Foreign Contribution (Regulation) Act Amendment Bill passed in the Parliament. Government to regulate Foreign Excahnge of Non-Profit Organisations.
While the farm ordinances have been raking up a storm in Parliament, the Modi government has introduced another set of amendments, in the Foreign Contribution Regulation Act (FCRA) on 23rd September 2020.
There’s a new FCRA bill which has been passed in parliament. This going to be another blow for the NGOs sector for the not-for-profit sector. That’s the big question that we’re asking let’s just break it down. The foreign contribution regulation amendment (FCRA) bill 2020 is a new law which essentially provides a framework under which organizations in India can receive and utilize grants from foreign sources.
It primarily affects NGOs or not-for-profit organizations that are receiving foreign contributions. Now governments have argued that the receipt and use of foreign grant funds needs to be regulated. In order to ensure that they are not used to hurt national interest this is the rationalization that has been given by the government.
So what really does this new law in fact seek to do. It seeks to ban inter NGOs transfer for foreign funds. Prohibit grants to NGOs involving public servants. Lower the administrative spend from 50 to 20 percent.
The government can and this is interesting ministry of home affairs can actually suspend certification of any NGOs beyond 180 days there’s no upper limit to what has been said here. So a whole host of changes that have in fact been made to the FCRA act.
How really does this impact the NGOs?
The FCRA amendment bill has been passed by the Lok Sabha on 21st September 2020. What is the FCRA. The FCRA is the foreign contribution regulation act. It was first enacted in 1976 during the emergency period by Indira Gandhi in 2010.
The congress led UPA amended the FCRA act and made it tougher. Now the BJP led NDA has proposed further amendments to make this act even more regulated. Before the details of amendments are discussed a bit of information on who benefits from the FCRA.
Usually the NGOs and missionaries are the biggest beneficiary of the FCRA. Since a lot of international voluntary organizations fund their India group for their activities. Under this act any individual in association or an NGOs can receive foreign donation from international donor or Organization which can be utilized for five broad purpose.
These are cultural, economic, educational, religious and social program from time to time. It has been amendments and there had been rules which were brought by the various government to tighten this law.
Because over a period of time there was alleged misuse of this foreign donation including for religious conversion. Some NGOs did very well by utilizing those foreign contributions but a lot of time The government probe and the agencies flagged its misuse because the fund was coming in One name but it was getting diverted into another.
Even in February 2012 prime minister Manmohan Singh had criticized NGOs for receiving support from abroad whose tall use of genetic engineering in agriculture and leading protests against Kudankulam nuclear power plant in Tamil Nadu. The latest figures show a similar inflow of foreign money in many such organizations in last three years between 2016 to 2019.
The amount of foreign contribution to Indian NGOs or to Indian association and individuals have been to the tune of 58,000 crore rupees. In 2018-19 report by the by the home ministry before the parliament. That in 2018-19 the amount received was to the tune of twenty thousand pros. It’s more than twenty thousand growths. Similarly, it is around eighteen to nineteen crore during the previous financial years.
This involves a large amount of money and there were around 49,000 NGOs or association which were registered with the home ministry when the NDA came in power in the year 2014. Which is the main agency which is looking after this FCRA act more than 27,000 NGOs lost their FCRA license in this period of six years because of alleged violations some even face CBI inquiry because of misutilization of fund.
Some of these NGOs were very reputed.
There are many NGOs which got into controversy and there was this whole argument from NGOs that the government is trying to squeeze them and they are trying to muzzle by this kind of rules and restrictions.
They are not letting us work. But the government said that these NGOs have been cycling money and they have been they have not been very transparent about the way these funds are being utilized and from where they are being brought.
They are being brought from one purpose and being utilized in some other. So among the key Changes proposed the first is about the eligibility of receiving Foreign Credit Reporting System (FCRS) certification and penalization for violation of any clause.
The amendments which is being introduced for the 2020 bill is related to section 3 of the FCRA act under which public servants defined as for the Indian penal code is being included in the categories of people who cannot receive foreign donation.
There is a whole lot of category which is defined in people who are prohibited from receiving this foreign donation. This included government servant but now this new term which is being inserted here is about public servants. So public servants also come into the category and they cannot receive foreign donation.
Similarly, the corporation government owned entities have also been included another amendment which is being proposed is a holding summary inquiry. Earlier this was this was related to that if you are found violating the FCRA act then only there could be some action against you. You may lose your license and you may face other kinds of distress.
But what the government is doing now is it is empowering itself to hold an inquiry and based on that inquiry it can debar your foreign donation for 180 days. They have increased that 180 days’ period to now 360 days. So 180 plus 180 which makes it almost a year. Tracking of the flows of fund has been made smoother by ensuring that aadhaar number of the applicant is added to the FCRA form just like income tax returns.
The NGOs or the organization have to file annually these returns.
So what was happening was these returns were not getting regularized and this was leading to a lot of delay so there was no audit of books or audit of accounts.
So there was a delay of sometimes. even two years three years four years so the government has made it mandatory that these returns have to be streamlined and it is to be filed online. So there is no excuse that the person cannot submit the returns.
Now they are trying to in this amendment bring in a factor which means that you will have to voluntary give your 16-digit number Aadhaar card of any person, any individual, any association, any NGOs which is applying for their registration.
They are trying to make it mandatory to again track things online because the government has a database. Using which they can track that how many accounts are being operated and how many of them are on the KYC norms.
To receive funds a particular branch of SBI identified by the government of India before it transferred to any other account in some other bank. The bill also talks about other amendments which includes the FCRA accounts which shall be opened in state bank of India as notified by the central government or its branches.
