CSR spend under The Companies Act is to be incurred on prescribed activities listed out in Schedule VII of The Companies Act. These activities in Schedule VII covers eradicating extreme hunger and poverty, reducing child mortality and improving maternal health, promotion of education, combating human immunodeficiency virus, acquired immune deficiency syndrome, malaria and other diseases, ensuring environmental sustainability, employment enhancing vocational skills, social business projects, contribution to the Prime Minister’s National Relief Fund or any other fund set up by the Central Government or the State Governments for socio-economic development and relief and funds for the welfare of the Scheduled Castes, the Scheduled Tribes, other backward classes, minorities and women, such other matters as may be prescribed.
Ambiguity on whether Disaster relief is within the CSR mandate
Disaster relief and rehabilitation were not specifically spelled out in Schedule VII. Companies attempted to cover relief material under heads such as medical aid, sanitation and providing housing and shelter, etc being interpreted as providing healthcare, provision of food and supplies as eradication of hunger, etc. These interpretations were technically workarounds and did not cover disaster relief, rehabilitation or disaster management specifically leading to a dilemma of the existence of a national crisis and willingness of the Corporate world to contribute but there being no specific CSR mandate.
Recent disaster incidents
India recently has faced natural calamities and environmental disasters, such as flash floods in Kerala, Kodagu in 2018 and in Orissa in 2019, etc. The preliminary assessment of losses in Kerala was alone was estimated to be around Rs 20,000 crore, or almost equal to the state’s annual plan size for 2018-19. Heavy rains and unprecedented floods in the state this monsoon season have claimed more than 400 lives. Several thousands of people were sheltered in relief centers and still suffering from the after-effects of these natural calamities.
Several corporate houses and industry chambers have made representations to the government, seeking clarity on the question of disaster spend and it’s inclusion under the CSR.
Disaster – Now included in CSR
The Ministry of Corporate Affairs vide a Notification dated May 30, 2019, has amended Schedule VII of the Companies Act, 2013 to include:
clause (xii) disaster management, including relief, rehabilitation and reconstruction activities” in the list of activities prescribed in Schedule VII of the Companies Act 2013.