Foreign Contribution (Regulation) Act and NGOs – Explained, pointwise

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Introduction

The Union Ministry of Home Affairs (MHA) refused the application for renewal of FCRA registration of Missionaries of Charity (MoC). MoC was established in 1950 by Bharat Ratna Mother Teresa. Last year, during the pandemic, the Foreign Contribution (Regulation) Act (FCRA), 2010 was amended to put fresh restrictions on both NGO’s funding and functioning.

FCRA registration is mandatory for any NGO or association to receive foreign funds or donations. The amendment restricted the operations of NGOs due to the stringent conditions imposed on them by the Foreign Contribution Regulation (Amendment) Act 2020 and Foreign Contribution Regulation (Amendment) Rules 2020.

Why did the Center refuse to renew the registration of FCRA for MoC?

‘Audit irregularities’ in MoC: The NGO registered in Kolkata has more than 250 bank accounts across the country to utilise the foreign funds. MoC stated that it had inadvertently received ₹3,50,000 domestic contributions in its FCRA account. According to MHA, there were also adverse inputs related to land purchase and ownership of vehicles.

Alleged child trafficking: The NCPCR had approached the Supreme Court in 2020 seeking a court-monitored special investigation team probe into alleged child trafficking by staff of MoC in Jharkhand. A case had been registered by Jharkhand Police in 2018.

Alleged religious conversions: Earlier this month, an FIR has been filed against one of MoC’s children’s homes in Vadodara following allegations of religious conversions by the National Commission for Protection of Child Rights (NCPCR). However, the MHA has denied this assertion observing that conversion allegations were not part of their records.

The Ministry of Home Affairs said it has refused to renew the Foreigners Contribution Regulation Act (FCRA) registration of Missionaries of Charity (MoC) as “some adverse inputs were noticed.”

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What are the previous such instances?

The registration of the international NGO Greenpeace was cancelled 5 years ago. Earlier the government has moved to restrict the funding for a group of 10 American, Australian and European NGOs dealing with issues related to the environment, climate change and child labour. Last year, Amnesty International exited India as its finances were suspended.

According to the Ministry of Home Affairs, of the 20,675 permissions under the FCRA that were cancelled from 2011 onwards, only 89 have been cancelled on request; the rest have been cancelled on the violation. Of these 80% of the cancellations are after 2014.

Further, 179 had either been rejected or were under scrutiny on Jan 1st, 2022. Recently, the government extended the validity of registration certificates till 31st March 2022.

What is the rationale behind the government’s strict actions on NGOs?

Unnecessary International Criticism: The Majority of the NGOs which faced government actions belong to areas such as climate change, environmental projects, child rights and slavery projects. These are the subjects where the government has been sensitive to international criticism.

Threat to Internal Security: For instance, 3 US non-governmental organisations were found to be fuelling protests at the Kudankulam Nuclear Project Site after strained Indo-US relations. Hence, the government amended the FCRA in 2010.

Biased data and poor ranking on several Indices: Recently, the government questioned the credibility of the Global Hunger Index published by ‘Concern Worldwide’ and ‘Welthungerhilfe’.

Other issues: There are shreds of evidence of money laundering, subversive activities, human trafficking and violation of the other laws by NGOs.

What is the Foreigners Contribution Regulation Act (FCRA)?

It is an act of Parliament enacted in 1976 and amended in 2010. The objective is to regulate foreign donations and to ensure that such contributions do not adversely affect internal security.

Coverage: It is applicable to all associations, groups, and NGOs which intend to receive foreign donations.

Registration: It is mandatory for all such NGOs to register themselves under the FCRA. The registration is initially valid for five years. The registration can be renewed subsequently if they comply with all norms.

Registered NGOs can receive foreign contributions for five purposes — social, educational, religious, economic, and cultural.