Which basically means that again this is also among one of the criticisms which has come from the opposition in opposition about this act that by doing this the government will be easily able to monitor the foreign donation which is coming and they cannot be cycling off or any kind of misuse of these funds.
But most of these NGOs or FCRA registered NGOs are on the online platform. And all the scheduled banks are also working on the online platform. So it is very free to actually monitor these fundings. And there is a financial intelligence unit and of course the intelligence bureau which can flag any kind of foreign donation coming from any foreign entity or an international NGOs.
Inserting this clause is seen as the government trying to control the flow of foreign fund among the NGOs. Earlier one organization or individual with FCRA clearance would transfer money to any other similar entity.
But the new list of amendments disallows any such action. All of this is being termed as draconian by the opposition but it seems every government in power including the erstwhile congress-led UPA has tried to make inflows of foreign funds in India for voluntary organizations a difficult and strictly monitored proposition.
When interviewed many citizens they were of mixed opinions and also some gave very logical solutions like-
1. Money given to an NGOs should be directed towards any branch of state welfare schemes i.e. NGOs can collect money but has to deposit funds with the govt.
2. Do a forensic audit of all NGO’s with retrospective penalties, where by NGOs will be penalized if even a single case of malpractice is found and punishment should be confiscation of land and monetary holdings with cease and desist orders
3. Director and people involved should be treated as offenders and citizenship stands cancelled retrospectively. Also their personal properties seized in India and abroad. Just put these three conditions and most of the culprits will be facing bans and loss citizenship with state gaining a lot of lost ground.
4. Most important thing is place the right people for the job.
How are these new amendments carrying out in actual life?
The first amendment – the concept of second recipient has been forgone. It has been provided that an organization which is registered under FCRA or who has obtained prior permission and receives any foreign contribution shall not transfer such foreign contribution to any other organization.
Unlike earlier research transfer was allowed by way of sub grant to another FCRA registered organization while working collaboratively for a particular project or program. Such transfers by original recipient of funds have now been debarred. Even if the letter is FCRA registered second amendment is the capping for administrative expenses have been reduced.
So it has now been proposed in the FCRA amendment bill 2020 to reduce the spending on administrative expenses to 20% from the earlier limit of 50 percent of the total funds received during the financial year. This although is a welcome step which will ensure the propriety of expenditures with focus on the main objective of the project making it more purpose oriented and meaningful.
However certain nature of projects which demand huge administrative expenses might now face difficulties in execution due to the cap on the spending. The third amendment is aadhaar made mandatory for all on governing port quoting the aadhaar number of all the office better’s directors and other key functionaries at the time of application for registration prep permission or renewal has now been made mandatory.
The monitoring will be done by Aadhaar card linking:
So the ones who are still waiting for any correction in the aadhaar card need to fast track the process as the date of FCRA renewal for most of the organizations are coming soon. The fourth amendment is on suspension of registration.
The current amendment bill has now empowered the department to suspend the FCRA registration for even more than six months. Earlier the organization which violates the provisions of FCRA could be suspended only for a period up to 180 days as specified in the act.
However, with the amendment the central government has been given the power to extend the suspension by another 180 days as may be specified in the act. So coming to the fifth amendment which is very surprising amendment FCRA.
Bank account has to be opened with state bank of India at a specified branch to be notified by the central government at New Delhi. So currently the FCRA registered organizations can open the designated bank account for receipt of foreign funds in any core banking compliant bank integrated with public financial management system which is integrated with the FCRA department.
Also however the amended bill has now proposed that all the organizations granted registration or prior permission under FCRA have to open a designated FCRA bank account. The process of renewal for the FCRA compliant organizations was like a cakewalk which means if the annual returns or the quarterly intimations have been filed on time. The FCRA funds have not been mixed with the local funds.
Intimations on change of designated bank account or opening of utilization account or change in the governing body by more than 50 percent have been filed with the department and any other such compliances have been done. The renewal was usually granted without further investigation or inquiry but with the proposed amendment now, an enquiry can be done if it deems fit by the department to be sure that the organizations have actually fulfilled all the conditions specified in the act.
So how are the NGOs feeling about these amendments?
Many NGOs are of the opinion that already enough monitoring is done under FCRA and with further tightening of norms there will be a very little room for any non-compliance. So over and above the existing norms if any enquiry will now be done even for renewal it will be cumbersome and harassing for at least those FCRA organizations which are fully compliant with the prevalent regulations.
So the last amendment which is relevant for FCRA registered organizations. Now the option of voluntary surrender of FCRA registration is in place under the current regulation. There is no provision of any FCRA registered organization to surrender its registration with the proposed amendments. The organizations who are no longer interested in FCRA receipts have an opportunity to surrender their registration by requesting the Ministry of Home Affairs department to do so.
However, the department before permitting such surrender shall completely satisfy itself that the organization has not contravened any provisions of the act and the management of the foreign funds. Assets created out of such foreign contributions has been vested in the competent authority as specified in the act.
So on one side it might be a boon for some who do not want to continue the registration but on the other. Those who have huge asset base created out of the foreign funds might have to surrender it too. Which will be no less than a setback for them so really a huge lot of amendments is awaiting the FCRA organizations.
With such draconian amendments a wave of reactions from heads of various NGOs have already started coming in which might also take a form of petitions and applications to the department in upcoming days. But will any amendment be relaxed or will it only be a talking tale among the NGOs sector and sink in gradually is difficult to comprehend at such an early stage remains a question.