Stressed Indian companies are donating big time to PM Cares—at their employees’ expense

Funding the big fight.
Funding the big fight.
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India’s newly established coronavirus relief fund, PM Cares, has marshalled phenomenal contributions from celebrities, tycoons, middle-class professionals, and corporates. Ironically, firms that claim to have no money even to pay their staff, too, have made huge donations to this corpus.

Consider the case of Cure.fit. On May 4, the fitness startup axed around 800 employees and closed down many of its fitness centres. While it provisioned only Rs2 crore ($260,000) as an emergency fund for axed employees, it allocated a more generous Rs5 crore to PM Cares and various other relief funds.

India’s most valued company Reliance Industries, seemingly flush with cash after the recent investments by Facebook and PE giant Silver Lake, announced salary cuts and the postponement of performance-linked payments in its hydrocarbon business. Yet, it contributed Rs500 crore to PM Cares.

Under such circumstances, it is pertinent for professionals to wonder if voluntary contributions to relief funds trump a firm’s contractual obligations to staff. This trend of companies trumpeting their donations while short-changing their own employees is bizarre.

Contributions to PM Cares can be legally counted as part of a company’s annual corporate social responsibility (CSR) contribution, according to the FAQs issued by India’s corporate affairs ministry.

While companies must assist the government machinery in these testing times, the net financial burden of CSR, it seems, is indirectly being passed on to employees. Are we looking at a scenario where corporates are using the pandemic to negate their CSR obligations and earn positive press at the expense of their staff?

The mandate of PM Cares

The questions do not end with the actions of corporates or startups. There are relevant concerns over PM Cares itself.

Its stated objective is to undertake and support relief measures concerning public health emergencies, calamity, or distress, including to create or upgrade of healthcare or any other relevant infrastructure. The fund also provides financial assistance to affected people in the form of grants or concessions.

These objectives are similar to the mandate of the Prime Minister’s National Relief Fund (PMNRF), established in 1948. The PMNRF is intended for all types of natural tragedies.

However, there are two striking differences between the two funds:

  • Custodians: A donation-based fund such as PM Cares does not fall under the ambit of any legislation or Act of parliament, nor is it part of the consolidated fund of India—the main bank account of the government. It exists merely as a quasi-private fund. The prime minister helms PM Cares as its ex-officio chairman with the defence, home, and finance ministers acting as its ex-officio trustees even when it is not a constitutional or government fund. The PMNRF, too, is a quasi-private fund but citizens have unfettered access to its functioning as files can be requested under Section 19 of the Indian Trusts Act.
  • Audit: The PM Cares fund is proposed to be audited by “independent auditors,” who are to be appointed by its chairman and trustees, similar to that of PMNRF. However, PMNRF, being a fund attributed to the prime minister’s office, is also subject to observations by the comptroller and auditor general of India (CAG), and the subsequent report is often made available in the public domain.

The moot question is: Given the existence of PMNRF, was it necessary to establish a pseudo-private fund with no legal mandate, and outside the purview of CAG?

The peculiar situation of supposedly distressed companies contributing significantly to the relief fund has developed a sense of mistrust between employees and corporates.

It is of little help that PM Cares is not subject to the prism of accountability.

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