Firms can use CSR funds for R&D

The government has decided to allow corporate India to use their mandatory corporate social responsibility (CSR) spending for investments in publicly-funded incubators and contribute to research efforts in science, technology, medicine and engineering at major institutions and bodies.

Finance Minister Nirmala Sitharaman said that the rules governing CSR spending norms have been amended to pave way for greater investment into research — a parameter the country fares poorly on a global basis.

India’s spending on research and development (R&D) activities has been far less than 1% of GDP for years, with the private sector chipping in less than half of investments. The Companies Act requires firms with a net worth of ₹500 crore, turnover of ₹1,000 crore or net profit of ₹5 crore or more to set aside 2% of their average net profit over the last three years towards ‘approved’ CSR activities.

Funding incubators

“Now this 2% can be spent on incubators funded by Central or State government or any agency of a Central or State public sector undertaking,” Ms. Sitharaman said. “They can also make contributions to publicly- funded universities, IITs, national laboratories and autonomous bodies (established under the auspices of ICAR, ICMR, CSIR, DAE, DRDO, DST and Ministry of Electronics and Information Technology),” she added.

“The government can fund research and is doing so, and will also increasingly do more.

“But today, there is a need for large investments and large pools of capital to be given to R&D. We are opening up the CSR window also,” she said.

When asked if the government was drawing on CSR funds, the Minister said that was not the case. “IIT receives funds from the government but is not a government institution as such. It is an autonomous institution for engineering and technology. If science and tech-related research is being done there, CSR money can also go there,” she explained.

Revenue Secretary Ajay Bhushan Pandey said that this would enable a private pharmaceutical company, for instance, to undertake research in pharmaceuticals in conjunction with a publicly funded institution like IIT or ICMR and derive benefit from it.

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Printable version | Jul 24, 2021 5:30:12 PM |

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