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Insights into Editorial: Killing the licence: On NGOs and funding

Context:

The Union Home Ministry (MHA) said that recently, it has refused to renew the FCRA registration of Missionaries of Charity (MoC), a Catholic religious congregation set up by Nobel laureate Mother Teresa, as “some adverse inputs were noticed.”

The Union Ministry of Home Affairs (MHA) has cancelled the Foreign Contribution (Regulation) Act (FCRA), 2010 registration of various non-governmental organisations (NGOs).

In 2020, the licences of 13 non-governmental organisations (NGOs) have been suspended under the Foreign Contribution (Regulation) Act (FCRA), 2010, this year. Their FCRA certificates were suspended and bank accounts frozen.

Suspension of FCRA license means that the NGO can no longer receive fresh foreign funds from donors pending a probe by the Home Ministry.

 

What is the FCRA?

  1. The Foreign Contribution (Regulation) Act, 2010 regulates foreign donations and ensures that such contributions do not adversely affect internal security.
  2. First enacted in 1976, it was amended in 2010 when a slew of new measures were adopted to regulate foreign donations.
  3. The FCRA is applicable to all associations, groups and NGOs which intend to receive foreign donations.
  4. It is mandatory for all such NGOs to register under the FCRA, initially valid for five years that can be renewed subsequently if it complies with all norms.
  5. Registered associations can receive foreign contribution for social, educational, religious, economic and cultural purposes.
  6. Filing of annual returns, on the lines of Income Tax, is compulsory. In 2015, the MHA notified new rules, which required NGOs to give an undertaking that the acceptance of foreign funds is not likely to prejudicially affect the sovereignty and integrity of India or impact friendly relations with any foreign state and does not disrupt communal harmony.
  7. It also said all such NGOs would have to operate accounts in either nationalised or private banks which have core banking facilities to allow security agencies access on a real time basis.

 

Who cannot receive foreign donations?

  1. Members of legislature, political parties, government officials, judges, media persons are prohibited from receiving any foreign contribution.
  2. However, in 2017, the MHA through the Finance Bill route amended the 1976 repealed FCRA law paving the way for political parties to receive funds from the Indian subsidiary of a foreign company or a foreign company where an Indian holds 50% or more shares.
  3. The Association of Democratic Reforms (ADR), a public advocacy group, had filed a PIL (public interest litigation) at the Delhi High Court in 2013 against both major political parties for violating FCRA norms by accepting foreign funds.
  4. Both political parties challenged a Delhi HC order, which had termed the donations illegal in 2014, and moved the Supreme Court. They withdrew the petitions from the apex court after the FCRA was amended retrospectively.
  5. In 2017, the MHA suspended the FCRA of Public Health Foundation of India (PHFI), one of India’s largest public health advocacy groups, on grounds of using ‘foreign funds’ to lobby with parliamentarians on tobacco control activities.
  6. After several representations by the PHFI to the government, it was placed under the ‘prior permission’ category.

 

Foreign Contribution Regulation (Amendment), Act 2020:

  1. Under the Act, foreign contribution cannot be transferred to any other person unless such person is also registered for that purpose.
  2. The amendment also forbids sub-granting by NGOs to smaller NGOs who work at the grassroots.
  3. The act states that foreign contributions must be received only in an FCRA account opened in the State Bank of India, New Delhi Branch. No funds other than the foreign contribution should be received or deposited in this account.
  4. Aadhar usage: The act makes it compulsory for all trustees to register their Aadhaar card with the FCRA account.
  5. The Act also makes Aadhaar a mandatory identification document. It is for all the office bearers, directors, and other key functionaries of an NGO.
  6. Restriction in utilisation of foreign contribution: The act gives government powers to stop utilization of foreign funds by an organization through a “summary enquiry”.
  7. Reduction in use of foreign contribution for administrative purposes: The act decreases administrative expenses through foreign funds by an organization to 20% from 50% earlier.
  8. Surrender of certificate: The act allows the central government to permit a person to surrender their registration certificate.

 

When is a registration suspended or cancelled?

The MHA on inspection of accounts and upon receiving any adverse input against the functioning of an association can suspend the FCRA registration initially for a period of 180 days.

Till the time any decision is taken, the association cannot receive any fresh donation and cannot utilise more than 25% of the amount available in the designated bank account without permission of the MHA.

The MHA can cancel the registration of an organisation which will not be eligible for registration or grant of ‘prior permission’ for three years from the date of cancellation.

According to MHA data, since 2011 when the Act was overhauled, the registration of 20,664 associations were cancelled for violations such as misutilisation of foreign contribution, non-submission of mandatory annual returns and for diverting foreign funds for other purposes.

As of December 29, there are 22,762 FCRA-registered NGOs.

 

What about international donors?

The government has also cracked down on foreign donors such as the U.S.-based Compassion International, Ford Foundation, World Movement for Democracy, Open Society Foundations and the National Endowment for Democracy.

The donors have been placed on a ‘watch list’ or in the ‘prior permission’ category, barring them from sending money to associations without the MHA’s clearance.

 

Critical arguments:

  1. Civil society supplements government works and works at the grass-roots level.
  2. They should be given due freedom and autonomy to support the needs of communities and provide relief during the COVID-19 pandemic.
  3. If the Government has ample evidence to prove that Indians are better off without the work of these internationally renowned organisations, then it has yet to show it.
  4. It is time the Government gives a more transparent account of its actions against NGOs, which at present appear to mirror those in China and Russia which have used their NGO laws to shut down dissent and criticism.
  5. The actions in India over “foreign hand” concerns seem more hypocritical given the relative ease with which political parties are able to access foreign funds for their campaigns through electoral bonds, under the same FCRA that seeks to restrict funds to NGOs.

 

Conclusion:

At a time when India is facing the crippling effects of the COVID-19 pandemic and a long-term economic crisis, the Government’s moves that have resulted in an estimated 30% drop in international non-profit contributions, only hurt the poorest and most vulnerable recipients of philanthropic efforts, particularly those by NGOs working in areas where government aid fails to reach.

Therefore, many experts argued that excessive regulation on foreign contribution may affect working of the NGOs which are helpful in implementing government schemes at the grassroots. They fill the gaps, where the government fails to do their jobs.

The regulation should not hamper sharing of resources across national boundaries essential to the functioning of a global community, and should not be discouraged unless there is reason to believe the funds are being used to aid illegal activities.