About the Foreign Contribution Regulation (Amendment), Act 2020

The salient features of the amendment include,

Transfer of foreign contribution: Under the Act, foreign contribution cannot be transferred to any other person unless such person is also registered for that purpose. The amendment also forbids sub-granting by NGOs to smaller NGOs who work at the grassroots.

Single FCRA account: The act states that foreign contributions must be received only in an FCRA account opened in the State Bank of India, New Delhi Branch. No funds other than the foreign contribution should be received or deposited in this account.

Regulation: The Act states that a person may accept foreign contributions if 1. They have obtained a certificate of registration from the central government or 2. They have taken prior permission from the government to accept foreign contributions.  

Aadhaar usage: The act makes it compulsory for all trustees to register their Aadhaar card with the FCRA account.

Reduction in use of foreign contribution for administrative purposes: The Act decreases administrative expenses through foreign funds by an organisation to 20% from 50% earlier.

Read more: Gauhati High Court Questions FCRA Amendment Act
What are the challenges associated with the recent amendment?

Over-regulation of NGOs: New regulations put excessive conditions on civil society organisations, and educational and research institutions that have partnerships with foreign entities. Further, the restriction of sub-grant impacted many niche organisations working in very remote areas.

Against Constitutional rights: According to the International Commission of Jurists, the new law is incompatible with international obligations and India’s own constitutional provisions on rights.

Discourage social work: Thousands of NGOs serve extremely disadvantaged sections. Presumption of guilt against all of them and excessive control, restricts their scope of voluntary actions.

Incompatible with international laws: The United Nations Human Rights Council resolution on protecting human rights defenders says that no law should criminalize or delegitimize activities in defence of human rights on account of the origin of funding.

Against Indian cultural ethos: The Prime Minister has often cited the ancient Indian ethos of Vasudhaiva Kutumbakam as the framework for its global engagement. New rules do not go well with India’s legitimate ambitions to be a global player.

An additional cost of compliance: Every FCRA-registered NGO will have to open an FCRA-marked bank account with a designated branch of the State Bank of India in New Delhi. Around 93% of FCRA NGOs are registered outside Delhi, and they now have to open a bank account in the capital.

The strict action of government on NGOs is criticised as the government is pushing for a ‘One Nation, One NGO’ regime.

Read more: FCRA Amendments are Crippling Work of NGOs
What are the concerns associated with revoking the FCRA registration?

1. Non-Achievement of SDGs and reduction in Foreign Aid/ Donations for India, 2. An increase in compliance cost will result in a reduction in entire Social Sector activities in India, 3. Impact on the livelihood of workers associated with NGOs, 4. Violation of Art 19 (1) which respect and protect the rights to freedom of association, expression, and freedom of assembly.

Read more: New FCRA Norms might result in fund crunch for philanthropy and CSR
What should be done?

The government should adopt a liberal stance towards NGOs. The NGOs can be provided with

1. Additional grace periods to file papers or other documents, 2. The concerns can be independently debated and litigated and outright cancellation of their registration for non-compliance can be avoided 3. The nature of misuse must be completely clear. “Adverse inputs” do not constitute activities “detrimental to the national interest”.

The state governments should set up an NGO coordination center at the local level, as recommended by National Disaster Management Authority (NDMA).

Increase transparency in FCRA: Like the foreign direct investment norms, the government has to come out with a clear policy that articulates the dos and don’ts and marks out the sectors in which foreign funding would be accepted and on what terms.

The government must commit itself to the ancient Indian ethos of ‘Vasudhaiva Kutumbakam’ as the framework for its global engagement and should not turn hostile against the NGOs who criticize the government.

NGOs are helpful in implementing government schemes at the grassroots. They fill the gaps, where the governments are unable to do their jobs. From food to education, the service of NGOs remains invaluable in a country where the state isn’t always there for everyone.

The duality of welcoming foreign investments while discouraging foreign aid to charities is a cause for concern. The government should be mindful before restricting the funds for important services or axing a global supply chain when they serve the most needy.

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