Covid-19 has rapidly spread around the world impacting economies, healthcare systems and daily life. The challenges that it poses are real and consequential. To help policymakers and donors better understand the impact on Asia’s social sector, CAPS (virtually) sat down with our partners across the region to understand the challenges they are grappling with, the strategies they are employing to contain the fallout, and their take on the future of the social sector.
Before Covid-19 hit India, some important regulatory changes impacting the social sector were taking place in the country. To get a better understanding of how these new regulations are impacting the social sector, especially in the changed circumstances, CAPS spoke to Noshir Dadrawala — Programme Director of the Centre for Advancement of Philanthropy (CAP) on 16 April 2020. Established in 1986, CAP is a Mumbai based support organization that specializes in the laws that regulate India’s non-profit sector and provides complete compliance solutions to organizations involved in philanthropic activity.
CAPS: Noshir, thank you for taking the time to speak with us. Can you tell us a bit more about the regulatory changes that were already in the pipeline pre-Covid?
Noshir: The first bill was proposed in the Finance Minister’s budget speech back in February 2020. She announced that all existing charitable and religious institutions will be required to apply for re-registration with the Income Tax Authority to revalidate their tax-exempt status. They would also have to revalidate their 80G certificate which allows donations to them to be tax-deductible.
This proposed bill was passed and made into law in March, but many of the details are still unclear. So far, nobody really knows what the online application forms look like, or what the submission requirements are. Many other questions remain. For example, suppose an organization established a long time ago has lost its registration certificates, will they still be able to apply for income tax exemption and deductions?
The second proposed regulation is the draft Amendments to the Indian Companies (CSR Policy) Rules which were proposed by the Ministry of Corporate Affairs in March 2020. This amendment would require a company to undertake all CSR activities itself, through a Section 8 company, or through a company set up by an act of Parliament. In practice, this means that many big trusts and societies which have their own Corporate Foundations and CSR implementing agencies such as the Mahindra Trust, the Godrej Trust, and the Tata Trust, would be prevented from doing CSR work through their own corporate trusts.
According to the government this amendment will allow better monitoring by the Registrar of Companies. However, critics think it may allow the government to eliminate some organizations. As you can imagine this is causing a lot of concern and a lot of representations have been made in response to this.
CAPS: Has anything changed with regard to the implementation of these regulations in light of the ongoing pandemic?
Noshir: The government seems intent on moving ahead with the revalidation of the tax-exempt status. However, the start of the application process has been postponed until 1 October. There are still many questions about how the government will implement this as they really don’t have the capacity at the moment and are pre-occupied with managing the pandemic.
CAPS: How is India coping with Covid? What’s the situation on the ground?
Noshir: At the urban level it is fairly well managed. There are a lot of NGOs providing relief by way of medical care, food and water, and financial aid. During the lockdown, 84.26 lakh [8.4 million] people were provided meals across the country—in most states predominantly by NGOs. But outside urban areas, the situation is a lot more dire and many people lack access to basic necessities.
CAPS: Who is funding these urban initiatives?
Noshir: A lot of the response has come from private individuals. Everybody is stepping up to help those in need within their communities by, for example, cooking extra food or helping elderly people get medicine or provisions for their daily needs. Most of these people have no history in philanthropy.
CAPS: Individuals and organizations at the very local level seem to be the primary lifeline for those affected by the pandemic across all of Asia, not just India.
Noshir: Absolutely, but there has also been a lot of corporate response. For example, Uber has launched several initiatives to support their drivers, including providing masks, waiving lease rentals and providing financial assistance. Several companies including Cisco and Adidas are reaching out to senior employees and others in their network to support people who have lost their income.
The government is also allowing companies to direct their mandatory CSR spending towards Covid-related measures. Unfortunately, this does not include crucial in-kind or non-monetary donations such as soap, sanitizer, masks etc. So rather than providing these products directly companies are giving money to NGOs to buy the materials from private vendors and then distributing them.
CAPS: India has a huge number of people working in the shadow economy. Even if companies are taking care of their own, are they only reaching a fraction of the labor force?
Noshir: True, but in April the Ministry of Corporate Affairs announced that companies who want to make one-off, ex-gratia cash transfers to temporary or contract workers can treat this as a permissible CSR expenditure. It is promising to see several big companies doing this and raising money internally to donate to these workers.
CAPS: What about the impact on the social sector?
Noshir: I fear we are already feeling the impact. A large part of the philanthropic funding is being deployed to Covid. CSR funding is predominantly being absorbed by the PM-CARES Fund for Covid relief. The fund raised over ₹7,000 crores (approximately US$935 million) in just 7 days—in all likelihood money diverted away from other social causes. Right now, the focus is very much on emergency relief but once this is over there will be a need for rehabilitation and I wonder if there will be any money left for this. We need to focus on rebuilding sustainable livelihoods for the thousands who have lost their jobs or closed business.