NGOs vs. GoI: The Conflicts and Scrutinies
MHA extends FCRA Registration of NGOs
Note4Students
From UPSC perspective, the following things are important :
Prelims level: Foreign Contribution Regulation Act (FCRA)
Mains level: NA
Why in the news?
The Ministry of Home Affairs extended till June 30 the validity of all FCRA registered NGOs whose licences are expiring on March 31.
What is Foreign Contribution Regulation Act (FCRA)?
- The FCRA regulates foreign donations and ensures that such contributions do not adversely affect internal security.
- First enacted in 1976, it was amended in 2010 when a slew of new measures was adopted to regulate foreign donations.
- The FCRA is applicable to all associations, groups and NGOs which intend to receive foreign donations.
- It is mandatory for all such NGOs to register themselves under the FCRA.
- The registration is initially valid for 5 years and it can be renewed subsequently if they comply with all norms.
What contributes to Foreign Donations?
- Foreign Contribution’ means the donation, delivery or transfer made by any foreign source of any:
- Article (whose market value is not more than one lakh rupees);
- Currency (whether Indian or foreign);
- Securities
- Foreign donations may be those from Governments, international agencies, foreign companies, trusts, corporations, foreign citizens
- However, some agencies like the UN, World Bank, IMF etc. are EXEMPTED from the definition of foreign donors.
Who cannot accept donations under FCRA?
According to the FCRA, foreign donations cannot be accepted by:
- Election candidates
- Editors and publishers of newspapers
- Judges and government employees.
- Political parties and members of legislature etc.
What was the recent Amendment?
The FCRA was amended in September 2020 to introduce some new restrictions:
- There is now a capping of the administrative expenses of NGOs at 20% of their foreign donations.
- The new amendment requires them to have a State Bank of India account at a Delhi Branch.
- It also prohibits the transfer of grants received under FCRA to any other outfit.
- It also gives sweeping powers to the Ministry of Home Affairs to cancel the FCRA certificate of an NGO.
- It made legal for political parties to accept foreign aid through Indian subsidiaries.
- Under the Act, the government may suspend the registration of a person for a period not exceeding 180 days.
- Providing Aadhar is mandatory for all office bearers, directors or key functionaries of the organization.
PYQ:2015: Examine critically the recent changes in the rule governing foreign funding of NGOs under the Foreign Contribution (Regulation) Act (FCRA), 1976.
2015: How can be the role of NGOs be strengthened in India for development works relating to protection of the Environment? Discuss throwing light on the major constraints.
Practice MCQ:Consider the following statements regarding “Foreign Contribution (regulation) Act”: 1. World Bank is excluded from the definition of foreign sources under the act. 2. Political parties are prohibited from taking foreign donations under the act. Which of the statements given above is/are correct? (a) Only 1 (b) Only 2 (c) Both 1 and 2 (d) Neither 1 nor 2 |
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NGOs vs. GoI: The Conflicts and Scrutinies
Why was FCRA registration for several NGOs cancelled?
Note4Students
From UPSC perspective, the following things are important :
Prelims level: FCRA
Mains level: Read the attached story
Introduction
- In recent developments, the Foreign Contribution Regulation Act, 2010 (FCRA) registration of two prominent non-governmental organizations (NGOs), the Centre for Policy Research (CPR) and World Vision India (WVI), has been cancelled.
FCRA: Regulating Foreign Donations
- Objective: FCRA regulates foreign donations to ensure they do not adversely affect India’s internal security.
- Compulsory Registration: Any association, group, or NGO intending to receive foreign donations must register under FCRA.
- Amendments: The FCRA was first enacted in 1976 and amended in 2010, with further changes in 2020.
Registration and Renewal
- Initial Registration: NGOs initially register under FCRA for five years, with the possibility of renewal if they adhere to the specified norms.
- Scope of Usage: Registered groups can receive foreign contributions for various programs, including social, educational, religious, economic, and cultural.
Cancellations and Renewals
- Cancellations: Since 2015, over 16,000 NGOs have had their FCRA registrations cancelled due to violations.
- Active NGOs: As of January 22, 16,989 FCRA-registered NGOs were active in India.
- Expired Registrations: Nearly 6,000 NGOs’ FCRA registrations ceased from January 1, 2022, either due to the MHA’s refusal to renew or NGOs not applying for renewal.
Significance and Controversies
- Risk of Money Laundering and Terrorism Financing: The MHA’s 2012 report highlighted the vulnerability of the NGO sector to money laundering and terrorist financing risks.
- Record Number of Registrations: In 2023, 1,111 associations received fresh FCRA registrations.
- Reasons for Rejection: Out of 1,615 applications received for FCRA registration in 2021 and 2022, 722 were granted clearance, while 225 were rejected.
- Foreign Contribution Amount: In 2019-2022, a total of 13,520 associations received ₹55,741.51 crore in foreign contributions.
Reasons for Cancellation: CPR and WVI
- CPR Allegations: The MHA accused CPR of diverting foreign donations to fund protests and legal battles against developmental projects, affecting India’s economic interests. CPR’s publication of current affairs programs using foreign funds was deemed a violation.
- CPR’s Response: CPR deemed the ministry’s decision incomprehensible and disproportionate, challenging the reasoning behind equating policy reports on their website with current affairs programming.
- WVI’s Allegations: WVI had its FCRA registration cancelled for alleged violations from 2012-13 to 2020-21. WVI received the highest amount of foreign donations among all NGOs registered under the Act in 1986.
FCRA Amendments: Recent Changes
The FCRA underwent significant amendments in 2020, introducing several restrictions:
- Fund Transfer Prohibition: Section 7 of the Act prohibits the transfer of foreign funds received by an organization to any other individual or association.
- Designated Bank Account: Recipients must open an FCRA bank account in a designated SBI branch in New Delhi, mandating that all foreign funds be received in this account.
- Shared Information: The designated bank informs authorities about foreign remittances with source and receipt details.
- Aadhaar Requirement: The Government can collect Aadhaar numbers of key functionaries of organizations applying for FCRA registration.
- Cap on Administrative Expenditure: The portion of funds allowed as administrative expenditure was reduced from 50% to 20%.
Criticisms and Government’s Perspective
- Arbitrary Restrictions: NGOs criticize the prohibition on fund transfer as arbitrary and restrictive.
- Non-Sharing of Funds: This prohibition hinders the sharing of aid received as material, impacting collaborative efforts.
- Inconvenient Designated Bank: The requirement for a Delhi-based bank account is inconvenient for NGOs operating elsewhere.
- Government’s Justification: The government maintains that these amendments are necessary to prevent foreign state and non-state interference in India’s internal affairs and to curb malpractices in fund utilization.
Conclusion
- The FCRA plays a crucial role in regulating foreign donations to NGOs in India.
- The recent cancellations of CPR and WVI registrations, coupled with the amendments, highlight the complex and evolving landscape of foreign contributions and their impact on Indian NGOs.
- Understanding these developments is essential for comprehending the dynamics of funding, regulation, and accountability in the non-profit sector.
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NGOs vs. GoI: The Conflicts and Scrutinies
FCRA licence of Centre for Policy Research suspended
Note4Students
From UPSC perspective, the following things are important :
Prelims level: FCRA
Mains level: Foreign funding of NGOs
Union Home Ministry suspended the Foreign Contribution Regulation Act (FCRA) licence of the Centre for Policy Research (CPR).
About CPR
- The CPR was established in 1973 as a think tank with the mission to contribute to a more robust public discourse about the issues that impact life in India.
