New FCRA Norms might result in fund crunch for philanthropy and CSR

Source: Live Mint

Syllabus: GS2: Development Processes and the Development Industry — the Role of NGOs, SHGs, various groups and associations, donors, charities, institutional and other stakeholders.

Context: New norms on foreign donations and covid-19 could end up shrinking the money pool for philanthropy and CSR.

What are the changes over the years?

• The Foreign Contribution Regulation Act (FCRA) Act was first brought in by the Indira Gandhi government during the Emergency in 1976.
• Its aim was to protect the ‘sovereignty’ of India from ‘foreign hands’ at a time when global powers were engaged in a cold war.
• The law prohibited political parties, electoral candidates and even cartoonists from accepting foreign contributions.
• In 2010, government made the renewal of registrations mandatory every five years and placed a 50% limit on administrative expenses.

What the Key changes in FCRA, 2010?

• Prohibition to accept foreign contribution: These include: election candidates, editor or publisher of a newspaper, judges, government servants, members of any legislature, and political parties.
• 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 registered organisations are barred from transferring foreign donations to smaller non-profits (a practice known as sub-granting) who often find it difficult to access donors on their own.
• Aadhaar for registration: The Act states that a person may accept foreign contribution if they have obtained a certificate of registration from 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 organisation 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.
• More power to government: FCRA registration can be suspended now after a summary enquiry and the period of suspension can extend up to a year (from 180 days earlier).

What are the various concerns associated with the amendments?

• Reduce the availability of funds: The crunch is also because a chunk of the corporate social responsibility (CSR) funds which NGOs depend on went to the PM-Cares fund.
• Reduce the number of philanthropic initiatives: Civil society organisations will be overburdened as they are already affected by COVID-19. For Example, cancellation of FCRA registration (in 2015) forced the environmental rights watchdog Greenpeace to halt its India operations
• Affect COVID-19 relief activities: the FCRA amendments could squeeze the once-vibrant not-for-profit sector of funds.
• Reduce accountability: the changes will push NGOs to become mere government contractors rather than raise questions on policy matters or defend the rights of tribal communities
• Reduce political empowerment of people: The FCRA amendments will halt the emergence of local leadership from marginalised communities. For example, crowdfunding platforms like Our Democracy have raised funds for committed individuals helping them contest elections.