When a few entities flout norms, the governmental system reacts by clamping down with more controls, inspections, reports, which are a hassle for all
Non-Governmental Organisations (NGOs) play an important role in the development of society and a country. In India, too, many NGOs are engaged in implementing Government schemes to help the poor and many of them have their own ways of aiding the underprivileged, restoring human rights or working for the environment and so on. However, friction between NGOs and the Government arises when foreign-funded ones venture into prohibited areas like politics and take a stand on communal and social disharmony. The Foreign Contribution Regulation Act (FCRA), 1976, was enacted to regulate foreign funding, requiring prior permission or intimation of/to the Government. While retaining the basic framework, the Act was rewritten in 2010 and amended in the last Parliament session in September. The law aimed at curbing foreign funding influencing politics, religious conversions and fomenting strife among communities. We are a proud, open democracy. Like any human institution, our systems may not be perfect. We do have problems to resolve but we don’t need foreigners who try to accentuate divisions, disaffection and alienation among people, playing on the insecurities of the wronged, deprived and misguided sections.
The NGOs engaged in “proxy politics” were unwelcome right from 1976. If they fish in troubled waters, they will face a pushback. They are free to go to undemocratic countries to help their voiceless people if they are allowed to operate there. Specifically, the 1976 Act banned election candidates, “correspondent, columnist, cartoonist, editor, owner, printer or publisher of a registered newspaper”, judges and Government/PSU employees, legislators, political parties and their office-bearers from accepting any foreign funds. (The 2010 Act added television and digital media too.) It prohibited “organisations of a political nature, not being a political party” from accepting any foreign contribution directly or indirectly through any proxy without prior permission of the Government.
It allowed non-political entities “having a definite cultural, economic, educational, religious or social programme” to receive foreign assistance provided they register with the Government and keep it informed about its quantum, source, time, purpose, bank account and actual utilisation. But the 2010 Act tightened control on ultimate recipients of foreign contributions by stipulating that FCRA-registered entities can transfer funds only to other FCRA-registered/regulated entities. The recent 2020 amendment has totally banned transfer of funds to others. The receiving NGO must spend all foreign contribution itself. It cannot become a distributing intermediary. The 1976 Act authorised the Government to deny access to foreign contributions if it prejudicially affected the sovereignty and integrity of India; or public interest; or freedom/fairness of election to any legislature; or friendly relations with any foreign State; harmony between religious, racial, linguistic, regional, social groups, castes or communities. The term “social” was added in 2010. The evolution of the FCRA law clearly shows its basic intent: Foreigners indulging in local politics are not welcome.The legislative intent was to curb foreign interference in domestic politics, the media, judiciary and the Government.
Critics saw the law as an attempt to clamp down on political dissent and the religious freedom of people to preach and of citizens to change their faith if they so wished. There was also criticism that the broad, vague restrictions for NGO funding and operations would have a stifling effect on the constitutionally guaranteed rights to freedom of association, expression and assembly. Plus there were fears that with the amendments, the Government had expanded its own discretion, bureaucratic control and oversight with respect to the day-to-day functioning of NGOs in India and left them vulnerable to partisan behaviour and favouritism. While basic human rights are assured by India to everyone, including foreigners, some rights are available only to Indian citizens. Foreigners everywhere are expected to comply with local laws. Foreign debt, equity and grants are regulated when they prejudicially affect national security, local culture, education, religion and social harmony. If an NGO indulges in political and religious activities, it is bound to invite political backlash. The following amendments to the FCRA Act have generated controversy.
Cap on administrative expenses: The 2010 Act stipulated a ceiling of 50 per cent on administrative expenses, which can be relaxed with the approval of the Government. The recent amendment has reduced this 50 per cent to 20 per cent. NGOs must seek Government approval to exceed the 20 per cent limit with proper justification (like expenses on a non-recurring event or being advocacy NGOs, not having projects). NGOs should spend more on implementation of projects, help poor beneficiaries rather than lavishly spend on their salaries, office rent, allied charges, business class travel, expensive event venues and so on. Only 1,328 NGOs reported administrative expenses over 20 per cent in 2018-19.