- Its headquarters is located in Chanakyapuri, New Delhi.
- It is a non-profit, non-partisan, independent institution dedicated to conducting research that contributes to high quality scholarship, better policies.
- Over the years it has cultivated a reputation as one of the country’s premier public policy think tanks.
Why was its licence suspended?
- The CPR allegedly received foreign funds in violation of the FCRA.
What is FCRA?
- The FCRA regulates foreign donations and ensures that such contributions do not adversely affect internal security.
- First enacted in 1976, it was amended in 2010 when a slew of new measures was adopted to regulate foreign donations.
- The FCRA is applicable to all associations, groups and NGOs which intend to receive foreign donations.
- It is mandatory for all such NGOs to register themselves under the FCRA.
- The registration is initially valid for five years and it can be renewed subsequently if they comply with all norms.
Why was FCRA enacted?
- The FCRA sought to consolidate the acceptance and utilisation of foreign contribution or foreign hospitality by individuals, associations or companies.
- It sought to prohibit such contributions from being used for activities detrimental to national interest.
What was the recent Amendment?
- The FCRA was amended in September 2020 to introduce some new restrictions.
- The Government says it did so because it found that many recipients were wanting in compliance with provisions relating to filing of annual returns and maintenance of accounts.
- Many did not utilise the funds received for the intended objectives.
- It claimed that the annual inflow as foreign contributions almost doubled between 2010 and 2019.
- The FCRA registration of 19,000 organisations was cancelled and, in some cases, prosecution was also initiated.
How has the law changed?
There are at least three major changes that NGOs find too restrictive.
- Prohibition of fund transfer: An amendment to Section 7 of the Act completely prohibits the transfer of foreign funds received by an organisation to any other individual or association.
- Directed and single bank account: Another amendment mandates that every person (or association) granted a certificate or prior permission to receive overseas funds must open an FCRA bank account in a designated branch of the SBI in New Delhi.
- Utilization of funds: All foreign funds should be received only in this account and none other. However, the recipients are allowed to open another FCRA bank account in any scheduled bank for utilisation.
- Shared information: The designated bank will inform authorities about any foreign remittance with details about its source and the manner in which it was received.
- Aadhaar mandate: In addition, the Government is also authorised to take the Aadhaar numbers of all the key functionaries of any organisation that applies for FCRA registration or for prior approval for receiving foreign funds.
- Cap on administrative expenditure: Another change is that the portion of the receipts allowed as administrative expenditure has been reduced from 50% to 20%.
What is the criticism against these changes?
- Arbitrary restrictions: NGOs questioning the law consider the prohibition on transfer arbitrary and too heavy a restriction.
- Non-sharing of funds: One of its consequences is that recipients cannot fund other organisations. When foreign help is received as material, it becomes impossible to share the aid.
- Irrationality of designated bank accounts: There is no rational link between designating a particular branch of a bank with the objective of preserving national interest.
- Un-ease of operation: Due to Delhi based bank account, it is also inconvenient as the NGOS might be operating elsewhere.
- Illogical narrative: ‘National security’ cannot be cited as a reason without adequate justification as observed by the Supreme Court in Pegasus Case.
What does the Government say?
- Zero tolerance against intervention: The amendments were necessary to prevent foreign state and non-state actors from interfering with the country’s polity and internal matters.
- Diversion of foreign funds: The changes are also needed to prevent malpractices by NGOs and diversion of foreign funds.
- Fund flow monitoring: The provision of having one designated bank for receiving foreign funds is aimed at making it easier to monitor the flow of funds.
- Ease of operation: The Government clarified that there was no need for anyone to come to Delhi to open the account as it can be done remotely.
Supreme Court’s observation
- The apex court reasoned that an unbridled inflow of foreign funds may destabilise the sovereignty of the nation.
- The petitioners have argued that the amendments suffered from the “vice of ambiguity, over-breadth or over-governance” and violated their fundamental rights.
- But the court countered that the amendments only provide a strict regulatory framework to moderate the inflow of foreign funds into the country.
- The free and uncontrolled inflow of foreign funds has the potential to impact the socio-economic structure and polity of the country.
- No one can be heard to claim a vested right to accept foreign donations, much less an absolute right, said the verdict.
Supreme Court’s assessment of Foreign Funds
- Philosophically, foreign contribution (donation) is akin to gratifying intoxicant replete with medicinal properties and may work like nectar.
- However, it serves as medicine so long as it is consumed (utilised) moderately and discreetly, for serving the larger cause of humanity.
- Otherwise, this artifice has the capability of inflicting pain, suffering and turmoil as being caused by the toxic substance (potent tool) — across the nation.
Way forward
- The court said charity could be found at home. NGOs could look within the country for donors.
- Fundamental rights have to give way in the larger public interest to the need to insulate the democratic polity from the “adverse influence of foreign contributions”.
- The third-world countries may welcome foreign donations, but it is open to a nation, which is committed and enduring to be self-reliant.
- An unregulated inflow of foreign donations would only indicate that the government was incapable of looking after its own affairs and needs of its citizens.
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NGOs vs. GoI: The Conflicts and Scrutinies
No Fundamental or Absolute Right to receive Foreign Donations: Supreme Court
Note4Students
From UPSC perspective, the following things are important :
Prelims level: FCRA
Mains level: Read the attached story
The Supreme Court upheld amendments introducing restrictions in the Foreign Contribution Regulation Act (FCRA) while holding that no one has a fundamental or absolute right to receive foreign contributions.
What is FCRA?
- The FCRA regulates foreign donations and ensures that such contributions do not adversely affect internal security.
- First enacted in 1976, it was amended in 2010 when a slew of new measures was adopted to regulate foreign donations.
- The FCRA is applicable to all associations, groups and NGOs which intend to receive foreign donations.
- It is mandatory for all such NGOs to register themselves under the FCRA.
- The registration is initially valid for five years and it can be renewed subsequently if they comply with all norms.
Why was FCRA enacted?
- The FCRA sought to consolidate the acceptance and utilisation of foreign contribution or foreign hospitality by individuals, associations or companies.
- It sought to prohibit such contributions from being used for activities detrimental to national interest.
What was the recent Amendment?
- The FCRA was amended in September 2020 to introduce some new restrictions.
- The Government says it did so because it found that many recipients were wanting in compliance with provisions relating to filing of annual returns and maintenance of accounts.
- Many did not utilise the funds received for the intended objectives.
- It claimed that the annual inflow as foreign contributions almost doubled between 2010 and 2019.
- The FCRA registration of 19,000 organisations was cancelled and, in some cases, prosecution was also initiated.
How has the law changed?
There are at least three major changes that NGOs find too restrictive.
- Prohibition of fund transfer: An amendment to Section 7 of the Act completely prohibits the transfer of foreign funds received by an organisation to any other individual or association.
- Directed and single bank account: Another amendment mandates that every person (or association) granted a certificate or prior permission to receive overseas funds must open an FCRA bank account in a designated branch of the SBI in New Delhi.
- Utilization of funds: Fund All foreign funds should be received only in this account and none other. However, the recipients are allowed to open another FCRA bank account in any scheduled bank for utilisation.
- Shared information: The designated bank will inform authorities about any foreign remittance with details about its source and the manner in which it was received.
- Aadhaar mandate: In addition, the Government is also authorised to take the Aadhaar numbers of all the key functionaries of any organisation that applies for FCRA registration or for prior approval for receiving foreign funds.
