The nation of India entered into a state of lockdown on the 21st of March, 2020 after the Hon. Prime Minister Narendra Modi made an official announcement regarding the same in view of the ongoing COVID-19 pandemic. (Gettleman & Schultz, 2020) While each week, the country witnessed a new task given by the PM to the citizens in an attempt to show national integrity and solidarity in these tough times, one of the key declarations that came forth a week after the call for a nationwide lockdown was the setting up of a fund dedicated to resolving the current crisis – The Prime Minister’s Citizens Assistance and Relief in Emergency Situations Fund – the PM CARES.
Within the first two weeks of its initialisation, one of the most imperative and talked about questions that caught the nation’s attention was the need for the formation of a new fund when the nation already had two well established institutions dedicated to fulfilling the same objectives, The Prime Minister’s National Relief Fund – PMNRF and the National & State Disaster Response Funds – NDRF & SDRF.
This article attempts to examine the foundation of the three funds, a comparative study between the NDRF/SDRF and the PM CARES in terms of transparency, accountability & administrative flaws and lastly, the need for the PM CARES to be set up.
The NDRF & SDRF, PMNRF and the PM CARES
The NDRF and SDRF were initiated through provisions provided under Section 46(1) and Section 48(1) respectively of the Disaster Management Act of 2005. (Justice, 2005) Both the institutions fall under the Disaster Management Division of the Ministry of Home Affairs and are considered the most important financial body of the government in situations of managing catastrophic events.(Justice, 2005) Each state has its own independent State Disaster Relief funds however, in situations when the degree of expenditure in combating a disaster is beyond the scope of the SDRF, the NDRF can allocate the required additional funds to the respective states after they follow the necessary protocols in filing a formal application. (Justice, 2005)
The PMNRF was established by Prime Minister Jawaharlal Nehru in 1948 primarily to resolve the issues pertaining to the Indo-Pak partition. (PMO, About PMNRF, 1948) Under Section 12(A) of the Income Tax Act, 1961, the government filed an application to the concerned Income Tax Authorities in 1973 to approve and register the PMNRF as a recognised trust with provisions of tax exemptions as mentioned under Section 10 and Section 39 of the ITA, 1961. (Rein, 2020) The Prime Minister has complete authority to run the trust and the fund coordinates its day to day activities from the South Block of the Prime Minister’s office. (Rein, 2020)
Set up on 28th March 2020, PM CARES was an initiative started by Central government as an independent charitable trust whose funds are solely aimed at alleviating the situation caused by the advancing global pandemic. (PMO, About PM CARES Fund , 2020) The fund functions on individual and voluntary contributions made by the citizens with no budgetary support from the Government of India. The Prime Minister serves as the Chairman, while the Ministers of Defence, Finance and Home Affairs are instated as ex-officio members. (PMO, About PM CARES Fund , 2020) (GoI, PM CARES Fund – FAQ, 2020)Besides them, the PM has the autonomy to nominate three other individuals belonging to different fields of study as trustees to the fund. (GoI, PM CARES Fund – FAQ, 2020)
The PM CARES and the NDRF/SDRF – a Comparative Analysis
With the rise in scepticism against the PM CARES, it is essential to address the very necessity of establishing this new body of funding in light of an existing institution mandated for fulfilling a similar objective – the National and State Disaster Response Funds, NDRF & SDRF. To understand the feasibility of both the funds, a comparative study could be drawn between the three primary characteristics that define them – Accountability, Transparency and process of Administration.
