Contributions made by companies to the Prime Minister’s relief fund to combat Covid- 19, called PM-CARES, qualify as Corporate Social Responsibility (CSR) but those made to the Chief Minister’s Public Relief Fund (CMPRF) do not. This has resulted in companies favouring the Prime Minister’s relief fund at the cost of Chief Ministers’ relief funds.

This discrimination needs to be rectified to encourage smooth flow of funds to both Central and State governments to jointly fight the coronavirus pandemic. What is needed at this time of the longest lockdown in history is a collective national endeavour and not concentration of power in the Prime Minister with his Finance Minister sitting tight on the Consolidated Fund of India.

A Special Bench of the Madras High Court comprising Justices N Kirubakaran and R Hemalatha was constrained to rue, “the fund allotment to Tamil Nadu is not adequate whereas States which have lesser number of coronavirus infected patients have been allotted more fund.

This court is not against the allotment of more funds to other States, but is concerned about Tamil Nadu getting lesser fund and directed the Central government to consider positively increasing the amount.” Even meagre contributions by corporates to the Tamil Nadu CMPRF were transferred to the State Disaster Management Authority with a view to making them eligible as CSR expenditure.

Justifying the discrimination between PMCARES and the CMPRF, the Corporate Affairs Ministry says that according to Schedule VII under Section 135 of the Companies Act, funds contributed by corporates to any Chief Minister’s Relief Fund do not come within the ambit of Corporate Social Responsibility.

Since Central funds, including PM CARES, have been specifically mentioned in Schedule VII, the corporates are sending their contribution to that fund and not to CMPRF. The intent of Schedule VII is to ensure that CSR funds are put to the specific end-uses listed in the Schedule. There is no provision in the Schedule that precludes CMPRF receiving CSR funds.

Denial of CSR funds to CMPRF goes against the principle of federalism. Prime Minister Narendra Modi has time and again stressed on the importance of cooperative federalism to guide national policies, but the Companies Act, 2013, was amended thrice, 30 May 2019, 6 August 2019 and 11 October 2019. since Modi became Prime Minister to make CSR Centre-specific.

Schedule VII of the latest amended Act has 12 clauses. Clause 7 of the Schedule covers “Contribution to the Prime Minister’s national relief fund or any other fund set up by the Central government for socio-economic development and relief and welfare of the Schedule Castes, Tribes, other backward classes, minorities and women.”

Socio-economic development and relief and welfare of the Scheduled Castes, Scheduled Tribes, other backward classes, minorities and women are subjects within the States’ List under the Seventh Schedule of the Constitution. There is no justification for the Centre to corner the entire CSR funds and leave it to the States to carry out the work for which the fund is intended.