B S :T C A Srinivasa-Raghavan 8 FEB 2014
In this year's Budget, the finance minister should mandate cooked food or eggs and milk for children via CSR
India has a huge malnutrition problem amongst children. You can quibble over the details of the extent of it but the broad fact is true: millions of kids aren't getting either the right amount of food or the right sort of food.
As a result, it is not just their health but also their intelligence that is vulnerable. You can see the outcomes all around you.
What should be done? The first part of the answer is simple: feed them. But then comes the hard part: should we give cooked food to the children or uncooked food to their parents as we have been doing so far and which is what the right to food law mandates?
If you look around, it quickly becomes obvious that it is far better to give cooked food to the children than grains to their parents because less of cooked food is likely to leak out than the grain in the public distribution system. Cooked food also has a larger employment creation effect.
Assume, for the sake of choosing from the alternatives, that Rahul Gandhi issues a fatwa on this. How would the operation be funded then?
This is where corporate social responsibility comes in: mandated CSR expenditure on food for children would align the public and private interest perfectly because both would benefit from healthy and reasonably intelligent children. You don't even have to go down the moral argument route for this, which, as the debate over the right to food Bill showed, is fraught with non sequiturs.
The tax rule
The problem is of incentivising the private sector. This can be done through the tax mechanism and there is a precedent for allowing certain types of charities to be tax deductible. Section 80G of the Indian income tax Act allows you to deduct donations made to charitable institutions for certain donations.
But it comes with certain conditions. One of them is that the amount donated in excess of 10 per cent of gross income will have to be ignored while computing the sum in respect of which deduction is to be allowed. The eligible deduction or tax break is 50 per cent of the sum computed thus.
The CSR route
Indian companies are currently required to spend two per cent of the average of net profits for three years on CSR. They now want a tax break on this, perhaps a rule similar to 80G. The minister for corporate affairs, Sachin Pilot, says he will see what he can do but adds that it is up to the finance ministry to say yes or no.
Given that Mr Pilot expects something between Rs 15,000 crore and Rs 20,000 crore to be spent on CSR, and since the deduction would apply only to sums in excess of two per cent, the revenue foregone would not be much.
On the other hand, if the revenue foregone is substantial but it incentivises firms to spend more on charity, it would be still worthwhile provided the CSR monies are spent on nutrition for children below the age of 10. This must be the necessary condition for availing of the tax relief. This must be the top priority, not only because we need to spend more on feeding children, but also because for relatively small outlays the long-term benefits are simply colossal.
Purists would argue that the government should not tell companies where they should spend their CSR money. But they can rest assured on that score because the tax benefits would accrue only to sums spent in excess of two per cent. Below that companies would be free to spend their money as they wished.
Thus, if suppose the total to be spent is, say, Rs 20,000 crore and the tax benefit incentivises firms to spend, at a conservative estimate, an additional Rs 2,000 crore on nutrition for children below 10, giving a tax break on this sum should not be a problem.
Mohandas Pai's mantra
Would this work? Mohandas Pai's Akshaya Patra website says that it costs just Rs 750 per child a year. (In contrast, the price of branded dog food is Rs 175 per kilo packet, which lasts less than a month). Akshaya Patra now feeds as many as 1.3 million children across nine states in 20 kitchens. This can be not only scaled up but also replicated across the country. Indeed, donations to Akshaya Patra are already under CSR.
Besides, expenditure on cooked food for distribution in schools has a large investment multiplier since each large kitchen can employ as many as 300 people directly and indirectly.
It is win-win - children getting fed at private expense, that too properly. We can call it the Rahul Gandhi Payt Bharo Abhiyan.
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