The economic crash caused due to COVID-19 pandemic has heavily impacted the CSR spending by the corporates in Financial Year 2019-20. According to the official data available on the Ministry of Corporate Affairs, about 50 per cent dip has been observed in CSR spending of businesses in FY20 as compared to FY19.
According to the LiveMint, in FY20 the companies spent a little over Rs 7,800 crore against Rs 18,655 crore in FY19. Considering the fact that CSR spending addresses several societal concerns of the country such as education, health, hunger, malnutrition and poverty, the dip has also affected these causes and undone the positive development accomplishments over these causes by several years in a matter of months.
The data has shown that about 248 entities, including large corporations in the auto, food and tech space spent well below the prescribed amount for CSR as per the law, while 98 per cent of companies in the pharma, insurance and cement space did not spend any amount towards the same.
In addition to this, it was also noted that the overall share of public sector companies’ contribution towards CSR dropped to 6 per cent in FY20 as compared to 20 per cent in FY19.
The data has highlighted that among the segments for which funding was severely affected during this time include health and livelihood – especially for the differently-abled. The figure for these causes combined slumped by 50 per cent to Rs 3,582 crore in FY20 as compared to the previous year.
Observing the dip in the early stage, the ministry in order to boost the CSR spend amid the pandemic relaxed the CSE norms and allowed credit for extra spending this year to be set off against spending obligation in future years.
Corporate have however been not very forthcoming in spending since CSR funds are sourced from overall liquidity which has been impacted due to the pandemic, according to Pavan Kumar Vijay, founder of consulting firm Corporate Professionals Group.
Taking the carrot and stick approach, the ministry has also imposed fines of at least Rs 1 crore on companies that default on their CSR, while defaulting officers could be fined at least Rs 2 lakh each. Names of top spenders and defaulters will also be made public.