FCRA Act and Its implications on working of NGOs

The Home ministry had cancelled the license of 20,000 NGOs for violating the various provisions of Foreign Contribution Regulation Act (FCRA). In the aftermath of this decision, only 13,000 out of 33,000 NGOs are legally valid in the country.

About FCRA

Foreign Contribution Regulation Act (FCRA), 2010 seeks to regulate the foreign contributions or donations to organizations and individuals in India and to curb those such contributions which might be detrimental to the national interest. Despite being a law related to financial regulation, this law does not fall within the purview of the RBI but under the Home Ministry as it is an internal security legislation.

Background to the Law

During the emergency period, the civil and political rights of the citizens were suspended. In those days, the prohibited voluntary organizations advocating political rights were seen by the government making attempts to overthrow the government with the aid of the foreign donors. With this backdrop, the FCRA act was enacted in 1976 to maintain strict control on political associations and voluntary organisations that receive foreign fund.

In 1980, when Indira Gandhi returned to power, an amendment was brought in the FCRA in 1984 whereby it was made obligatory for all NGOs to register themselves with the home ministry. This amendment empowered the state to ban any organisation receiving foreign contribution, should the state considered the organisation to be political instead of neutral. This act was repealed in 2010 and instead, a new act was enacted with more stringent provisions.

Salient Features of 2010 Act

The 2010 act was further improvement in the existing act and it introduced the more stringent provisions. A brief introduction to these changes is as follows:

• In the 2010 act, the provision was made for suspension as well as cancellation of registrations granted to NGOs was made. Such provision was not there in previous act.
• Under the repealed Act, there was no time limit regarding the validity of registration certificate granted to the associations etc. for accepting foreign contribution. FCRA, 2010 provides that the certificate granted shall be valid for a period of five years.
• A new provision was introduced to the effect that the assets of any person who has become defunct shall be disposed of in such manner as may be, specified by the Central Government.
• No funds, other than foreign contribution shall be deposited in the FC account to be separately maintained by the associations etc. Every bank shall report to such authority, as may be prescribed, the amount of foreign remittance received, sources and manner and other particulars.
• Provision has been made for inspection of accounts if the registered person or person to whom prior permission has been granted fails to furnish or the intimation given is not in accordance with law.
• As per FCRA 2010 ,the following organisational individuals are debarred from receiving foreign contribution
  • candidate for election
  • cartoonist, editor, publishers of registered newspaper
  • Judge, government servants or employee of any corporation
  • Member of any legislature
  • Political parties.

The FCRA act defined the companies as foreign if they have 50% foreign shareholding. To do away this treatment, the FCRA was recently amended to allow the political parties to receive donations from companies which are now treated as “Indian” for the purpose of FCRA. This would not only help foreign-origin companies to fund NGOs but has also cleared the way for them to give “donations to political parties.”

Issues

The current paradigms around this law should be analyzed in the light of below questions:

• The FCRA has affected the functioning of NGOs and there are calls to repeal this act. How far these calls are justified?
• It is claimed that the Foreign aided NGOs are stalling development. How far is this justified?

FCRA and Functioning of NGOs – The law should be repealed

The calls to repeal the act are not baseless. Firstly, the FCRA has duplicate mandate already given to several other legislations such as Prevention of Money Laundering Act 2002, Unlawful activities Prevention Act 1967, Foreign Exchange Management Act, 1999 and Income Tax 1961(for auditing propose). Secondly, it has failed to address the root cause of the problem.  Though the stated objective of the act is to strengthen internal security, it addresses only the voluntary sector and only foreign funding. Interestingly, this constitutes less than one per cent of gross inflow of foreign funds into India. Thirdly, the act has been used to intimidate those NGOs also which take up development works. Many NGOs work as a bridge between state and the people and ensure effective delivery mechanism. They play an effective role in strengthening of democracy. The FCRA act is capability to cripple them at the whim of home ministry.

Fourthly, as per some experts, the law is a contravention to the International Covenant on Civil and Political Rights, to which India is a party. This convenent says that access to funding is a part of right to freedom of association. Some other critics say that FCRA violates the universal declaration of human rights, where right to freedom of association is a part of it.

Lastly, the FCRA’s broad and vague terms such as ‘political nature’, ‘economic interest of the State’ or ‘public interest’ are overly broad, do not conform to a prescribed aim.

FCRA and Functioning of NGOs: FCRA needed for greater control of NGOs

An IB report had revealed that Foreign aided NGOs are stalling development. The major issues with rogue NGOs include lack of accountability, stalling the development projects, threat to internal security etc. Firstly, the unaccounted flow of fund to NGO is a major problem. According to CBI only 10 percentage of NGO files return. In some state the laws do not require NGO to be transparent. FCRA act seek to address this by registration. Secondly, NGO are used by vested interest to halt developmental project in India as reported by Intelligence Bureau. This was witnessed in kudankulam protest. Thirdly, funds flowing to NGOs can be used for anti-national activity such as economic security. Hence regulation of NGO receiving fund is necessary.

There are instances where NGOs has violated FCRA but escaped penalty under the pretext of FEMA act which falls under finance ministry. FCRA seek to monitor fund which is not a capital but under FEMA fund is being accorded the status of capital.