NEW DELHI: Companies spending on relief material meant for flood-hit Jammu and Kashmir, which is facing a humanitarian disaster of enormous proportions, will be allowed to count this toward their mandatory 2 per cent spending on corporate social responsibility (CSR) initiatives under the Companies Act, a senior government official said. Disaster relief can't otherwise be grouped under this heading.
"Contributions towards disaster management are not there in the list of CSR activities," the official said. "Companies that want to undertake relief operations in Kashmir and other places and provide food packets, tents or medical services can show it under the already notified food relief (eradicating hunger), health services and environmental sustainability heads. It will be considered as part of their 2 per cent CSR spend." Prime Minister Narendra Modi has already announced emergency assistance of Rs 1,000 crore as the state copes with chaos caused by the Jhelum inundating Srinagar and other areas following incessant rain. The armed forces have been conducting hectic rescue operations as they try to move people to safety.
The government clarification follows representations from industry chambers and corporate representatives on whether the spending on relief operations in disaster-hit areas would be considered under the list of mandatory CSR initiatives. A number of power, cement, food processing, agricultural and pharmaceutical companies have operations in the hill states that are regularly hit by floods.
Companies spending on reconstruction of schools, hospitals or other social infrastructure in disaster-hit areas can also claim it toward the mandatory CSR spend. Companies will also be able to facilitate relief operations by engaging non government organisations ( NGOs). Severe flooding in Kashmir has killed more than 175 people in the past one week, with the toll feared to be much higher.
Flood alerts have also been issued in Bihar, Odisha and coastal Andhra Pradesh. Last year, flash floods in Uttarakhand killed hundreds and caused losses running into several thousand crores of rupees.
Around 14,000 companies are expected to spend about Rs 15,000 crore on various social projects. Under the Companies Act 2013, a company must spend 2 per cent of its profit on CSR from the current fiscal if it has a turnover of Rs 1,000 crore or more, or net worth of Rs 500 crore or more, or net profit of Rs 5 crore or more. The government has provided a list of activities that qualify as CSR, which include measures to eradicate hunger, promote education and rural sports, protection of heritage, environmental sustainability and contributions to the Prime Minister's Relief Fund.