India Inc Allowed to Count Disaster Relief as CSR

Companies that are spending on relief material for floods-hit Kerala will be allowed to count this toward their mandatory 2% spending on corporate social responsibility (CSR) initiatives under the Companies Act, 2013.

Disaster relief doesn't come under Schedule 7, Section 135 of the Companies Act that outlines CSR guidelines and the areas where expenditure could be made. However, companies can club relief material under heads such as medical aid, sanitation and providing housing and shelter, a top corporate affairs ministry official said.

In the last few weeks, several corporate houses and industry chambers have made representations to the government, seeking to know if money spent on rebuilding basic services in Kerala would be treated as CSR.

The government has told them that companies willing to provide or already providing medical aid can account those as expenses towards promoting health care, including preventive health care.

“Food supply can be covered under eradicating hunger, poverty and malnutrition and supply of clean water can be covered under sanitation and making available safe drinking water,” the official added. Companies directly donating to the chief minister’s relief fund are already getting covered under the CSR provision of the Companies Act.

In India, around 14,000 companies are required to spend on various social projects under Section 135 of the Companies Act. As per law, a company must spend 2% of its profit on CSR from the current fiscal year if it has a turnover of Rs 1,000 crore or more, or net worth of Rs 500 crore or profit of Rs 5 crore and more. The ministry has provided a list of items under Schedule 7 that are covered under the law.

The preliminary assessment of losses in Kerala was 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. Lakhs of people are still sheltered in relief centres.