Addressing the question of accountability, the corporate contributions received under the PM CARES are counted as Corporate Social Responsibility funds as defined by the Companies Act of 2013. (PMO, 2020) Hence, the collected money is not subjected to any tax regulations on expenditure. Any individual donations made are 100% exempted from Income Tax under Section 80(G) of the ITA, 1961. (PMO, 2020) Besides being under the aspect of CSR, the fund is open to foreign contributions made internationally as mentioned under the Foreign Contributions (Regulations) Act of 2010. (PMO, 2020) Another distinctive feature of the PM CARES is that it accepts funds from Public Sector Undertakings which is seen as quite problematic by the critics. (PMO, 2020) An example to understand this further would be the decision of the Ministry of Railways to make a donation of 151 crores to the PM CARES while subsequently denying a reduction in the train ticket rates to the migrant workers stuck in different parts of the country hoping to get home. (Today, 2020)
Furthermore, the fund is not audited by the office of the Comptroller and Auditor General of India, but is mandated to be audited by a third-party firm owing to the inflow of private donations. (Sharma, PM CARES fund now has an independent auditor, PMO is trust’s head office, 2020)As of April 2020, M/s SARC Associates, Chartered Accountants, who audit the funds of the PMNRF were appointed as the official auditing firm for the PM CARES as well. (Sharma, PM CARES fund now has an independent auditor, PMO is trust’s head office, 2020)
Since the PM CARES does not publish any report on their official site accounting for matters of income and expenditure of the money, space of ambiguity increases. As recorded and tabulated by IndiaSpend team from the Press Information Bureau’s official website, the PM CARES received a total of Rs. 9,677.9 crores as of 20th May, 2020. (Bhuyan & Salve, 2020) The only time the fund saw any expenditure from their account was on 13th May, 2020 when the PMO released a total of Rs. 3100 to buy ventilators and develop a vaccine. (Sharma, 2020)
The accounts of NDRF & SDRF are managed by the Chief Controller of India. (GoI, Guidlines, 2010) The fund is audited annually by the office of the CAG who then submit a report to the Ministry of Finance and Home Affairs. (GoI, Guidlines, 2010) The money in the NDRF/SDRF is not considered as CSR funds and hence, taxes are accounted for on expenditure. The cash inflow into these institutions is only through the budgetary allocation of the Government of India and not through any private party funding.
With regards to the COVID-19 situation, due to the rise in cases and shortage of money, the states filed in their official memorandums to seek help from the NDRF. The only time the government acknowledged these funds and allocated money to them was on 3rd April, 2020 when they released a total of Rs. 17, 287 crores to 14 states for them to deal with the situation. (Bureau, 2020)
Addressing the question of transparency, any information pertaining to the functioning of the NDRF and SDRF are open to the common man to receive by simply filing an RTI application. Besides this, in its fifteen years of existence, rarely or never has any issue been raised against the administration of the funds or the legitimacy of its establishment. In the case of the PM CARES however, several public litigators registered PILs in the Supreme Court for its ambiguous functioning and demanded the release of essential documents pertaining to the fund for public scrutiny. In the case of the PIL filed by lawyer M.L Sharma questioning the legitimacy of the fund being set up under Articles 267 and 266(2) of the Constitution as it never created any state government, neither passed the parliament’s approval nor did it receive the President’s consent (Hindu, 2020). The Supreme Court however observed the fund was ‘misconceived’ by the plaintiff and dismissed the application. (Hindu, 2020) In another case of questioning the fund’s transparency, Advocate Aditya Hooda of S.S. Hooda firm filed a PIL in the Delhi High court demanding the government to display and declare the income and expenditure details of the fund on their official website and also brought forth the need of the PM CARES to come under the RTI act and the hearing of this case is scheduled for the 28th of August, 2020. (ANI, 2020) The Centre for Public Interest Litigation (CPIL) came forward and filed a PIL in the Supreme Court in the matter of the NDRF being undermined and on 17th June, 2020, the Supreme Court directed the government to respond to the plea within a duration of 4 weeks. (Desk, 2020) (Mahajan, 2020) On the 9th of July, 2020, the Centre however in response to this plea held that the PM CARES was the need of the hour and completely opposed the transfer of collected funds from this new institution to the NDRF. (editor, n.d.) Another issue of transparency that needs to be addressed is the rising opposition from various RTI Activists who seek to bring forth to the common man, reports and analysis of working of this fund. Several RTI activists have filed in their applications demanding the same however the government has unabashedly declined to respond to these applications without providing any clarity. In one such case of Vikrant Tongad, the founder and CEO of the Social Action for Forest and Environment, the government turned down the plea by quoting a Supreme Court observation from the past. “Indiscriminate and Impractical demands under the Right to Information Act for disclosure of all and sundry information would be counterproductive.” (Mishra, 2020) While this application is one of the few that received a response other queries and applications have already passed their one-month statutory period to seek a reply.
