CSR, tax laws not favourable for international aid
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Indian companies, led by ITC Ltd, Bharti Airtel Ltd and SpiceJet Ltd, have rushed to the aid of earthquake-ravaged Nepal, and many more are looking for ways to provide help.
For now, Indian companies can mostly extend aid by leveraging their own businesses or services as a goodwill gesture.
For instance, ITC is supplying the National Disaster Relief Management (NDRM) centre, which is involved with disaster relief, with 200,000 food packets and nine tonnes of biscuits and ready-to-eat food.
“We will be looking at deploying more material aid based on the need. For now, since we are food manufacturers, we could address this need urgently,” said an ITC spokesperson as the death toll from Saturday’s quake and scores of aftershocks crossed 4,000.
Airtel offered free calls on its network from India to Nepal for 48 hours from Saturday.
SpiceJet said it is offering free flights from Kathmandu to India to people who cannot afford to pay the full fare. In addition, it is helping non-governmental organizations (NGOs) and relief organizations to travel to Nepal in a flight that has been put together for relief measures.
Mobile wallet provider Paytm said it will match the donation by its customers and will put the contributions into a relief fund run by the Indian government’s Nepal-specific relief fund.
The companies’ move marks a departure from past practice in two respects: so far companies have responded to disasters in India, and they have done so by extending financial aid.
Noshir Dadrawala, chief executive of the Mumbai-based Centre for Advancement of Philanthropy, a not-for-profit working in the area of corporate social initiatives, said companies will not be able to tap their corporate social responsibility (CSR) funds for international aid, as government rules require that these funds be spent on CSR activities in India.
Besides the restrictions on CSR placed by the Companies Act of 2013, charitable funding outside of India is not easy to carry out under the Income Tax Act, 1961, and it is regulated by the Reserve Bank of India.
“Every trust, society or section 8 (previously section 25) company that enjoys tax exemptions is required to apply its income for charitable purpose only in India. For a charitable organization to send funds out of India, it would require the permission of the Reserve Bank of India and the funds could only be used “for a cause in which India is interested”, says Dadrawala.
While companies are routing their relief material through government agencies such as NDRM or through the ministry for external affairs, which in turn sends the material with the Indian Air Force, Indian-registered NGOs may not find it easy to engage in relief operations in Nepal, even when they have the expertise.
Goonj, an NGO that works in disaster relief, has found its work hampered by these rules, and has been unable to send immediate relief material even though it is ready.
“We have good experience in disaster response and given the scale of the disaster, there is a great need to mobilize resources quickly. We have two truckloads of material—medicines, blankets, tents—ready to be deployed. But we are awaiting permission from the home ministry and external affairs ministry,” said Anshu Gupta, founder, Goonj.
Ketto.org, an online crowdfunding platform, has created a page for raising funds for Nepal relief, and its co-founder Varun Sheth said it raised close to Rs.6 lakh in just a day. “We are trying to get as many individuals to raise funds as possible. Currently, about 21 individuals are campaigning for funds, including actor Kunal Kapoor,” Sheth said. They are aiming to raise about Rs.25 lakh in the course of the month and the money will be used to assemble disaster kits which will contain tarpaulin, mats, soaps, blankets, etc. Ketto will work with CARE India, an NGO that deals with disaster preparedness and response among other issues. CARE India in turn hopes to supply these items to CARE Nepal.
CARE India CEO Muhammad Musa said the NGO has mobilized 1,500 kits that will support 9,000 people. The kits contain essential items such as tarpaulin for making tents, water, hygiene kits, etc. Like Goonj, CARE is also awaiting permission from the government to send the material across to Nepal.
Dadrawala said cross-border laws are complicated when it comes to providing aid, and suggested the rules be relaxed in major disasters like the Nepal quake in order to allow aid to flow freely.
Officials at the ministry of corporate affairs refused to offer a comment for this story.
Dadrawala said given the restrictions, the best way to deploy funds would be to route them through a local unit in Nepal or through the Prime Minister’s relief fund.
Donations to the Prime Minister’s relief fund are acceptable under CSR rules. The Prime Minister’s relief fund is being deployed to give compensation to the kin of those who have died in the Nepal earthquake.