The Government has announced to amend the corporate social responsibility rules which mandate companies to spend certain amount of their profits on CSR projects.
Covid-19 related research and development (R&D) expenditure on new vaccines, drugs and devices has been brought under the CSR projects by the latest amendments.
According to CSR law, companies with net worth of Rs 500 crore and above, or with revenue of Rs 1,000 crore and above, have to spend 2% of the average profits of the previous three years on CSR projects.
However, the existing law has a clause which does not consider activities to pursue the ‘normal course’ of their business as CSR activities.
What does this mean?
Simply put, if a pharma company decides to set aside funds for research and development activities in pharmaceutical sector, it is not counted as CSR expenditure. On the other hand, if decides to invest in school education, it will be considered as CSR activities.
After this latest amendment, even pharmaceutical companies can claim expenses on research and development (R&D) expenditure on new vaccines, drugs and devices under CSR if the research is in collaboration with a publicly-funded institution.
In fresh amendments to the Companies (Corporate Social Responsibility) Rules, 2014, the Ministry of Corporate Affairs has inserted a provision that would allow firms to claim CSR benefits for such activities until the 2022-2023 financial year.
The notification says, “Provided that any company, engaged in research and development activity of new vaccine, drugs and medical devices in their normal course of business, may undertake research and development activity of new vaccines, drugs and medical devices related to Covid-19 for the years 2020-21, 2021-22 and 2022-23 subject to the conditions that (i) such research and development activities shall be carried out in collaboration with any of the institutes or organisations mentioned in item (ix) of Schedule VII to the Act”.
“Universities and labs should grasp this opportunity and set up collaborative programs for Covid-19 R&D, also get support for other areas”, K Vijay Raghavan, principal scientific adviser to the government, said in a tweet.
Till now, investments made by Indian pharma and biotch companies don’t go beyond their own lab. There are very instances of collaboration between government agencies and pharma companies.
Some notable exceptions are Cipla-Indian Institute of Chemical Technology (IICT) for for Covid-19 drugs, and Bharat Biotech’s collaboration with Indian Council of Medical Research for Covid-19 for Covid-19 vaccine.