AADHAAR/Passport/Overseas Citizenship of India card for key managerial personnel: The new law requires NGOs to furnish Aadhaar numbers of all key functionaries while seeking FCRA registration, renewal of registration or prior permission to obtain foreign contribution. For foreigners/OCIs, a copy of passport or OCI card will do. This is a one-time requirement.
Routing of funds through a bank account in the SBI: The new law requires foreign contributions to be routed through a bank account with the SBI in New Delhi. From there, funds can go to other FCRA accounts and these must not receive other funding to avoid mixing of regulated and unregulated funds. NGOs can continue using their preferred bank account after foreign funding inflows pass through this SBI account. This is a one-time hassle. NGOs don’t need to come to Delhi. They can approach the nearest SBI branch. Of the 21,490 NGOs filing FCRA returns in 2018-19, 1,488 were Delhi-registered. As many as 2,214 NGOs were registered in three years between 2017 and 2019. The SBI is expected to facilitate/fast-track the process. The Government may give some transition time so that the fund flow does not come to a halt during the current pandemic.
NGOs can’t be financial intermediaries to route foreign contributions: The most substantive change in the 2020 amendment is that an FCRA-registered NGO cannot transfer funds to other NGOs. It has to directly spend all foreign funds it receives. Under the 2010 law, such transfer was permitted to other FCRA-registered entities. So bigger NGOs could act as a funnel to route foreign funds to grassroots organisations. Now these larger NGOs will have to re-orient their working to start either direct spending or start connecting foreign donors and FCRA-registered grassroots organisations. Foreign funds will bypass the bank accounts of these intermediary NGOs and go directly to the ultimate beneficiary NGOs.
Foreign funds received by NGOs totalled Rs 18,337.66 crore in 2016-17, Rs 19,764.64 crore in 2017-18 and Rs 20,011.21 crore in 2018-19. About half of 21,490 NGOs filing returns in 2018-19 reported nil foreign grants in 2018-19.
In 2018-19, 4,107 NGOs received Rs 1,768 crore as re-grants from bigger NGOs, with a median transfer value of Rs 7.6 lakh. Half of them received less than Rs 7.6 lakh. Pruning of intermediation cost would mean more bang for the buck for genuine foreign donors. It will help the Government to know which foreign donor is funding which Indian NGO. Intermediary NGOs were an obstruction to this transparency and may be adding to the cost. Sub-granting entailed double counting of foreign contribution, by intermediary and final recipient. Who received what and from which foreign donor was unclear. Transparency should be welcomed. Of course, to avoid sudden disruption of fund flow during the pandemic, some transition time should be allowed.
Non-compliance: The 2010 Act barred following types of entities from getting/renewing FCRA registration: Fictitious or benami entities; entities prosecuted or convicted for indulging in activities aimed at religious conversions through inducement or force; prosecuted or convicted for creating communal tension; found guilty of diversion or misutilisation of funds; engaged in propagation of sedition or advocating violent methods to achieve its ends; using foreign contributions for personal gains or diverting for undesirable purposes.
The Government has strengthened the mechanism to root out non-compliant NGOs. The period of cancellation of registration has been changed from up to 180 days to 360 days. The FCRA registrations of 14,500 NGOs were cancelled in five years ending December 2019. These were mostly duplicate registrations held by some NGOs. Failure to file annual returns also invited some cancellations as was the case with the crackdown on shell companies. In 2017-18, names of 2.26 lakh companies were struck off.
When a few entities flout norms, the governmental system reacts by clamping down with more controls, inspections, reports, which are a hassle for all. But it is necessary to keep errant NGOs in line.
(The writer former Special Secretary, Ministry of Commerce and Industry)
