Explainer: PMNRF Vs PM CARES – What are these funds for?
Sai Krishna Muthyanolla
April 3, 2020
The PM recently announced the launch of a dedicated fund ‘PM CARES’ to cater to situations like the ones created by COVID-19 and similar disasters. However, the PMNRF already exists for a similar purpose. What is the difference between these funds and why is there a controversy around the setting up of this fund?
On 24 March 2020, Prime Minister Narendra Modi announced a nationwide lockdown to contain the spread of COVID-19 in the country. This epidemic has been declared as a natural disaster and Disaster Management Act-2005 was invoked. Subsequently, the Central Government and several state governments announced relief packages to those who are affected by the lockdown.
Meanwhile,on 28 March 2020, Prime Minister Narendra Modi announced via Twitter that the PrimeMinister’s Citizen Assistance and Relief in Emergency Situations Fund (PMCARES) is being constituted.
As per the initial tweet, the fund was created as a response to people expressing their desire to contribute towards the fight against COVID-19. In the following tweet, the Prime Minister, apart from the appeal to contribute to the fund, also stated that this fund would be used to address future situations of distress. The official press release also offers only minimal information beyond what is provided in the tweets.
From thepress release, it is learnt that the objective of creating this fund is thefollowing.
Based on this, it can be inferred that the fund is a Public Charitable Trust and is set up as a dedicated national fund that deals with any kind of emergency or distress. However, it does not offer any additional information on the need for setting up this fund when the ‘Prime Minister’s National Relief Fund’ (PMNRF) already exists to serve a similar purpose.
PMNRF has
been providing relief assistance for over 70 years
The PMNRFwas started in 1948, following an
appeal by the then Prime Minister of India, JawaharlalNehru, to support people displaced from Pakistan.
Over theyears, PMNRF resources are being used to provide relief to families of victimskilled in natural calamities like floods, cyclones, earthquakes etc and also tovictims of major accidents and riots. The fund is also used to meet expensesrelated to treatments like – heart surgeries, kidney transplantation, cancertreatment, acid attack etc.
Features ofPMNRF are the following.
As per the PMNRF’s Statement of Income and Expenditure for the year 2018-19, the balance of funds available at the end of FY 2018-19 was Rs. 3,800.44 crores. The availability of these funds further raises questions around the need for creating a new fund ‘PM CARES’ for tackling COVID-19 and other disasters.
In the year2018-19, the total income of PMNRF through contributions, interest & refundwas Rs. 783.18 crores while the expenditure in the form of relief was Rs. 212.5crores. It is not even the cases of dwindling funds as except for 2010-11, overthe 10-year period between 2009-19, the income of PMNRF has always been higherthan the expenditure. Because of this reason, with the exception of 2010-11,the balance of funds available with PMNRF at the end of a year has seen ayear-on-year increase over the past 10 years.
Donations to PM CARES to be 100% tax-exempt
With anational fund to provide disaster relief already existing and that too withconsiderable corpus, the rationale for constituting a new fund is not clear. Ashighlighted earlier, the press release by PMO does not provide enough clarityon different aspects of the trust fund.
From the detailsprovided, apart from the information provided regarding its purpose as a fundto tackle disaster, it is understood that:
The extent of IT exemption was not provided in the initial press release. However, as per the Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance, 2020 issued by Finance Ministry on 31 March 2020, donations made to ‘PM CARES’ fund would be 100% tax exempt under Section 80(G).
Furthermore,as per a Memorandum
of Corporate Affairs Ministry, any contributions made to PM CARES fund wouldqualify as CSR expenditure of companies.
Many
unanswered questions regarding the need for this fund
The
Hindu reported the apprehensions raised by Congress leadersother prominent voices about the opaqueness in the rules and expenditure of thetrust as well as non-utilization of the available funds in PMNRF.
While, thebalance in PMNRF is being shown at Rs. 3,800.44 crores, there are reports whichhighlight the low liquidity of only 15% of this fund, which makes it achallenge to be used in case of emergency. According to these reports, bulk ofthe corpus is invested in fixed deposits, state development loans etc.
Further, astory in The
Wire highlights the lack of information on the publicdomain in respect to – Trust Deed of PM CARES, compliance with the rules ofPublic Trust, constitution & announcement of the fund and the membersinvolvement.
Meanwhile,there are arguments in public domain that are in favour of creating the newfund. As per story on Business
Line, few legal experts are of the opinion that attachingthe fund to COVID-19 and allowing micro donations would encourage more peopleto come forward and donate.
However,all these are opinions interpretations & assumptions. The true rationale ofsetting up a new fund despite the existence of PMNRF with similar objectivescan be explained only by the government.
Factly haswritten to PMO asking for the rationale of setting up PM CARES. This articlewill be updated as soon as a response is received. We contacted the PMO contactin the Press Information Bureau (PIB) who directed us to the press release anddid not provide any additional information.