Business News/ News / India/  Vaccinating associates in supply chain is CSR, but not employees: Govt

NEW DELHI : The Corporate affairs ministry on Monday clarified that businesses paying for vaccinating those in their supply chain and the local community could show it as their corporate social responsibility (CSR) spending. Vaccinating own employees will not qualify as CSR, said a government official.

Companies with net worth of 500 crore or more, or a turnover of 1,000 crore or more, or net profit of 5 crore or more, are required to spend 2% of their average net profit of the preceding three years on CSR activities.

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In response to queries from the industry, the ministry has taken the view that CSR spending could cover the cost of vaccinating those in the supply chain of a business and the local community which would not only contribute to the society but also help keep the business’ operations from any disruption due to covid-19 infections. “However, this does not cover the company’s own employees as spending on employees is not the philosophy of CSR," explained the official who spoke on condition of anonymity. The move would enable corporations with many small suppliers especially in the informal sector to extend vaccination to their workers.

Last year the government had tweaked the CSR rules to give more flexibility to use this fund in a way that suits the current realities. Accordingly, in August, life sciences companies with research and development (R&D) activities were allowed to spend their CSR funds for finding therapies for covid-19 subject to riders. It removed the restriction on life sciences companies spending CSR funds in activities which are part of their normal course of business.

Also, donations to the Prime Minister’s emergency fund set up to fight back the Coronavirus pandemic qualifies as CSR spending. Indian businesses roughly spend around 15,000 crore a year on CSR as per pre-pandemic official estimates.

Since Covid-19 is notified as a pandemic, businesses could spend CSR funds to fight the coronavirus disease. Promoting healthcare including preventive care and disaster management qualifies as eligible CSR expenditure. Companies are free to make broad interpretation of the areas specified for utilisation of CSR funds.

CSR spending helps companies in winning goodwill among the local community, which is often affected by environmental impact and loss of land. When a large corporation conducts health camps or other services to the community, it also helps many of its own employees who belong to the locality, something that indirectly benefits the company. Government encourages CSR spending as it complements its own efforts to improve healthcare and alleviate poverty.

Gireesh Chandra Prasad
Gireesh has over 22 years of experience in business journalism covering diverse aspects of the economy, including finance, taxation, energy, aviation, corporate and bankruptcy laws, accounting and auditing.
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Updated: 04 Jan 2021, 05:09 PM IST
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