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Should Companies Be Allowed to Use CSR Funds to Vaccinate Employees?

Nov 26, 2020 9:16 AM 4 min read

The past week saw major new developments in the race to develop a COVID-19 vaccine. Moderna and Pfizer released data from their clinical trials, which showed both their vaccines being about 95% effective against the novel coronavirus.

As results of other trials - notably Oxford’s - are in the offing and companies begin filing for emergency use authorisation, a vaccine is expected to be available for public use within the next few months.


The Distribution Dilemma

However, this doesn’t mean the pandemic is at its end. Once the vaccine is finalised, the world will have to confront its next big challenge: the distribution and administering of the vaccine to all people in all jurisdictions.

No mean task for a planet of 7.8 billion individuals!

Especially so considering that the vaccines under development need to be stored in very cold conditions to be effective - something that is both expensive and a logistical challenge, especially for lower and middle income countries. And some of the vaccines are double dose ones, meaning they have to be taken in two doses, three to four weeks apart, adding to scientists’ and governments’ headaches.

To say nothing of the titanic costs involved in the entire process, which could appreciably  pressure existing monetary and fiscal discipline.

So how may we ensure that a vaccine reaches as many people in as little time as possible while being somewhat cost-efficient through it all?

Specifically, how can this process be accelerated by roping in the private sector?


Enter, CSR

One way may be by tapping into companies’ Corporate Social Responsibility (CSR) funds, as Biocon Chairperson Kiran Mazumdar-Shaw recently told Moneycontrol. “I've been recommending to the Government that corporates should inoculate their own employees, but you should allow them to use CSR funds to do that and claim it over years.”

Mazumdar-Shaw’s suggestion is pertinent because utilising the private sector’s expertise and infrastructure to accelerate vaccine distribution makes sense in that it ensures speedier delivery and could possibly cut costs as well.

And it wouldn’t even be the first time the Government incentivised CSR expenditure in the fight against COVID-19.


Coronavirus Sparring Responsibility

Tying coronavirus relief with CSR obligations is already an option for companies. In March this year, the Government said that all expenditures incurred on activities related to COVID-19 would be added as the permissible avenues for CSR expenditure.

These activities include contributions to the PM CARES Fund and State Disaster Management Authority. Additionally, they cover expenditure incurred on preventive health care and sanitation, ex-gratia to temporary/casual workers over and above daily wages, and providing quarantine facilities.

A subsequent amendment to the CSR rules stated that COVID-related R&D activities “of new vaccines, drugs and medical devices” would also be eligible for CSR benefits.

There were two other CSR-related policy changes since the onset of the pandemic. One was allowing all donations for COVID-related efforts to be eligible for 100% tax deduction. And the other was permitting companies that contributed over and above the minimum prescribed amount to later offset the excess against the CSR obligation arising in subsequent years, if they so desired.

That’s a lot of renewed confidence placed in companies’ CSR intentions by the Government. Considering that only last year, CSR violations were temporarily (and infamously) made a criminal offense, this change in tack is a more than welcome change!


How Big a Deal is CSR?

The Companies Act talks about corporates, CSR obligations. Those companies with a net worth of ₹500cr ($67.4m), or revenues exceeding ₹1,000cr ($135m), or net profit over ₹5cr ($674,434) are required to set aside 2% of their average profit over the previous three years on CSR programmes.

By one estimate, CSR expenditure had increased 18% YoY to ₹11,961cr ($1.6bn) in 2019.

The pandemic seems to have made India Inc. more generous with its CSR kitty. It spent ₹7,537cr ($1bn) in only two months as CSR obligations on COVID-related concerns. This included ₹4,316cr ($582m) in donations to the PM CARES Fund; the remaining was spent on other relief funds, food and ration donation, face masks, hand sanitisers and protective gear kits.


How Big a Deal is Vaccine Distribution?

All this is a lot of money. And considering the scale of the vaccine distribution challenge that is ahead of us, every penny counts.

And it’s a lot of pennies. While not entirely clear as of now, one dose of the vaccine could cost as much as ₹500 ($6.7) per person. And not every citizen would be able to cough up that amount, which is why the state would need to step in and subsidise the process or deliver vaccines free of cost altogether.

All in all, it is estimated that it could cost a minimum of ₹50,000cr ($6.74bn) to vaccinate everyone in the country. Considering the cold chain logistics, administrative challenges, and the sheer size of the country, the bill is likely to be much higher.

It would no doubt be in the Government’s fiscal interests to have the private sector foot some of that bill. Incentivising CSR expenditure further is one way to go about this.


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