The Proposed FCRA Amendment Will Deal Another Blow to India's Non-Profit Sector

The government has repeatedly used the FCRA as an instrument for harassment of political rivals or activist organisations like Amnesty International.

The Foreign Contribution (Regulation) Amendment (FCRA) Bill, 2020 has been introduced in the current parliament session.

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 organisations in India can receive and utilise grants from foreign sources. This primarily affects the non-profit sector in India, comprising a wide range of organisations – NGOs that implement development projects, research organisations, civil society activists, etc.

Governments have argued that the receipt and use of foreign grant funds need to be regulated to ensure that they are not used to hurt the national interest. Nobody denies that there should be greater transparency when it comes to activities that are funded by foreign sources.

But is it too much to hope that the government will see NGOs and civil society organisations as genuine partners in India’s development journey? As demonstrated during the ongoing pandemic and the migrant workers’ crisis, NGOs and activists routinely make up for gaps in government programmes, by reaching the unreached, supplementing the quality and quantity of services provided, and speaking for those whose voices are marginalised.

Restraining non-profit organisations is equal to restraining democracy itself. But several elements of the FCRA rules and their vague definitions of national interest makes it hard to believe that the government sees this sector as an ally. The government has used the FCRA as an instrument for harassment of political rivals or activist organisations such as Amnesty International. Starting from environmental activism to religious activities – a wide range of organisations have come under the scanner of government authorities in recent years.

Also read: PM-CARES Fund Exempted From FCRA, MHA Reveals Under RTI

The central objectives of the latest amendment Bill are the following:

  •  To prohibit any grants from abroad being made to organisations that involve ‘public servants’, or in other words, any organisation that is “controlled or owned” by the government; 
  • To prohibit the transfer of grants received under FCRA to any other person or organisation; 
  • To lower the cap on administrative expenses that can be funded by FCRA funds from 50% to 20%; 
  • To expand the power of the Ministry of Home Affairs, GoI to cancel FCRA certificate for more than 180 days; 
  • To make Aadhaar mandatory for persons who control recipient organisations, and 
  • To stipulate that foreign grants can only be received at the State Bank of India at New Delhi.

Statue of Mahatma Gandhi on the premises of the Parliament House during the monsoon session, New Delhi. September 20, 2020. Photo: PTI/Kamal Kishore

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%. 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 unique identity and does little to improve transparency or oversight by the government. Similarly, the stipulation that all foreign fund recipients need to use SBI bank accounts will only increase the transaction costs for organisations that receive such funds.

Let’s look at the more substantive provisions of the Bill. The provision that public servants cannot be involved in organisations that seek to receive foreign grants – as others have pointed out – seems to have been introduced with its particular objections to Indira Jaisingh, whose NGO had received foreign funds while she was the additional solicitor general of the Government of India. That aside, the amendment does not explain what it is that the government finds objectionable about a public servant being involved in public causes through non-governmental organisations. It is even more baffling in the light of recent revelations that the PM CARES fund had received exemptions from complying with FCRA provisions when it is headed by Union cabinet ministers and administered by PMO officials.

Also read: The Chronology of Subterfuge on Amending the FCRA

This amendment Bill also seeks to prohibit the transfer of FCRA funds to other persons or organisations. Again, other than creating obstacles for implementing projects, it is not clear how this provision would contribute to better transparency in the use of foreign funds. All this does is to prevent an organisation that raises funds from abroad from transferring funds to partner organisations.

A far easier option would have been to ask organisations that receive foreign funds under FCRA to annually report on all activities towards which those funds are utilised. Is it even clear any more that the government is genuinely interested in improving transparency? The 2015 amendments to the FCRA struck a blow to any such notions when it retrospectively allowed political parties (which we know are amongst the most non-transparent of organisations) to receive foreign funds.

Through this amendment, the government wants to limit the proportion of administrative expenses in the utilisation of foreign funds to 20%. This one is truly an example of a regulation that serves no purpose but to make life difficult for larger organisations who have higher overheads (administrative costs). This is the equivalent of the government introducing laws that ask for-profit companies to impose a cap on expenditure on salaries or facilities.

Organisations that are able to raise funds from abroad do so on the basis of their credibility or relationship with the donor. If donors determine that funds are not being used on direct delivery of programmes but instead are being wasted on administrative expenses, it is up to them to respond. There is hardly any need for the government to get involved in such matters.

Finally, this Bill gives the Ministry of Home Affairs powers to suspend FCRA certificates for more than 180 days, without specifying an upper limit. In the current circumstances, this should worry NGOs and civil society organisations. By suspending the FCRA certificate, the government can starve organisations of funds while it investigates them. For India’s already-suffering civil society, this is very bad news.

Also read: Surreptitious FCRA Amendment: The Empire Attempts to Push Back

In summary, the proposed amendments will increase the cost of doing business for India’s non-profits, while making them further vulnerable to harassment. This may not be a drastic change, but signals a worsening trend for India’s non-profit sector.

Suvojit Chattopadhyay is currently based in Dhaka, and works on issues of public sector governance and development management in South Asia. You can find his blog here. He tweets @suvojitc.