Union finance and corporate affairs minister Nirmala Sitharaman on Friday said the Centre has decided to expand the scope of corporate spending under the corporate social responsibility (CSR) norms.
According to the Companies Act, firms 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.
These include initiatives that would have a social, economic and environmental impact, or a way to give back to the society, such as promoting gender equality, empowering women, promoting education, eradicating hunger, poverty, malnutrition, rural development projects and conserving natural resources.
Friday’s announcement widened the scope of CSR activities. Companies can now contribute towards research across various fields such as science, technology and medicine. Besides, CSR funds can now be spent on incubators funded by the Centre or state or any state-owned entity. This is expected to attract more funds on research and development in India.
“Now, the CSR 2% fund can be spent on incubators funded by central or state government, or any agency or public sector undertaking of central or state government, and, making contributions to public-funded universities, IITs, national laboratories and autonomous bodies (established under the auspices of ICAR, ICMR, CSIR, DAE, DRDO, DST, ministry of electronics and information technology) engaged in conducting research in science, technology, engineering and medicine aimed at promoting SDGs (sustainable development goals)," the government said in a statement.
“The move to allow CSR funds to be spent on incubators funded by the government and public bodies will lead to a boost for innovation and entrepreneurship. This is a very positive move as India looks at giving a boost to startups," said N.C. Hegde, partner, Deloitte India.
“CSR spending on contributions to specified institutions engaged in research will also be eligible, paving the way for greater investment in research and development. The move to extend spending on innovation and research, as being part of an extended CSR, will hugely benefit trade and industry," Hegde added.
Spending on CSR has gone up from ₹10,066 crore in 2014-15 to ₹13,327 crore in 2017-18, Mint had reported. Of the over 21,300 companies mandated to report their CSR activities in 2017-18, more than 10,800 have complied. CSR spending between 2014-15 and 2017-18 was the highest in education, health, poverty and malnutrition, access to clean drinking water, livelihood and for the differently-abled.
“The thrust towards research-based innovation is a much needed step and in the right direction. Integration with established private enterprises in key sectors will provide the required impetus for a future-ready economy," said Jaivir Singh, VC and president, PwC India Foundation.