ensure that companies would have a bigger CSR corpus through which they can continue to support existing developmental projects.  

The NRF corpus is set to be Rs 50,000 crore for the 5-year period (2023-2028). However, given India's ambitions of emerging as a developed nation and becoming self-reliant, the size of the NRF corpus may need to go up several notches higher for providing adequate funding support to all deserving research institutions.

During the financial year 2021-22, the total CSR expenditure of companies stood at Rs 25,932.79 crore. The total CSR expenditure of companies from 2017-18 to 2021-22 was Rs 1,14,425.78 crore. Given this, if the NRF sees CSR funds coming in, the target of Rs 50,000 crore by 2028 would easily be achieved, even exceeded.

Getting listed private sector companies, especially, to make large contributions to the corpus of the NRF where such contributions do not qualify as CSR expenditure, may be expecting a bit too much of them. With the absence of benefits, combined with the tricky market conditions and high expectations from shareholders, there is little incentive for listed private sector entities to contribute to the NRF corpus. When it comes to reinvesting the profits or giving higher dividends or giving away money for research purposes (however noble it might be) companies/shareholders are likely to choose between the first two.

To develop the NRF without the participation of the private sector, especially contributions from big private players, would mean that the government will have to do the heavy lifting. This could mean additional burden on the exchequer, or additional revenue-generating measures like, say, an NRF cess.

Establishment of the National Research Foundation is a step in the right direction and adds heft to the shaping of a new India. The unavailability of large funds on a consistent basis should not come in the way of its effectiveness.

(Sumali Moitra is a current affairs commentator. Twitter: @sumalimoitra.)

Disclaimer: The views expressed above are the author's own. They do not necessarily reflect the views of DH.