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NEW DELHI : Spending by corporates towards setting up oxygen plants and other medical infrastructure towards combating covid-19 will be counted as eligible corporate social responsibility (CSR) activity, the government said on Wednesday, as it seeks to expedite efforts to bolster the healthcare infrastructure amid a deadly second wave of the pandemic.

Funds earmarked for CSR could be spent on setting up medical facilities towards covid care, medical oxygen generation and storage plants as well as production and supply of oxygen concentrators, cylinders and other medical equipment needed to fight back the pandemic, the ministry of corporate affairs said in a statement, elaborating on the activities that would be counted as CSR activity.

Earlier, the ministry had allowed companies to spend CSR funds for covid to set up “makeshift hospitals and temporary" covid care facilities.

The clarification from the ministry comes as the pandemic continues to put an acute strain on India’s healthcare infrastructure with shortages of hospital beds and oxygen supplies.

The issue of oxygen shortage in the national capital has reached the Delhi high court, which has warned about contempt proceedings against government officials.

The Companies Act mandates businesses with net worth of 500 crore or more, or annual revenues of at least 1,000 crore, or net profit of at least 5 crore, to spend 2% of their average net profits of the preceding three years on CSR activities.

Given corporate profits may be depressed during the economic downturn, which could also tell on the amount businesses spend on CSR, the government in January gave companies more flexibility to spend on charity. Accordingly, they are free to spend more than their obligation—2% of their net profits—on CSR in any given year and the excess amount spent can be set off against the CSR spending obligation in future years.

The government also tweaked the CSR rules that were implemented recently, which could lead many companies to take their obligations more seriously.

Earlier, companies that did not spend the mandated CSR obligations could explain it away. But a penalty provision that took effect from 22 January prescribes at least 1 crore for the defaulting company and at least 2 lakh for each defaulting officer.

As per official data, Indian companies spent 17,885 crore on CSR activities in FY20.

Companies such as Reliance Industries Ltd, Tata Consultancy Services Ltd, Oil and Natural Gas Corp. Ltd, HDFC Bank Ltd and Indian Oil Corp. Ltd, Infosys Ltd, Bharat Petroleum Corp. Ltd and Power Grid Corp. of India Ltd were the top CSR spenders in FY20.

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