- Cap on administrative expenditure: Another change is that the portion of the receipts allowed as administrative expenditure has been reduced from 50% to 20%.
What is the criticism against these changes?
- Arbitrary restrictions: NGOs questioning the law consider the prohibition on transfer arbitrary and too heavy a restriction.
- Non-sharing of funds: One of its consequences is that recipients cannot fund other organisations. When foreign help is received as material, it becomes impossible to share the aid.
- Irrationality of designated bank accounts: There is no rational link between designating a particular branch of a bank with the objective of preserving national interest.
- Un-ease of operation: Due to Delhi based bank account, it is also inconvenient as the NGOS might be operating elsewhere.
- Illogical narrative: ‘National security’ cannot be cited as a reason without adequate justification as observed by the Supreme Court in Pegasus Case.
What does the Government say?
- Zero tolerance against intervention: The amendments were necessary to prevent foreign state and non-state actors from interfering with the country’s polity and internal matters.
- Diversion of foreign funds: The changes are also needed to prevent malpractices by NGOs and diversion of foreign funds.
- Fund flow monitoring: The provision of having one designated bank for receiving foreign funds is aimed at making it easier to monitor the flow of funds.
- Ease of operation: The Government clarified that there was no need for anyone to come to Delhi to open the account as it can be done remotely.
What did the Supreme Court observed now?
- The apex court reasoned that unbridled inflow of foreign funds may destabilise the sovereignty of the nation.
- The petitioners have argued that the amendments suffered from the “vice of ambiguity, over-breadth or over-governance” and violated their fundamental rights.
- But the court countered that the amendments only provide a strict regulatory framework to moderate the inflow of foreign funds into the country.
- Free and uncontrolled inflow of foreign funds has the potential to impact the socio-economic structure and polity of the country.
- No one can be heard to claim a vested right to accept foreign donations, much less an absolute right, said the verdict.
Supreme Court’s assessment of Foreign Funds
- Philosophically, foreign contribution (donation) is akin to gratifying intoxicant replete with medicinal properties and may work like a nectar.
- However, it serves as a medicine so long as it is consumed (utilised) moderately and discreetly, for serving the larger cause of humanity.
- Otherwise, this artifice has the capability of inflicting pain, suffering and turmoil as being caused by the toxic substance (potent tool) — across the nation.
Way forward
- The court said charity could be found at home. NGOs could look within the country for donors.
- Fundamental rights have to give way in the larger public interest to the need to insulate the democratic polity from the “adverse influence of foreign contributions”.
- The third-world countries may welcome foreign donations, but it is open to a nation, which is committed and enduring to be self-reliant.
- An unregulated inflow of foreign donations would only indicate that the government was incapable of looking after its own affairs and needs of its citizens.
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NGOs vs. GoI: The Conflicts and Scrutinies
Back in news: Foreign Contribution Regulation Act (FCRA)
Note4Students
From UPSC perspective, the following things are important :
Prelims level: FCRA
Mains level: Amendment to the FCRA
The Union Home Ministry has placed a US based NGO on its watchlist following an investigation that foreign contributions it sent were being used for climate awareness campaigns, an activity not permissible under the FCRA [Foreign Contribution (Regulation) Act].
About Foreign Contribution Regulation Act (FCRA)
- The FCRA regulates foreign donations and ensures that such contributions do not adversely affect internal security.
- First enacted in 1976, it was amended in 2010 when a slew of new measures was adopted to regulate foreign donations.
- The FCRA is applicable to all associations, groups and NGOs which intend to receive foreign donations.
- It is mandatory for all such NGOs to register themselves under the FCRA.
- The registration is initially valid for five years and it can be renewed subsequently if they comply with all norms.
Why was FCRA enacted?
- The FCRA sought to consolidate the acceptance and utilisation of foreign contribution or foreign hospitality by individuals, associations or companies.
- It sought to prohibit such contributions from being used for activities detrimental to national interest.
What was the recent Amendment?
- The FCRA was amended in September 2020 to introduce some new restrictions.
- The Government says it did so because it found that many recipients were wanting in compliance with provisions relating to filing of annual returns and maintenance of accounts.
- Many did not utilise the funds received for the intended objectives.
- It claimed that the annual inflow as foreign contributions almost doubled between 2010 and 2019.
- The FCRA registration of 19,000 organisations was cancelled and, in some cases, prosecution was also initiated.
How has the law changed?
There are at least three major changes that NGOs find too restrictive.
- Prohibition of fund transfer: An amendment to Section 7 of the Act completely prohibits the transfer of foreign funds received by an organisation to any other individual or association.
- Directed and single bank account: Another amendment mandates that every person (or association) granted a certificate or prior permission to receive overseas funds must open an FCRA bank account in a designated branch of the SBI in New Delhi.
- Utilization of funds: Fund All foreign funds should be received only in this account and none other. However, the recipients are allowed to open another FCRA bank account in any scheduled bank for utilisation.
- Shared information: The designated bank will inform authorities about any foreign remittance with details about its source and the manner in which it was received.
- Aadhaar mandate: In addition, the Government is also authorised to take the Aadhaar numbers of all the key functionaries of any organisation that applies for FCRA registration or for prior approval for receiving foreign funds.
- Cap on administrative expenditure: Another change is that the portion of the receipts allowed as administrative expenditure has been reduced from 50% to 20%.
What is the criticism against these changes?
- Arbitrary restrictions: NGOs questioning the law consider the prohibition on transfer arbitrary and too heavy a restriction.
- Non-sharing of funds: One of its consequences is that recipients cannot fund other organisations. When foreign help is received as material, it becomes impossible to share the aid.
- Irrationality of designated bank accounts: There is no rational link between designating a particular branch of a bank with the objective of preserving national interest.
- Un-ease of operation: Due to Delhi based bank account, it is also inconvenient as the NGOS might be operating elsewhere.
- Illogical narrative: ‘National security’ cannot be cited as a reason without adequate justification as observed by the Supreme Court in Pegasus Case.
What does the Government say?
- Zero tolerance against intervention: The amendments were necessary to prevent foreign state and non-state actors from interfering with the country’s polity and internal matters.
- Diversion of foreign funds: The changes are also needed to prevent malpractices by NGOs and diversion of foreign funds.
- Fund flow monitoring: The provision of having one designated bank for receiving foreign funds is aimed at making it easier to monitor the flow of funds.
- Ease of operation: The Government clarified that there was no need for anyone to come to Delhi to open the account as it can be done remotely.
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NGOs vs. GoI: The Conflicts and Scrutinies
Challenges facing the Civil Society Organisations
Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much
Mains level: Paper 2- Regulatory challenges faced by civil society organisations
Context
Recently, the Missionaries of Charity established by Nobel Laureate Mother Teresa was in the news for the cancellation of its permission under the FCRA.
Detailed scrutiny delaying permission for grant
- The levels of due diligence and the information sought on the one hand and the annual declarations to be given by the board members of civil society organisations on the other have increased significantly.
- The mandatory opening of bank accounts for foreign contributions has been centralised in one branch of the State Bank of India.
- The linking of Permanent Account Number (PAN), Aadhaar number and mapping it with the bank account/s of the individual board members are happening.
- The registrations under Foreign Contribution (Regulation) Act (FCRA) have been long necessitated in order to undertake due diligence of the causes for which the organisation is working for and also to have a handle on the traceability of funds.
- The dashboard shows a little under 17,000 active organisations — which have either got permission or will know their fate by March 2022, while around 33,000 organisations have either lost their permission or it has expired.
