CSR Funds for COVID-19 Relief

• @kw
• 29 Apr 2020

Government is running many programs to fund relief for poor people in the time of crisis due to lock down for spread of Corona virus. In this relief funds CSR monies are added, others maintain the spending is best left to individual companies.

Now since government has cleared the ways for companies to spend their CSR (Corporate social responsibility ) fund on COVID  related activities, it has however been proposed by one section of people who say that the fund should be routed through central fund, and leave it to the government to deploy the money as it deems fit. This way the CSR money can be utilized for health infrastructure, buying protective gears for healthcare providers and provide relief to those who are badly effected by the disruption.  However those in the social sector prefer a decentralized model. They feel that by a decentralized model decisions can be much faster where individual company or group of companies can identify the project to be supported. We have already seen that some projects have already come up with support of companies like Reliance Industries, TATA Group and others who have already announced various COVID related initiatives and committed funding for them. 

The CSR funding even if it is entirely dedicated for COVID related activities, can only be treated as an addition to the Government  and cannot replace public spending by state and central government. The Ministry of Corporate Affairs had clarified on March 23 that support for COVID -19 related activities would qualify as CSR spending. The Companies Act, 2013, requires companies to spend 2 per cent of their profits of the previous three years on CSR activities.

Those in support of centralized spending of CSR funds said if decentralized approach is favored there would be duplication and overlap of effort. And further government has machinery to far reach to support to cover entire nation which no corporate entity can provide. It is however estimated that large fund of unspent CSR fund is available with companies which if transferred to support government projects, it can immediately to COVID–fund, without upsetting the ongoing projects. COVID fund can be a part of the Prime Minister’s National Relief Fund or a separate fund, the government can consider spending on COVID-related activities as a new entry in Schedule VII of the Companies Act, 2013, which currently lists spending on 12 activities as eligible to be considered as CSR.

There are some argument for decentralized spending which provide advisory support for sustainable development initiatives, advocated a fund in the private sector to which companies can contribute a part of their CSR funds. These funds can be used to provide income support to workers who lose their jobs due to pandemic-led shutdowns and demand contraction. Executive Director, Plan India, a non-profit working in the area of child rights, did not agree that a centralized fund can deliver in a situation that is changing rapidly and quick decisions are needed on supporting projects. He said he is not sure if synchronized funding will be able to address the variables involved in the current situation, which is set to see a rise in the rate of infection, affect livelihoods and even reverse the gains made on various Sustainable Development Goals. Continuing with the existing partnership between companies and non-profits will work better, he added.

However, it is important to understand that in India we need to follow both the models simultaneously as vast nature of problem that exist can only be tackled with dedicated effort of government machineries and also through direct participation of Corporate bodies and individual philanthropist through various support groups and NGO’s.