Donations to PM-CARES comes under CSR but not CM Relief Fund: Government attracts criticism

The Centre's clarification that corporate donations to PM-CARES will come under Corporate Social Responsibility (CSR) expenditure but not those to Chief Minister's Relief Fund invited criticism from the Opposition on Saturday, saying it was "blatantly discriminatory" in the fight against Covid-19.

The Ministry of Corporate Affairs on Friday had said that contributions made to PM-CARES will qualify as CSR expenditure under Schedule VII of the Companies Act 2013 and was further through an office memorandum issued on March 28, the day Prime Minister Narendra Modi announced the setting up of PM-CARES.

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In the Covid-19 related FAQ, the Ministry also made it clear that the "Chief Minister’s Relief Fund’ or ‘State Relief Fund for COVID-19’ is not included in Schedule VII of the Companies Act, 2013 and therefore any contribution to such funds shall not qualify as admissible CSR expenditure".

However, the contributions made to State Disaster Management Authorities to combat Covid-19 will qualify as CSR expenditure.

CPI(M) General Secretary Sitaram Yechury said it was an attempt to "corner all CSR monies for his (Modi's) personally named fund and deny states -- who are in the frontline of combatting Covid-19 -- these funds. This is “Cooperative Federalism”? Amend Schedule 7 of Companies Act to permit State governments to access these funds which could save millions of lives".

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He said it was "blatantly discriminatory and goes against the constitutional principle of federalism". States are at the forefront of this battle to contain the spread of Covid-19 and they are being "strangulated" by the Centre in this fight, he added.

On March 23, the government had allowed companies to spend their corporate social responsibility (CSR) funds to fight the Covid-19 pandemic, which was notified as a disaster.

According to the existing law, every company having net worth of Rs 500 or more, or turnover of Rs 1,000 crore or more or a net profit of Rs five crore or more will have to spend at least 2% of the average net profits made during the three immediately preceding financial years every financial year in pursuance of its Corporate Social Responsibility Policy.

Modi has on March 28 announced the setting up of public charitable ‘Prime Minister’s Citizen Assistance and Relief in Emergency Situations Fund’ (PM CARES Fund) with the "primary objective of dealing with any kind of emergency or distress situation, like posed by the Covid-19 pandemic, and to provide relief to the affected". Besides the Prime Minister as Chairman of the Trust, it has the Defence Minister, the Home Minister and the Finance Minister as members among others.

The decision to set up the new public charitable fund instead using the existing PM National Relief Fund (PMNRF) to collect funds from the public to fight Covid-19 has already come under criticism with opponents accusing him of using a tragedy to enhance personality cult besides raising questions about the transparency of the scheme.

In the FAQ, the Ministry also said payment of salary or wages to employees and workers, including contract labour, during the lockdown period cannot be considered as CSR expenditure

However, if any ex-gratia payment is made to temporary, casual workers or daily wage workers over and above the disbursement of wages, specifically for the purpose of fighting Covid-19, it is admissible towards CSR expenditure as a one-time exception provided there is an explicit declaration to that effect by the Board of the company, which is duly certified by the statutory auditor.

The clarifications came after the Ministry received several references and representations from various stakeholders seeking clarity on eligibility of CSR expenditure related to Covid-19
activities.