Various restrictions
- Restriction on sub-grant: In the past, the amendments in the FCRA that restricted the ability to sub-grant, killed many of the niche organisations working in very remote areas which had no direct access to international funding but were doing it through larger non-governmental organisations.
- Restriction on administrative expenses: The other amendment restricting the proportion of expenses on administration almost choked organisations that worked for the rights of the disposed.
- The increasing level of surveillance type of data sought has resulted in many organisations losing people on their governance structure and resulting in problems in funding.
Why do we need Civil Society Organisations?
- We need them because they usually work on what can be called an unreasonable agenda.
- This unreasonableness falls in three large verticals.
- [1] Ensuring efficiency and accountability from state: The first is that they ask for greater efficiency, delivery and accountability from the state.
- Whether is it about rehabilitation and compensation in the case of land acquisition or setting up a great accountability framework as was done through the movement led by the Mazdoor Kisan Shakti Sangathan for the Right to Information.
- [2] Correcting extractive nature of market: The second vertical is in correcting the extractive nature of markets.
- The groups asking for environmental accountability are looking at inter-generational justice on a matter that is not very precisely measurable but is palpable.
- [3] Picking up niche causes: The third is basically picking up causes that are so niche that it is beyond the capability of the state to come up with such initiatives.
- For example, a drama school set up in a village called Heggodu, Karnataka, or an idea of distributing clothing for work as done by Goonj.
- These initiatives cannot be put into specific business plans, spreadsheets or government schemes.
- They, therefore, need a grant-based, cause-based revenue stream model.
Should these organisations accept foreign funding?
- Causes have no boundaries: “Causes” have no boundaries and funding for such socially desirable belief systems could come from beyond borders.
- Some causes carried out by organisations such as Doctors Without Borders, or Reporters Without Borders are by definition international in nature.
- Similar is the case with the Jaipur foot provided by the Bhagwan Mahaveer Viklang Sahayata Samiti.
- The humanitarian work by the Missionaries of Charity is beyond the capability of a state.
- Such causes do not have a rational basis to be explained in terms of a financial model; how do you put a price tag to press freedom?
- The niche funding will happen from agencies that may be beyond the borders.
- The duality of welcoming foreign investments (which takes away capital gains and dividends) while actively discouraging foreign aid to charities is staring us in the face.
Conclusion
The government needs to ensure that the regulations do not create hurdles for the civil society organisations in their functioning and receiving fundings.
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NGOs vs. GoI: The Conflicts and Scrutinies
Aiding in governance
Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much
Mains level: Paper 2- Role of Non-state actors
Context
The collaborative effort of markets and the Government are key to the development of a country.
How CSR law aids citizenry-private partnerships
- Section 135 of the Companies Act mandates corporates who are beyond a certain level of profits and turnover to pay at least 2% of their net profits before tax to the development space.
- Scope for collaboration with Non-state actors: This law gives corporates the necessary impetus to collaborate with non-state actors like Non-Governmental Organisations (NGOs) and Civil Society Organisations (CSOs).
- Using the depth of engagement of non-state actors: Non-state actors, because of their depth of engagement with communities, bring patient capital to corporate board rooms and help the state, too, by engaging in welfare activities.
- Role of NGOs: A key pillar of democratic governance is citizens’ power to question the state.
- NGOs and voluntary groups/organisations have played a significant role in building capacities of citizens to hold governments accountable.
- Hence, Corporate Social Responsibility (CSR) grants, have assumed importance to provide the much-needed sustenance to NGOs and CSOs as key players in non-state governance.
How Non-state actors differ from Governments
- Risk-averse nature of bureaucracy: The Indian bureaucratic elite have little appetite for risk-taking and innovation because of the constant changing goalposts of their politician-bosses or because the quantum of work is more than what they can efficiently handle.
- Bureaucrats, therefore, often take recourse to the status quo even if it is to at least get some work done and not stall everything by campaigning for change, especially in the realm of governance.
- Fear of failure: There is also the fear of failure, with its deep-rooted consequence of non-risk-takers smoothly sailing to the top posts.
- In such contexts, it is the non-state actor who innovates and creates breakthrough models of community engagement.
- They also become the vehicle to carry the demands of people to formal institutions.
- We saw this in the case of the Right to Information (RTI) campaign, which became a law after decades-long efforts by NGOs.
- It is common knowledge that the District Collector calls on vetted NGOs/CSOs to implement various schemes during the normal course of the day or to step in at short notice when calamities strike.
- When non-state actors take a large load off the state’s shoulder, the state can focus more on governance.
- Research shows that it is the synergy of NGOs, Government and corporates which is the key to the development.
Conclusion
The CSR law has made the corporate world not only clean its own mess but has also created a legal framework for corporates to work with NGOs and CSOs. NGOs and CSOs in India, will play a major role in mobilising citizen action to right various wrongs.
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NGOs vs. GoI: The Conflicts and Scrutinies
Missionaries of Charity denied FCRA nod
Note4Students
From UPSC perspective, the following things are important :
Prelims level: FCRA
Mains level: Threats over foreign fundings of NGOs
The Union Home Ministry has refused to renew the Foreign Contribution Regulation Act (FCRA) registration of Missionaries of Charity (MoC) set up by Nobel laureate Mother Teresa.
About Foreign Contribution Regulation Act (FCRA)
- The FCRA regulates foreign donations and ensures that such contributions do not adversely affect internal security.
- First enacted in 1976, it was amended in 2010 when a slew of new measures was adopted to regulate foreign donations.
- The FCRA is applicable to all associations, groups and NGOs which intend to receive foreign donations.
- It is mandatory for all such NGOs to register themselves under the FCRA.
- The registration is initially valid for five years and it can be renewed subsequently if they comply with all norms.
Why was FCRA enacted?
- The FCRA sought to consolidate the acceptance and utilisation of foreign contribution or foreign hospitality by individuals, associations or companies.
- It sought to prohibit such contributions from being used for activities detrimental to national interest.
What was the recent Amendment?
- The FCRA was amended in September 2020 to introduce some new restrictions.
- The Government says it did so because it found that many recipients were wanting in compliance with provisions relating to filing of annual returns and maintenance of accounts.
- Many did not utilise the funds received for the intended objectives.
- It claimed that the annual inflow as foreign contributions almost doubled between 2010 and 2019.
- The FCRA registration of 19,000 organisations was cancelled and, in some cases, prosecution was also initiated.
How has the law changed?
There are at least three major changes that NGOs find too restrictive.
- Prohibition of fund transfer: An amendment to Section 7 of the Act completely prohibits the transfer of foreign funds received by an organisation to any other individual or association.
- Directed and single bank account: Another amendment mandates that every person (or association) granted a certificate or prior permission to receive overseas funds must open an FCRA bank account in a designated branch of the SBI in New Delhi.
- Utilization of funds: Fund All foreign funds should be received only in this account and none other. However, the recipients are allowed to open another FCRA bank account in any scheduled bank for utilisation.
- Shared information: The designated bank will inform authorities about any foreign remittance with details about its source and the manner in which it was received.
- Aadhaar mandate: In addition, the Government is also authorised to take the Aadhaar numbers of all the key functionaries of any organisation that applies for FCRA registration or for prior approval for receiving foreign funds.
- Cap on administrative expenditure: Another change is that the portion of the receipts allowed as administrative expenditure has been reduced from 50% to 20%.
What is the criticism against these changes?
