The Foreign Contributions Amendment (Regulation) Bill (FCRA) of 2020 was introduced in the current session of parliament.
The amendment seeks to make specific changes to the FCRA law, first introduced in 2010 by the UPA government and whose rules were amended in 2012, 2015 and 2019. The law provides the framework under which organizations in India can receive and use grants from foreign sources. . This mainly affects the non-profit sector in India, which comprises a wide range of organizations: NGOs implementing development projects, research organizations, civil society activists, etc.
Governments have argued that the receipt and use of foreign grant funds should be regulated to ensure that they are not used to harm the national interest. No one denies that there should be greater transparency when it comes to activities that are funded by foreign sources.
But is it too much to expect the government to see NGOs and civil society organizations as genuine partners on India’s development path? As demonstrated during the ongoing pandemic and migrant worker crisis, NGOs and activists routinely fill gaps in government programs, reaching the unreached, supplementing the quality and quantity of services provided, and speaking on behalf of those whose voices are marginalized.
Restricting non-profit organizations amounts to restricting democracy itself. But various elements of the FCRA rules and their vague definitions of national interest make it hard to believe that the government sees this sector as an ally. The government has used the FCRA as a tool to harass political rivals or activist organizations such as Amnesty International. From environmental activism to religious activities, a wide range of organizations have come under scrutiny by government authorities in recent years.
The central objectives of the latest draft amendment are as follows:
- Prohibiting grants from abroad being made to organizations that involve ‘public servants’, or in other words, to any organization that is “owned or controlled” by the government;
- Prohibit the transfer of grants received under the FCRA to any other person or organization;
- Reduce the limit on administrative expenses that can be financed with FCRA funds from 50% to 20%;
- To extend the power of the Home Office, the Government of India will cancel the FCRA certificate for more than 180 days;
- Make Aadhaar mandatory for people who control host organizations, and
- Stipulate that foreign grants can only be received at the State Bank of India in New Delhi.
Mahatma Gandhi statue on the premises of Parliament House during the monsoon session, New Delhi. September 20, 2020. Photo: PTI / Kamal Kishore
According to the FCRA panel of the Government of India, there are currently 22,447 active FCRA registrations in India. In 2018-19, 21,915 annual returns were filed, a compliance rate of 97.6%. It can hardly be argued that non-compliance is a concern here. Making Aadhaar mandatory is another step towards expanding the use and coverage of the single identity and does little to improve transparency or oversight by government. Similarly, the stipulation that all recipients of foreign funds must use SBI bank accounts will only increase transaction costs for organizations that receive such funds.
Let’s look at the more substantive provisions of the bill. The provision that public servants cannot participate in organizations seeking to receive foreign grants, as others have pointed out, appears to have been introduced with their particular objections to Indira Jaisingh, whose NGO had received foreign funds while she was the additional attorney general of the Government of India. Other than that, the amendment does not explain what the government finds objectionable about a public servant’s participation in public causes through non-governmental organizations. It is even more puzzling in light of recent revelations that the PM CARES fund had received exemptions from complying with the FCRA provisions when it is led by Union cabinet ministers and administered by PMO officials.
This amendment bill also seeks to prohibit the transfer of funds from the FCRA to other individuals or organizations. Once again, in addition to creating obstacles to project implementation, it is unclear how this provision would contribute to greater transparency in the use of foreign funds. All it does is prevent an overseas fundraising organization from transferring funds to partner organizations.
A much easier option would have been to ask organizations that receive foreign funds under the FCRA to report annually on all activities for which those funds are used. Is it even clearer that the government is really interested in improving transparency? The 2015 amendments to the FCRA struck a blow at such notions when they retrospectively allowed political parties (which we know to be among the least transparent organizations) to receive foreign funding.
Through this amendment, the government wants to limit the proportion of administrative expenses in the use of foreign funds to 20%. This is truly an example of a regulation that has no purpose other than to make life more difficult for larger organizations that have higher overhead (administrative costs). This is the equivalent of the government introducing laws that ask for-profit businesses to put a cap on spending on salaries or facilities.
Organizations that can raise funds from abroad do so on the basis of their credibility or their relationship with the donor. If donors determine that funds are not being used for direct program delivery but are being wasted on administrative costs, it is their responsibility to respond. There is almost no need for the government to get involved in these matters.
Finally, this bill gives the Interior Ministry powers to suspend FCRA certificates for more than 180 days, without specifying an upper limit. In the current circumstances, this should be of concern to NGOs and civil society organizations. By suspending the FCRA certificate, the government can deprive organizations of funds while investigating them. For already suffering civil society in India, this is very bad news.
In short, the proposed amendments will increase the cost of doing business for Indian nonprofits, while also making them more vulnerable to harassment. This may not be a drastic change, but it indicates a worsening trend in India’s non-profit sector.
Suvojit Chattopadhyay is currently based in Dhaka and works on public sector governance and development management issues in South Asia. You can find his blog here. He tweets @suvojitc.
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