Foreign Contributions (Regulation) Amendment Act 2020: A Draconian Act ?

As of January 1, 2022 over 12,000 Non-Governmental organizations lost their Foreign Funding license owing to the recent amendments made in the Foreign Contribution regulation Act. This means that these NGOs are barred from receiving any foreign funds, this declaration acted as a heavy blow to thousands of organizations working tirelessly for betterment of disadvantageous section of the society. Organizations like Oxfam India, Mother Teresa’s Missionary School (licensee got renewed recently) The Indian medical Association, The Indira Gandhi National center for Arts, The Tuberculosis Association of India which carried out large scale operations to help the needy people had to succumb to the directive of FCRA (Foreign Contributions Regulation act). It’s an even bigger loss for millions of Indians who relied on the aid provided by these organizations. While corporate social responsibility funds would be available to charitable organizations, it's not clear why India took a policy stance that could deprive many of the country's poorest citizens of foreign assistance.

FCRA: A History of disrupting NGO’s

Non-Profit organizations have played a significant role in the welfare of the society, most of these organizations heavily rely on funding and from decades foreign funding from nations across the globe have facilitated welfare activities and operations of these organization which in turn aid the disadvantageous section of the society. These Foreign funds received by these organisations are regulated by FCRA (Foreign Contributions Regulation Act), for an NGO to receive foreign funds it is imperative for it to get registered with the Ministry of Home Affairs and once the NGO is registered, it is provided with a unique FCRA Registration number or license which has to be renewed every 5 years.

The FCRA was enacted way back in 1976 during the emergency regime of Indira Gandhi, the act barred election candidates, political parties, judges, legislators, and even cartoonists to accept foreign contributions. The inclusion of cartoonist, columnist and editors and publishers or registered newspapers (as per Section 4 clause b of the FCRA 1976, repealed) gives the impression that the intention of the incumbent government was to stifle political dissent.

Later the said act of 1976 was replaced by Foreign Contributions regulations Act of 2010 which can be construed to be a stringent version of the emergency-era enactment. The new Act stipulated for renewal of FCRA license every five years. The impact of this new requirement was subsequently visible in 2015, when almost 15,000 non-profit organizations lost their license owing to failure to apply for renewal within stipulated time. Over time, the law has become more restrictive, undermining the work of NGOs rather than creating an enabling environment for their growth.

The amendment of 2020 has further exacerbated the situation. Many NGOs contend that the renewal process has become more stringent under the current central government as the compliance norms were made more stringent, like NGOs were required to submit quarterly reports on foreign grants received. Additionally, they were required to notify within 15 days of any changes to their bank account, name, address, mission, objectives, or key personnel.

Major Changes made in FCRA and its implications

Provision of FCRA Account

Section 12 of Foreign Contribution (Regulation) Amendment Act, 2020 made it compulsory for an organization to open a bank account in State Bank of India at New Delhi, which shall be designated as the FCRA account. All the foreign contribution made to a non-profit organization shall be accepted via this FCRA account opened by the organization in the specified branch of State of India at New Delhi. According to the reports of CSIP (Centre for Social Impact and Philanthropy) 93 Percent of the NGOs operate outside the national capital, which means almost 20,000 across India must come to Delhi in order to open a FCRA Account as mandated by the recent enactment. This specific requirement acts as an impediment in the functioning of these NGOs especially in times of COVID when these NGOs are facing much greater challenges.

Restriction on transfer of foreign funds

The Foreign Contributions (Regulations) amendment Act, 2020 further discourages social welfare by restricting subletting of the foreign funds to other NGOs or welfare organizations. While status quo ante permitted transfer of foreign funds to another organization or person who is registered under the FCRA law/has obtained previous permission, or even an unregistered person with the approval of the Central Government, however the amendment completely bars an organization from subletting foreign funds Voluntary Action Network India (VANI), an apex body of Indian voluntary organizations has stated:

“Collaborations even with national NGOs which are complying with FCRA laws will be constrained since the Bill talks of no sub-granting, hence eliminating the general spirit of collaboration,”

Many a times Large NGOs work in collaboration with smaller NGO’s which are not able to raise requisite foreign funds on their own. Also, around 90 percent of the NGOs registered under FCRA do not receive significant foreign contributions.

Restriction on Administration expense

Another major impediment in the proper functioning of the NGOs is limitation on utilization of foreign funds for administrative expenses. Section 4 of the Foreign Contributions (Regulation) Act, 2020 axed the erstwhile limit of 50 percent to 20 percent which implies that only 20 percent of the Foreign Funds received shall be used for administrative purposes.

In words of a government official, administrative expenses may be inclusive of cost of writing and publishing a report, as well as costs associated with field data collection, in addition to salaries, rent, repairs, and consumables such as electricity, water, telephone, and mobile phone charges. Considering the wide range expenses covered under administrative expenses, it will be a difficult task for the NGOs to limit their administrative expenses via Foreign Funds. Already in 2018-29, there were 1328 NGOs whose administrative expenses exceeded 20 percent of the foreign Funds received by the organization.

Aftermath

Many NGOs found it difficult to comply with the new guidelines owing to which they could not file for renewal within the stipulated time owing to which over 12000 NGOs lost their FCRA license. In the past 10 years the government has cancelled the registration of almost 20,000 NGO across the nation. Many of these organizations are indulged in aiding the weaker section of the society, this indeed will have a detrimental impact on the welfare activities carried out by these organizations. Although the date for renewal of FCRA license has been extended to 22 march 2022, but surely one cannot shy away from the fact that the aforementioned compliance guidelines disrupt the functioning of thousands of NGOs across the nation, especially during this critical time of COVID when the disadvantageous section of the society is more vulnerable than ever.

Concluding Remarks

FCRA is an emergency era enactment which was made stringent by the UPA government in 2010 with the insertion of renewal of FCRA license every five years and the current NDA government have made amendments in this draconian law which exacerbates the situations via stringent compliance requirements for the NGOs. Many critics of the government suggest that refusing FCRA clearance is a means of repressing organizations whose activities and operations whose do not kneel to the will of center.

Amidst this tussle the paramount question that emerges is whether a country like India really needs such laws which may hinder the welfare drive of the nation? There is no denying that NGOs have been involved in illegal activities, we are all aware of the fact that the façade of NGOs has been used to coverup fraudulent activities, however the measures adopted to check the same shall not disrupt the greater good of the society. Perhaps it’s time to revive the idea of setting up a national level self-regulatory agency NACI (National Accreditation Council of India) that would be responsible for monitoring and accrediting CSOs (Civil society organizations). Back in 2009 a seven-member task force was constituted to create a national level autonomous, statutory body which would operate in consonance with the Bar Council of India. Unfortunately, no action was taken in its furtherance instead we got a much harsher form of FCRA in 2010. Its high time that the government should consider setting up such an agency and repeal FCRA.