- Arbitrary restrictions: NGOs questioning the law consider the prohibition on transfer arbitrary and too heavy a restriction.
- Non-sharing of funds: One of its consequences is that recipients cannot fund other organisations. When foreign help is received as material, it becomes impossible to share the aid.
- Irrationality of designated bank accounts: There is no rational link between designating a particular branch of a bank with the objective of preserving national interest.
- Un-ease of operation: Due to Delhi based bank account, it is also inconvenient as the NGOS might be operating elsewhere.
- Illogical narrative: ‘National security’ cannot be cited as a reason without adequate justification as observed by the Supreme Court in Pegasus Case.
What does the Government say?
- Zero tolerance against intervention: The amendments were necessary to prevent foreign state and non-state actors from interfering with the country’s polity and internal matters.
- Diversion of foreign funds: The changes are also needed to prevent malpractices by NGOs and diversion of foreign funds.
- Fund flow monitoring: The provision of having one designated bank for receiving foreign funds is aimed at making it easier to monitor the flow of funds.
- Ease of operation: The Government clarified that there was no need for anyone to come to Delhi to open the account as it can be done remotely.
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NGOs vs. GoI: The Conflicts and Scrutinies
FCRA
Note4Students
From UPSC perspective, the following things are important :
Prelims level: FCRA
Mains level: Amendment to the FCRA
The Supreme Court has reserved its judgment on petitions challenging the validity of amendments introduced in 2020 to the Foreign Contribution (Regulation) Act, 2010, aimed at tightening the curbs on NGOs allowed to receive foreign funds.
About FCRA
- The FCRA regulates foreign donations and ensures that such contributions do not adversely affect internal security.
- First enacted in 1976, it was amended in 2010 when a slew of new measures was adopted to regulate foreign donations.
- The FCRA is applicable to all associations, groups and NGOs which intend to receive foreign donations.
- It is mandatory for all such NGOs to register themselves under the FCRA.
- The registration is initially valid for five years and it can be renewed subsequently if they comply with all norms.
Why was FCRA enacted?
- The FCRA sought to consolidate the acceptance and utilisation of foreign contribution or foreign hospitality by individuals, associations or companies.
- It sought to prohibit such contributions from being used for activities detrimental to national interest.
What was the recent Amendment?
- The FCRA was amended in September 2020 to introduce some new restrictions.
- The Government says it did so because it found that many recipients were wanting in compliance with provisions relating to filing of annual returns and maintenance of accounts.
- Many did not utilise the funds received for the intended objectives.
- It claimed that the annual inflow as foreign contributions almost doubled between 2010 and 2019.
- The FCRA registration of 19,000 organisations was cancelled and, in some cases, prosecution was also initiated.
How has the law changed?
There are at least three major changes that NGOs find too restrictive.
- Prohibition of fund transfer: An amendment to Section 7 of the Act completely prohibits the transfer of foreign funds received by an organisation to any other individual or association.
- Directed and single bank account: Another amendment mandates that every person (or association) granted a certificate or prior permission to receive overseas funds must open an FCRA bank account in a designated branch of the SBI in New Delhi.
- Utilization of funds: Fund All foreign funds should be received only in this account and none other. However, the recipients are allowed to open another FCRA bank account in any scheduled bank for utilisation.
- Shared information: The designated bank will inform authorities about any foreign remittance with details about its source and the manner in which it was received.
- Aadhaar mandate: In addition, the Government is also authorised to take the Aadhaar numbers of all the key functionaries of any organisation that applies for FCRA registration or for prior approval for receiving foreign funds.
- Cap on administrative expenditure: Another change is that the portion of the receipts allowed as administrative expenditure has been reduced from 50% to 20%.
What is the criticism against these changes?
- Arbitrary restrictions: NGOs questioning the law consider the prohibition on transfer arbitrary and too heavy a restriction.
- Non-sharing of funds: One of its consequences is that recipients cannot fund other organisations. When foreign help is received as material, it becomes impossible to share the aid.
- Irrationality of designated bank accounts: There is no rational link between designating a particular branch of a bank with the objective of preserving national interest.
- Un-ease of operation: Due to Delhi based bank account, it is also inconvenient as the NGOS might be operating elsewhere.
- Illogical narrative: ‘National security’ cannot be cited as a reason without adequate justification as observed by the Supreme Court in Pegasus Case.
What does the Government say?
- Zero tolerance against intervention: The amendments were necessary to prevent foreign state and non-state actors from interfering with the country’s polity and internal matters.
- Diversion of foreign funds: The changes are also needed to prevent malpractices by NGOs and diversion of foreign funds.
- Fund flow monitoring: The provision of having one designated bank for receiving foreign funds is aimed at making it easier to monitor the flow of funds.
- Ease of operation: The Government clarified that there was no need for anyone to come to Delhi to open the account as it can be done remotely.
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NGOs vs. GoI: The Conflicts and Scrutinies
What is Extinction Rebellion?
Note4Students
From UPSC perspective, the following things are important :
Prelims level: XR
Mains level: Climate activism
Delhi Police have named some environmental activists who are volunteers of a global environment movement seeking to call attention to the climate change emergency, in the Greta Thunberg ‘toolkit’ case.
Q.Climate activism is increasingly turning into a propaganda movement. Discuss.
What is Extinction Rebellion?
- The global movement Extinction Rebellion also referred to as ‘XR’, describes itself as a decentralized, international and politically non-partisan movement using non-violent direct action and civil disobedience.
- It aims to persuade governments to act justly on the Climate and Ecological Emergency.
- XR was launched in the UK on October 31, 2018, as a response to a report by the United Nations Intergovernmental Panel on Climate Change (IPCC).
- It had then declared that we only have 12 years to stop catastrophic climate change and our understanding that we have entered the 6th mass extinction event.
- The movement now has a presence in 75 countries, including India.
What does XR want?
- The group has “three core demands” of governments around the world.
- It wants governments to “Tell the Truth”, to “Act Now”, and to “Go Beyond Politics” in order to confront the climate and ecological emergency that the world is faced with.
- It wants them to communicate the urgency to bring change, and reduce greenhouse gas emissions to net-zero by 2025.
- XR seeks to “rebel”, and asks groups to “self-organise”, without the need for anyone’s permission, to come up with collective action plans as long as they adhere to the group’s core principles and values.
What activities have XR done so far?
- The group had announced a “Declaration of Rebellion” at launch, involving a public act of civil disobedience in London, demanding that the government reduce carbon emission to zero by 2025.
- The eventual plan was to coordinate actions in other countries and to engage in an “International Rebellion” in March 2019.
- The XR global website, however, states that the movement is “strictly non-violent”, and that they are “reluctant law-breakers”.
- In April 2019, Greta Thunberg, the teenage Swedish climate activist, lent her support to the group by speaking to its members in London.
XR and India
- The movement claims to have been inspired by 15 major civil disobedience movements around the world, including, apart from Women’s Suffrage and the Arab Spring, India’s struggle for Independence.
- It refers to Mahatma Gandhi’s Salt March in 1930.
- XR’s website says there are 19 groups in the country, including in the cities of Mumbai, Pune, Delhi, Hyderabad, Bengaluru, Kolkata, and Chennai.
Recent events
- One of the group’s early public events was a “die-in” protest organised at Bandra Reclamation in Mumbai in October 2019.
- Participants at “die-in” protests lie on the ground, pretending to be dead.
- Since the city was already seeing protests against the felling of trees at Aarey Colony for the Metro crashed, police did not grant permission for the “die-in” protest.
