The government on Monday allowed companies to spend their corporate social responsibility (CSR) funds to fight the Covid-19 pandemic, a notified disaster.
The move is expected to benefit local communities, where businesses have operations and complement the state’s efforts to combat the crisis that has disrupted economic activity and could impact livelihoods.
Indian companies spend around ₹15,000 crore a year on charity as mandated by law. The Companies Act requires firms with a net worth of at least ₹500 crore or revenue of ₹1,000 crore or net profit of ₹5 crore to spend at least 2% of their net profit on CSR. If they fail to do so, it should be explained in the annual financial statement.
An order by the ministry of corporate affairs said CSR funds may be spent on various activities related to the Covid-19 disease in ways such as promoting healthcare, including preventive care. CSR funds could also be used to tackle disaster management, which includes relief, rehabilitation and reconstruction activities.
The order explained that the decision was taken in view of the spread of the virus in the country, its declaration as a pandemic by the World Health Organization and the government’s decision to treat it as a disaster. “Spending of CSR funds for Covid-19 is eligible CSR activity," said the order.
The move came while opposition parties have demanded the government announce a financial package to deal with the crisis. The pandemic has affected businesses, forcing factory shutdowns. The disruption to business activity comes as India’s economy has been struggling to tide over a deceleration in growth.
“I am sure corporates will come forward in large numbers to make contributions for the cause," said Pavan Kumar Vijay, founder of consultancy firm Corporate Professionals Group. He suggested the government create a portal where specific requirements can be posted and businesses may contribute in cash or kind.