NEW FCRA RULES AND ITS BACKGROUND | 12th NOV., 2020

Context: Foreign Contribution Regulation rules, 2011 have been amended by the Ministry of Home Affairs (MHA) with the notification of new FCRA rules.

• New rules require any organization that wants to register itself under the FCRA to have existed for at least three years.
• should have spent a minimum of Rs. 15 lakh on its core activities during the last three financial years for the benefit of society.
• Office bearers of the NGOs seeking registration under the Foreign Contribution (Regulation) Act must submit a specific commitment letter from the donor indicating the amount of foreign contribution and the purpose for which it is proposed to be given.
• Any NGO or person making an application for obtaining prior permission to receive foreign funds shall have an FCRA Account.

What is FCRA (Foreign Contribution Regulation Act)?

• Foreign Contribution (Regulation) Act: It is an act of Parliament enacted in 1976 and amended in 2010 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.
• Who cannot receive foreign donations?
  • Members of the legislature and political parties, government officials, judges, and media persons are prohibited from receiving any foreign contribution.
  • However, in 2017 the FCRA was amended through the Finance Bill to allow political parties to receive funds from the Indian subsidiary of a foreign company or a foreign company in which an Indian holds 50% or more shares.
• Registration: It is mandatory for all such NGOs to register themselves under the FCRA. The registration is initially valid for five years and it can be renewed subsequently if they comply with all norms.
• Purpose of Foreign contribution: Registered associations can receive foreign contributions for social, educational, religious, economic, and cultural purposes. The filing of annual returns on the lines of Income Tax is compulsory.
• Ministry of Home Affairs (MHA) New Rules:
  • In 2015, the MHA notified new rules which required NGOs to give an undertaking that the acceptance of foreign funds is not likely to prejudicially affect the sovereignty and integrity of India or impact friendly relations with any foreign state and does not disrupt communal harmony.
  • It also said all such NGOs would have to operate accounts in either nationalized or private banks which have core banking facilities to allow security agencies access on a real-time basis.

Key provisions of FCR(Amendment), Act 2020:

• Prohibition to accept foreign contribution:
  • Include certain public servants in the prohibited category for accepting foreign contribution: These include: election candidates, editor or publisher of a newspaper, judges, government servants, members of any legislature, and political parties.
  • The Bill adds public servants to this list. Public servant includes any person who is in service or pay of the government or remunerated by the government for the performance of any public duty.

• Transfer of foreign contribution: Under the Act, foreign contribution cannot be transferred to any other person unless such person is also registered to accept foreign contribution.
• FCRA account: The Bill states that foreign contribution must be received only in an account designated by the bank as FCRA account in such branches of the State Bank of India, New Delhi. No funds other than the foreign contribution should be received or deposited in this account.
• Definition of persons: The FCRA 2010 allows the transfer of foreign contributions to persons registered to accept foreign contributions. The term ‘person’ under the Bill includes an individual, an association, or a registered company.
• Regulation: The Act states that a person may accept foreign contributions if they have obtained a certificate of registration from the central government or obtained prior permission from the government to accept foreign contribution. The bill makes Aadhaar mandatory for registration.
• Restriction in utilisation of foreign contribution: The Bill gives government powers to stop utilisation of foreign funds by an organization through a “summary enquiry”.
• Reduction in use of foreign contribution for administrative purposes: The bill decreases administrative expenses through foreign funds by an organisation to 20% from 50% earlier.
• Surrender of certificate: The Bill allows the central government to permit a person to surrender their registration certificate.

Need for such amendments:

• To monitor Misuse of funds: In Parliament, the government alleged that foreign money was being used for religious conversions. For instance, in 2017, the government barred American Christian charity, Compassion International.
• To prevent loss to the GDP: An official report quantifying the GDP losses allegedly caused by environmental NGOs was prepared during the NPA period, indicating a foreign conspiracy against India.
• To enhance transparency and accountability: The annual inflow of foreign contribution has almost doubled between the years 2010 and 2019, but many recipients of foreign contribution have not utilised the same for the purpose for which they were registered or granted prior permission under the said Act.
• To regulate NGO’s: Many persons were not adhering to statutory compliances such as submission of annual returns and maintenance of proper accounts.

Concerns associated with the recent amendments

• Over-regulation of NGO: New regulations put excessive conditions on civil society organizations, and educational and research institutions that have partnerships with foreign entities.
• Lack of Consensus: The amendments were not discussed with the stakeholder and passed with limited discussion in Parliament.
• 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.
• 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 defense of human rights on account of the origin of funding.
• Discourage social work: Thousands of NGOs serve extremely disadvantaged sections. Only presumption of guilt against them all, followed by control, restricts their scope of voluntary actions.
• Selective barriers: The over-regulation appears to be towards selected categories of global ideas and ideals such as environmentalism, human rights, and civil liberties.
• Reduce investments and technology flow: As a growing economy, India has been proactive in seeking global capital and technology. Strict rules governing FCRA will impact investments.
• Against Indian cultural ethos: 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.
• Additional cost of compliance: Every FCRA-registered NGO will have to open an FCRA-marked bank account with a designated branch of State Bank of India in New Delhi. Around 93% of FCRA NGOs are registered outside Delhi, and will now have to open a bank account in the capital.
• Lowering the cap on administrative expenses: The micro-management and cost structures vary from project to project. It is difficult for NGOs whose work revolves around advocacy rather than projects. In 2018-19, there were 1,328 NGOs whose administrative expenses exceeded 20% of their total foreign funds.

What can be the way forward?

• Delink religious propagation and conversions from the question of foreign funding.
• There are adequate laws against conversion by inducement. It cannot be decided against the touchstone of the source of funds, native or foreign.
• Seamless sharing of ideas and resources across national boundaries is essential to the functioning of a global community.
• The government must commit itself to the ancient Indian ethos of Vasudhaiva Kutumbakam as the framework for its global engagement and should not be hostile against the NGOs who criticize the government for their work.

Civil society’s supplements government works and works at the grass-root level. Civil societies should not be discouraged unless there is reason to believe the funds are being used to aid illegal activities.