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NGOs vs. GoI: The Conflicts and Scrutinies
What are Social Stock Exchanges?
Note4Students
From UPSC perspective, the following things are important :
Prelims level: Social stock exchange
Mains level: NGO/NPO and their financing solutions
The Economic Survey 2021 has backed setting up of Social Stock Exchange in India.
Q. What are Social Stock Exchanges? Discuss how it will help finance social enterprises in India.
What are Social Stock Exchanges (SSEs)?
- An SSE is a platform which allows investors to buy shares in social enterprises vetted by an official exchange.
- The Union Budget 2019 proposed setting up of first of its kind SSE in India.
- The SSE will function as a common platform where social enterprises can raise funds from the public.
- It will function on the lines of major stock exchanges like BSE and NSE. However, the purpose of the Social Stock Exchange will be different – not profit, but social welfare.
- Under the regulatory ambit of SEBI, a listing of social enterprises and voluntary organizations will be undertaken so that they can raise capital as equity, debt or as units like a mutual fund.
Why SSEs?
- India needs massive investments in the coming years to be able to meet the human development goals identified by global bodies like the UN.
- This can’t be done through government expenditure alone. Private enterprises working in the social sector also need to step up their activities.
- Currently, social enterprises are very active in India. However, they face challenges in raising funds.
- One of the biggest hurdles they face is, apparently, the lack of trust from common investors.
Benefits
- There is a great opportunity to unlock funds from donors, philanthropic foundations and CSR spenders, in the form of zero-coupon zero principal bonds. These bonds will be listed on the SSE.
- At first, the SSE could become a repository of social enterprises and impact investors.
- The registration could be done through a standard process.
- The SEs could be categorized into different stages such as as- Idea, growth stage and likewise, investors can also be grouped based on the type of investment.
Development so far
- The Economic Survey 2021 highlighted the concept of setting up a social stock exchange (SSE) in India.
- It will be under the regulatory ambit of the Securities and Exchange Board of India (SEBI).
- SEBI constituted a working group (WG) on social stock exchanges back in September 2019.
- The WG has outlined its vision and made recommendations, which include the participation of NPOs and for-profit enterprises (FPE) on SSE subject to committing to minimum reporting requirements.
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NGOs vs. GoI: The Conflicts and Scrutinies
Home Ministry amends FCRA rules
Note4Students
From UPSC perspective, the following things are important :
Prelims level: FCRA
Mains level: FCRA
The Ministry of Home Affairs (MHA) has relaxed FCRA norms for farmer, student, religious and other groups who are not directly aligned to any political party to receive foreign funds if the groups are not involved in “active politics”.
Must read:
What is Foreign Contribution (Regulation) Act, and how does it control donations?
What is the FCRA?
- The Foreign Contribution Regulation Act (FCRA), 2010 regulates foreign donations and ensures that such contributions do not adversely affect the internal security of our country.
- The Act, first enacted in 1976, was amended in the year 2010 when a slew of new measures was taken by the Union Home Ministry to regulate foreign donations. It was again amended in September this year.
- It is applicable to all associations, groups and NGOs which intend to receive foreign donations. It is mandatory for all such NGOs to register themselves under the FCRA.
- The registration is initially valid for five years and it can be renewed subsequently if they comply with all norms.
What are the new rules?
- The new rule says- the organisations specified under clauses (v) and (vi) of sub-rule (1) shall be considered to be of political nature, if they participate in active politics or party politics, as the case may be.
- The 2011 rules on said clauses dealt with “guidelines for the declaration of an organisation to be of a political nature, not being a political party”.
- It said that the Central government could specify an organisation as that of political nature based on six criteria.
Defining ‘Political group’
- Clause V of Rule 3 (FCRA 2011) qualified a political group as, “organisations of farmers, workers, students, youths based on caste, community, religion, language or otherwise, which is not directly aligned to any political party, but whose objectives or activities, include steps towards advancement of political interests of such groups.
- The activities include: habitually engagement in or employ common methods of political action like rasta roko, jail bharo, rail roko, bandh or hartal in support of public causes.
Why such a move?
- As per the FCRA, members of legislatures, political parties, government officials, judges and media persons are prohibited from receiving any foreign contribution.
- The new rules make new FCRA registrations more stringent.
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NGOs vs. GoI: The Conflicts and Scrutinies
Foreign Contribution (Regulation) Act (FCRA)
Note4Students
From UPSC perspective, the following things are important :
Prelims level: FCRA
Mains level: FCRA
The Ministry of Home Affairs (MHA) has asked all NGOs seeking foreign donations to open a designated FCRA account at the State Bank of India’s New Delhi branch.
What is the FCRA?
- The FCRA regulates foreign donations and ensures that such contributions do not adversely affect internal security.
- First enacted in 1976, it was amended in 2010 when a slew of new measures was adopted to regulate foreign donations.
- The FCRA is applicable to all associations, groups and NGOs which intend to receive foreign donations. It is mandatory for all such NGOs to register themselves under the FCRA.
- The registration is initially valid for five years and it can be renewed subsequently if they comply with all norms.
What happens once registered?
- Registered associations can receive a foreign contribution for social, educational, religious, economic and cultural purposes.
- 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.
- It ruled that it 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.
- It also said all such NGOs would have to operate accounts in either nationalized or private banks which have core banking facilities to allow security agencies access on a real-time basis.
Who cannot receive foreign donations?
- Members of the legislature and political parties, government officials, judges and media persons are prohibited from receiving any foreign contribution.
- However, in 2017 the MHA 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 in which an Indian holds 50% or more shares.
How else can receive foreign funding?
- The other way to receive foreign contributions is by applying for prior permission.
- It is granted for receipt of a specific amount from a specific donor for carrying out specific activities or projects.
- But the association should be registered under statutes such as the Societies Registration Act, 1860, the Indian Trusts Act, 1882, or Section 25 of the Companies Act, 1956.
- A letter of commitment from the foreign donor specifying the amount and purpose is also required.
When is a registration suspended or cancelled?
- The MHA on inspection of accounts and on receiving any adverse input against the functioning of an association can suspend the FCRA registration initially for 180 days.
- Until a 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 the 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.
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NGOs vs. GoI: The Conflicts and Scrutinies
Exploring the idea of Social Stock Exchange
Note4Students
From UPSC perspective, the following things are important :
Prelims level: Social Stock Exchange
Mains level: Paper 2- Social Stock Exchange
Context
- The Securities and Exchange Board’s (SEBI) working group has submitted its report with recommendations regarding the structure, mechanisms, and regulatory framework for the proposed Social Stock Exchange (SSE).
What are Social Stock Exchanges (SSEs)?
- An SSE is a platform which allows investors to buy shares in social enterprises vetted by an official exchange.
- The Union Budget 2019 proposed setting up of first of its kind SSE in India.
- The SSE will function as a common platform where social enterprises can raise funds from the public.
- It will function on the lines of major stock exchanges like BSE and NSE. However, the purpose of the Social Stock Exchange will be different – not profit, but social welfare.
- Under the regulatory ambit of SEBI, a listing of social enterprises and voluntary organizations will be undertaken so that they can raise capital as equity, debt or as units like a mutual fund.
Issues with the idea of Social Stock Exchange
- SSE exists in one form or another in UK, Singapore, South Africa, Canada and Brazil, but it is yet to take off in any country.
- It has been an instrument focussed on social enterprises with rather poor results.
- The proposed SSE in our country could have been an interesting innovation if it was first.