Lastly, in the case of administrative flaws, the PM CARES as a trust is run by a group of trustees as mentioned above. It is administered by individuals who are instated on an honorary basis from the Prime Minister’s Office. The Secretary (Honorary) of the fund is an individual who works in the PMO as a Joint Secretary and is duly assisted by an individual who works in the PMO as a Director or Deputy Secretary. (GoI, PM CARES Fund – FAQ, 2020) While both these individuals have the power to administer the fund, it is the trustees of the fund who make the rules on which the fund shall function. As the funds Chairperson, the Prime Minister was expected to nominate three other eminent personalities from various fields of study as trustees as soon as the fund was to be set up. (GoI, PM CARES Fund – FAQ, 2020) Interestingly enough, today, after 3 months of its initialisation, no such announcement has yet been made by the PMO, which means the fund is solely run by the PM and the three ex-officio trustees of the fund – the Defence Minister, Home Minister and Finance Minister. Hence, in reality, the actual power of running the fund is under their control. (Sharma, PMO is trust’s head office, 2020)
In the case of the NDRF/SDRF on the other hand, the process of assessment for relief assistance from the NDR funds to the state authorities has been extensively provided for under paragraph 7 of the Operational Guidelines for constitution and administration of the NDRF. (GoI, Guidlines, 2010)
State Authorities are expected to submit forth an official memorandum outlining the required amount to be discharged from the NDRF and the subsequent reasons regarding the same. (GoI, Guidlines, 2010) These memorandums are examined to establish the legitimacy of the demand after complete scrutiny and on spot assessment of the situation by a Central team that has been instated for the very purpose. (GoI, Guidlines, 2010) Following this, the report produced by the central team is verified by the National Executive Committee (NEC) which has been set up under Section 8 of the DMA, 2005. (GoI, Guidlines, 2010)
The next step in this process involves the analysis of the report and recommendations of the NEC submitted to the High-Level Committee (HLC) which compromises of the Home Minister, the Finance Minister, the Agricultural Minister, the Deputy Chairman of the Planning Commission and overlooked by the Disaster Management Department of the Ministry of Home Affairs. (GoI, Guidlines, 2010) It is only when the HLC finds the recommendations of the NEC to be satisfactory that the funds from the NDRF are approved to be transferred to the SDRF for the states to follow through with their required activities. (GoI, Guidlines, 2010)
Hence on a whole, accountability, transparency and a well-structured administration are the three major fronts in which the NDRF & SDRF supersedes the PM CARES as a financing institution for disaster management in India.
A more viable option
Having understood the three primary bodies of disaster management financing, it is essential to pose a few questions before analysing need for the PM CARES to be set up. One key question that remains obscure would be, considering how the PMNRF is configured in a similar way, why was there a need to create a new body of funding? Secondly, as of the official website of the PMNRF, the remaining funds the trust holds in its pool is over 3800 crores for the fiscal year of 2018-19 (PMO, About PMNRF – Income & Expenditure, 2018), which could have been transferred as advance payments by the government to the NDRF when deemed necessary. The deficit that occurs after the transfer of funds to the NDRF could be over time normalised by the inflow of donations made by the public. If a new body such as the PM CARES has the potential to pull in over a thousand crores in less than two weeks, why wouldn’t a well-established institution such as the PMNRF provide if not more, a similar outcome? This way, an efficient framework is created where the cycle of public donations received by the central government and going back to the public in times of need could have been much more accountable compared to that of the PM CARES.
The PM CARES not being subjected to fall under the purview of the RTI is not a new piece of information. However, in a recent turn of events, in the first week of June, the department of Expenditure of the Finance Ministry cleared the application to a new public account of the NDRF and SDRF to receive individual voluntary donations from the public. A breakthrough for this institution, 15 years after its establishment. With this action, the public can now directly donate their contributions to the NDR and SDR Funds. (Krishnankutty, 2020) The question that remains however would be, given a decade and a half of its working, why did the Finance Ministry never take adequate steps to set up this public account for individual transfer earlier? What changed in these 3 months of lockdown that the ministry found the necessity to grant a no objection clearance now, especially if their new initiative, the PM CARES is doing as well as they claim?
Whether this decision of the government was taken under conditions of absolute necessity or to create a distraction from the allegations on the money collected by the PM CARES might been a question too soon to be asked. However, prior to setting up the PM CARES, the government had declared this global pandemic as a natural disaster. Rightfully so, funding for resolving of this crisis would fall under the mandate of the NDRF and the SDRF and should have been coordinated by these institutions rather than a new body such as the PM CARES.
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