According to the companies act, firms with a net worth of ₹500 crores or more, or turnover of ₹1,000 crores or more or net profit of ₹5 crores or more, are required to spend 2% of average net profit of the preceding three years on corporate social responsibility activities.
These include initiatives that would have a social, economic and environmental impact or a way to give back to the society, such as promoting gender equality, empowering women, promoting education, eradicating hunger, poverty, malnutrition, rural development projects, conserving natural resources, among others.
Apart from these causes, till now, companies were also allowed to provide CSR funds to technology incubators located within Centre-approved academic institutions
However, the Corporate Affairs and Finance Minister Nirmala Sitharaman has made an announcement that the government has decided to expand the scope of corporate spend under Corporate Social Responsibility (CSR) norms.
As a result of this, the companies can now contribute towards research across various fields such as science, technology, medicine. Besides, CSR fund can be spent on incubators funded by the Centre or state or any state-owned companies. This is expected to attract more funds for research and development in the country.
“Now CSR 2% fund can be spent on incubators funded by central or state government or any agency or public sector undertaking of central or state government, and, making contributions to public-funded universities, IITs, national laboratories and autonomous bodies (established under the auspices of ICAR, ICMR, CSIR, DAE, DRDO, DST, Ministry of Electronics and Information Technology) engaged in conducting research in science, technology, engineering and medicine aimed at promoting SDGs (sustainable development goals),” the government has said in a statement.
The Finance Minister made this announcement while addressing a press conference in Goa. She also said that the government will “increasingly fund” more research, but added that there was a need for large investment for research and development in India.
“Because there is a need for large investment for RD we are opening up CSR window also,” she said.
Citing an example of how the expansion of the scope of CSR could help the corporate sector, Union Revenue Secretary Ajay Kumar Pandey, who was also present at the media briefing with Sitharaman, said that pharma companies could now outsource their research to the National Centre for Microbial Resource or IITs.