- Replicating an experiment from elsewhere in an extremely complex environment of endemic poverty, high inequality and regional variation does not seem a reasoned decision.
- It is therefore important to analyse why it has been pushed as a key policy.
Why civil society is sceptical
- The 2020-21 Union Budget says that not-for-profit organisations will need to apply every five years for income tax registration to ascertain their charitable status.
- They will also need to renew their 80(G) certificate that provides tax relief to their donors.
- The not-for-profit sector would not be able to survive without the tax-exempt charitable status.
- These restrictions will open the gates to corruption and bullying by the tax and government bureaucracy.
- The SEBI working group was constituted of business leaders, government and SEBI officials with a token representative from civil society.
- Composition of the committee reflects the real intent of the SSE, which is to create instruments for market to enter the social sector.
- However, the way the exchange is envisioned makes it clear that the interests of the private sector are guiding the idea of SSE.
Will the entry of private sector benefit social sector
- The proponents of the SSE argue that it would help set standards and a performance matrix for the social sector.
- SSE is also expected to help bench-marking of sector actors (credibility checks), organise information and data, help in impact assessments, and do capacity building for the sector.
Solving complex social problems
- Poverty or injustice are essentially systemic and political questions that need multi-pronged dynamic engagement.
- Developing set standards of impact assessment and performance matrix has the risk of privileging only one approach to the developmental challenges at hand.
- The SSE would create more intermediaries and benefit larger organisations.
- More than 99 per cent of the three million NGOs in the country are in the small category and will be untouched by the SSE.
Conclusion
The core business of the SSE is to strengthen the social sector and bring new resources to it, SEBI for sure itself would admit that it is not the appropriate anchor.
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NGOs vs. GoI: The Conflicts and Scrutinies
Foreign Contribution (Regulation) Amendment Bill, 2020
Note4Students
From UPSC perspective, the following things are important :
Prelims level: FCRA
Mains level: FCRA
The Centre is set to amend the Foreign Contribution (Regulation) Act and has proposed to make Aadhaar a mandatory identification document for all the office-bearers, directors and other key functionaries of an NGO or an association eligible to receive foreign donations.
What are the news Amendments?
(1) Prohibition to accept foreign contribution:
- Under the Act, certain persons are prohibited to accept any foreign contribution.
- These include election candidates, editor or publisher of a newspaper, judges, government servants, members of any legislature, and political parties, among others.
- The Bill adds public servants (as defined under the Indian Penal Code) to this list.
- Public servants include any person who is in service or pay of the government or remunerated by the government for the performance of any public duty.
(2) Transfer of foreign contribution:
- Under the Act, foreign contribution cannot be transferred to any other person unless such person is also registered to accept foreign contribution (or has obtained prior permission under the Act to obtain foreign contribution).
- The Bill amends this to prohibit the transfer of foreign contribution to any other person. The term ‘person’ under the Act includes an individual, an association, or a registered company.
(3) Aadhaar for registration:
- The Act states that a person may accept foreign contribution if they have: (i) obtained a certificate of registration from central government, or (ii) not registered, but obtained prior permission from the government to accept foreign contribution.
- Any person seeking registration (or renewal of such registration) or prior permission for receiving the foreign contribution must make an application to the central government in the prescribed manner.
- The Bill adds that any person seeking prior permission, registration or renewal of registration must provide the Aadhaar number of all its office bearers, directors or key functionaries, as an identification document.
- In case of a foreigner, they must provide a copy of the passport or the Overseas Citizen of India card for identification.
(4) FCRA account:
- Under the Act, a registered person must accept foreign contribution only in a single branch of a scheduled bank specified by them.
- However, they may open more accounts in other banks for utilization of the contribution.
- The Bill amends this to state that foreign contribution must be received only in an account designated by the bank as “FCRA account” in such branch of the State Bank of India, New Delhi, as notified by the central government.
- No funds other than the foreign contribution should be received or deposited in this account.
(5) Restriction in the utilization of foreign contribution:
- Under the Act, if a person accepting foreign contribution is found guilty of violating any provisions of the Act or the unutilized or unreceived foreign contribution may be utilized or received, only with the prior approval of the central government.
- This amendment Bill also seeks to prohibit the transfer of FCRA funds to other persons or organisations.
- The Bill adds that the government may also restrict usage of unutilized foreign contribution for persons who have been granted prior permission to receive such contribution.
- This may be done if, based on a summary inquiry, and pending any further inquiry, the government believes that such a person has contravened provisions of the Act.
(6) Renewal of license:
- Under the Act, every person who has been given a certificate of registration must renew the certificate within six months of expiration.
- The Bill provides that the government may conduct an inquiry before renewing the certificate to ensure that the person making the application: (i) is not fictitious or benami, (ii) has not been prosecuted or convicted for creating communal tension and (iii) has not been found guilty of diversion or misutilisation of funds, among others conditions.
(7) Reduction in use of foreign contribution for administrative purposes:
- Under the Act, a person who receives foreign contribution must use it only for the purpose for which the contribution is received.
- Further, they must not use more than 50% of the contribution to meeting administrative expenses. The Bill reduces this limit to 20%.
(8) Surrender of certificate:
- The Bill adds a provision allowing the central government to permit a person to surrender their registration certificate.
- The government may do so if, post an inquiry, it is satisfied that such person has not contravened any provisions of the Act, and the management of its foreign contribution (and related assets) has been vested in an authority prescribed by the government.
(9) Suspension of registration:
- Under the Act, the government may suspend the registration of a person for a period not exceeding 180 days.
- The Bill adds that such suspension may be extended up to an additional 180 days.
Significance of the amendment
1.Prevent misuse:
- The annual inflow of foreign contribution has almost doubled between the years 2010 and 2019, but many recipients of foreign contribution have not utilised the same for the purpose for which they were registered or granted prior permission under the FCRA 2010.
- Recently, the Union Home Ministry has suspended licenses of the six (NGOs) who were alleged to have used foreign contributions for religious conversion.
2.Strengthen National security
- Many persons were not adhering to statutory compliances such as submission of annual returns and maintenance of proper accounts.
- Such a situation could have adversely affected the internal security of the country.
3.Transparency and accountability
- The new Bill aims to enhance transparency and accountability in the receipt and utilisation of foreign contributions and facilitating the genuine non-governmental organisations or associations who are working for the welfare of society.
Criticism of the FCRA Bill, 2020
- The legislation may be used to target political opponents and religious minorities.
- Effects NGO Functioning: Due to the 20% cap, many NGOs will shut shop and many people will become jobless.
- Inconsistency: On one hand the government invites foreign funds, but when such funds come for educational and charitable purposes, it is prevented.
- High compliance rate: According to the GoI’s FCRA dashboard, there are 22,447 active FCRA registrations in India today. In 2018-19, 21,915 annual returns were filed – a compliance rate of 97.6%.
- Double standards: PM CARES fund had received exemptions from complying with FCRA provisions when it is headed by Union cabinet ministers and administered by PMO officials.
- Licence-Raj on NGOs: The Bill assumes that all NGOs receiving foreign grants are guilty and thus makes Aadhar of office bearers as mandatory requirement.
- Bureaucratic Discretion: There is a thin line between enforcing transparency and using rules to allow official interference and harassment in the sector. Much of the present bill crosses that line and introduces a questionable degree of micro-management.
Way Forward
- NGOs are helpful in implementing government schemes at the grassroots. They fill the gaps, where the government fails to do their jobs.
- The government must stick to the ancient Indian ethos of Vasudhaiva Kutumbakam as the framework for its global engagement and should not act with vendetta against the NGOs who criticize its working.
- Seamless sharing of ideas and resources across national boundaries is 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.
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NGOs vs. GoI: The Conflicts and Scrutinies
What is Foreign Contribution (Regulation) Act, and how does it control donations?
Note4Students
From UPSC perspective, the following things are important :
Prelims level: FCRA
Mains level: FCRA
The licences of 13 non-governmental organisations (NGOs) have been suspended under the Foreign Contribution (Regulation) Act (FCRA), 2010, this year.
What is the FCRA?
- The FCRA regulates foreign donations and ensures that such contributions do not adversely affect internal security.
- First enacted in 1976, it was amended in 2010 when a slew of new measures was adopted to regulate foreign donations.
- The FCRA is applicable to all associations, groups and NGOs which intend to receive foreign donations. It is mandatory for all such NGOs to register themselves under the FCRA.
- The registration is initially valid for five years and it can be renewed subsequently if they comply with all norms.
What happens once registered?
- Registered associations can receive a foreign contribution for social, educational, religious, economic and cultural purposes.
- 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.
- It ruled that it 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.
- It also said all such NGOs would have to operate accounts in either nationalized or private banks which have core banking facilities to allow security agencies access on a real-time basis.
Who cannot receive foreign donations?
- Members of the legislature and political parties, government officials, judges and media persons are prohibited from receiving any foreign contribution.
- However, in 2017 the MHA 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 in which an Indian holds 50% or more shares.
How else can receive foreign funding?
- The other way to receive foreign contributions is by applying for prior permission.
- It is granted for receipt of a specific amount from a specific donor for carrying out specific activities or projects.
- But the association should be registered under statutes such as the Societies Registration Act, 1860, the Indian Trusts Act, 1882, or Section 25 of the Companies Act, 1956.
- A letter of commitment from the foreign donor specifying the amount and purpose is also required.
When is a registration suspended or cancelled?
- The MHA on inspection of accounts and on receiving any adverse input against the functioning of an association can suspend the FCRA registration initially for 180 days.
- Until a 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 the 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.
Also read:
Registration under Foreign Contribution Regulation Act (FCRA)
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NGOs vs. GoI: The Conflicts and Scrutinies
Registration under Foreign Contribution Regulation Act (FCRA)
Note4Students
From UPSC perspective, the following things are important :
Prelims level: FCRA
Mains level: Money laundering and terror financing
The Union Home Ministry has granted FCRA registration to the famous Gurdwara Harmandir Sahib, or the Golden Temple, in Amritsar, enabling it to receive foreign donations.
Foreign Contribution Regulation Act
- The Foreign Contribution (Regulation) Act, 2010 is an act to regulate the acceptance and utilization of foreign contribution or foreign hospitality by certain individuals or associations or companies
- It prohibits acceptance and utilization of foreign contribution or foreign hospitality for any activities detrimental to the national interest and for matters connected therewith or incidental thereto
- The central government has the power to prohibit any persons or organizations from accepting foreign contribution or hospitality if it is determined that such acceptance would likely “affect prejudicially”
(i) the sovereignty and integrity of India,
(ii) public interest,
(iii) freedom or fairness of election to any legislature,
(iv) friendly relations with any foreign State, or
(v) harmony between religious, racial, social, linguistic or regional groups, castes or communities
Premise for the FCRA
- Government of India enacted the Foreign Contribution (Regulation) Act (FCRA) in the year 1976 with an objective of regulating the acceptance and utilization of foreign contribution.
- Any association, non-government organisation (NGO) or registered society requires FCRA registration to receive foreign donations for specified purposes.
- The act was majorly modified in 2010 with several amendments because many NGOs were found using illegal use of foreign funding.
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NGOs vs. GoI: The Conflicts and Scrutinies
Foreign Funding of Public Organizations
Note4Students
From UPSC perspective, the following things are important :
Prelims level: FCRA
Mains level: Issues with foreign funding
The Central government cannot brand an organisation ‘political’ and deprive it of its right to receive foreign funds for using “legitimate forms of dissent” like bandh, hartal, road roko or jail ‘bharo’ to aid a public cause, the Supreme Court held.
Why such Judgement?
- The verdict came on a petition filed by Indian Social Action Forum challenging certain provisions of the Foreign Contribution Regulation Act (FCRA), 2010 and the Foreign Contribution (Regulation) Rules of 2011.
- Both of these confer the Centre with “unguided and uncanalised power” to brand organisations ‘political’ and shut down their access to foreign funds.
- The FCRA 2010 prohibited acceptance and utilization of foreign contribution or foreign hospitality for any activities detrimental to the national interest, it the court said.
- The FCRA and its Rules allowed the government to indulge in its whims and fancies to deprive organisations of their foreign contributions.
- The terms used in the statute like ‘political objectives’, ‘political activities’, ‘political interests’ and ‘political action’ had no clarity.
Issues with FCRA
- The provisions under challenge before the court included Section 5 (1) of the FCRA.
- This provision allowed the Centre a free hand to decide whether a seemingly non-political organisation was actually political in nature. INSAF argued that Section 5(1) was vague and thus unconstitutional.
- The Delhi High Court, which INSAF approached first, said the provision was “expansive” and not vague. The Supreme Court agreed with the High Court.
- The next provision under the microscope was Section 5(4) of the FCRA.
- INSAF said the provision did not exactly identify the authority before which an organisation could represent its grievance. But the apex court dismissed this contention.
- INSAF had also challenged the various clauses of Rule 3 of the 2011 Rules. This provision identified the various types of ‘political’ activities for which/organisations whose foreign funding could be stopped by the government.
Foreign funds are permissible for non-political organizations
- Any organisation which supports the cause of a group of citizens agitating for their rights without a political goal or objective cannot be penalized by being declared as an organisation of a political nature.
- But the foreign funding pipeline could be cut if an organisation took recourse to these forms of protest to score a political goal, the court said.
- It struck a similar balance in the cases of organisations of farmers, workers, students, youth based on caste, community, religion, language, etc.
- It said their foreign funding could continue as long as these organisations worked for the “social and political welfare of society” and not to further “political interests”.
What about Political Organizations?
- The court wholesomely agreed that organisations with avowed political objectives in its memorandum of association or bye laws cannot be permitted access to foreign funds.
- Such organisations were clearly of a “political nature,” it concluded.
Why regulate foreign funding?
- The purpose for which the statute prevents organisations of a political nature from receiving foreign funds is to ensure that the administration is not influenced by foreign funds.
- Prohibition from receiving foreign aid, either directly or indirectly, by those who are involved in active politics is to ensure that the values of a sovereign democratic republic are protected.
- On the other hand, such of those voluntary organisations which have absolutely no connection with either party politics or active politics cannot be denied access to foreign contributions.
Back2Basics
FCRA
- Government of India enacted the Foreign Contribution (Regulation) Act (FCRA) in the year 1976 with an objective of regulating the acceptance and utilization of foreign contribution.
- The act was majorly modified in 2010 with several amendments because many NGOs were found using illegal use of foreign funding.
- It is a consolidating act whose scope is to regulate the acceptance and utilisation of foreign contribution or foreign hospitality by certain individuals or associations or companies.
- It aims to prohibit funding for any activities detrimental to the national interest and for matters connected therewith.
- In 2016 license of about 20,000 NGOs were cancelled after reviewing their work.
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