Financial Regulations As Means To Force NGOs To Shut Down?

In 2020 the NDA government introduced new restrictions into the Foreign Contribution (Regulation) Act of 2010 [FCRA]. The new amendments curtail Indian Civil societies’ ability to receive foreign funds for their activities. The amendment makes it mandatory that to receive foreign funding a civil society must have a dedicated FCRA account in the State Bank of India’s  New Delhi branch. The amendment was challenged in the supreme court by civil societies. However, the Supreme court upheld the amendment. The three judge bench stated that “Receiving foreign donations cannot be an absolute or even a vested right. Free and Uncontrolled flow of foreign contributions has the potential of impacting the sovereignty and integrity of the nation, its public order and also working against the interest of the general public,” (The Wire,2022)(2)

Since 2020, when the amendment was upheld by the supreme court over 6000 NGOs have been forced to shut down due to their license not being renewed. The total number of NGOs in operation has reduced from 20,000 to 16,888 as of April 2022 due to the amendment. (Singh, 2022)(1). The Ministry Of Home Affairs [MHA] have actively denied renewing the license of several NGOs that worked on important causes citing procedural ground. The court has also stepped away from interfering in MHA’s decision. So what is  FCRA? What are the amendments made? What does the closing down of these NGOs that used to work on critical issues like human rights mean to Indian democracy? 

What Is FCRA Act?

The Foreign Contribution (Regulation) Act was first passed in 1976 and aimed to regulate foreign donations to Civil societies in India. It was brought about to ensure that foreign funding did not affect India’s Internal security. All civil societies that wish to receive funding from foreign donations are mandated to register themselves under the act. The validity of the license issues is for 5 years and has to be renewed after that. The societies had to file an annual return similar to that of income tax. The money received through donations can be used for a wide range of activities. In 2010 the act was amended once and then again in 2020 November.

The Key Amendments To The Act 

  1. Transfer of foreign donations prohibited

Earlier it was possible to transfer foreign donations received by an FCRA license holder to another person who does not have the license, given prior permission from the government has been taken. However, the amendments prohibited this transfer process completely.

  1. Administrative expenditures

The government has reduced the percentage of foreign donations that could be used for administrative expenditure. Before the amendments, civil societies could use 50% of the foreign donations to run themselves. Now only 20% of donations could be used for regular administrative expenses.

  1. Supremacy of government

The latest amendment allows the central government to stop an FCRA license holder from receiving or utilising the foreign donations received. Government can do this based on a summary inquiry and before a person is found guilty of any kind of wrongdoing associated with the FCRA act.

  1. Compulsory bank account in New Delhi

It is now mandatory for all civil societies wishing to receive foreign funding to have a dedicated FCRA  bank account in the State Bank of India’s New Delhi branch.

  1. Identification proofs

The government now requires people applying for FCRA or renewal to give an Aadhaar card or other official identity proof. This helps the government build an information database of all stakeholders receiving foreign funding.

  1. Suspension Period

The government has increased the suspension period of FCRA licenses from 180 days to 360 days.

Why is this Problematic for Indian Democracy?

The problems regarding the FCRA amendments are multifold. To begin with, they are being used to stop many civil society organizations that are critical of the central government from working. Most of these civil societies heavily depend on foreign funding from trusts or philanthropists to meet their day to day expenses like giving out salaries and paying bills. When these sources of funding are stopped due to not getting the FCRA license renewed the NGOs are forced to cease their operations.

In any healthy democracy, civil societies form the bridge between government and the people. It helps governments to complement their policies since these civil societies due to the grass root level influence these organizations have. These civil societies also provide the criticism and opposition that government policies need to improve.

These amendments also stop small scale NGOs working in remote locations from operating. Not all civil societies have the money required to travel to Delhi to open an account or fight a case against the law in court. This can have a far reaching impact on the people to whom these organizations cater. More often than not these societies are the online lifeline and hope for these people to get their needs met.

The Ministry of Home Affairs has been coming down on active Civil societies that are critical of the actions of the incumbent government. This also creates fear among other organizations that may want to point out the government’s wrongdoings.

Greenpeace, Amnesty and in the latest such case and Commonwealth Human Rights Initiative [CHRI] are some of the prominent organizations that had closed their operations to the financial crisis that emerged due to the amendments. Greenpeace before closing down was actively involved in environmental related issues while Amnesty and CHRI were involved in human rights related programs.

Conclusion

The way forward would be difficult since the Supreme court has upheld the act. Ensuring the prevention of corruption is important but using regulations to choke civil societies to death is not the way to go. Active opposition and support of NGOs are essential for effective governance. Cracking down on such organizations can also deny people who are dependent on them a chance at a dignified life. This becomes all the more relevant at a time when India is ranked in dismal 119 out of 165 countries on the Human Freedom Index released in 2021 (CATO Institute, et al).

Such measures from the governments against civil societies need more media coverage. Closing down of these civil societies can lead to widespread implementation of problematic laws in India since there is no one to challenge them. It is in the collective interest that Indian civil societies are protected from unfair laws that are used to choke financially and cripple them in the name of regulations against corruption.

Works Cited

  1. CATO Institute, et al. “Human Freedom Index: 2021.” Cato Institute, https://www.cato.org/human-freedom-index/2021 
  1. Singh, Vijaita. “FCRA registration of human rights NGO cancelled.” The Hindu [New Delhi], 26 April 2022, https://www.thehindu.com/news/national/fcra-registration-of-human-rights-ngo-cancelled/article65354639.ece 
  1. The Wire. “Explained: Amendments to FCRA Law That the Supreme Court Has Upheld.” The Wire, 9 April 2022, https://thewire.in/law/explained-amendments-to-fcra-law-that-the-supreme-court-has-upheld. 

References

https://timesofindia.indiatimes.com/blogs/truth-lies-and-politics/critical-review-of-the-foreign-contribution-regulation-act-amendment-act-2020-part-1/

https://www.thehindu.com/news/national/fcra-registration-of-human-rights-ngo-cancelled/article65354639.ece

https://thewire.in/law/explained-amendments-to-fcra-law-that-the-supreme-court-has-upheld

https://fcraonline.nic.in/home/PDF_Doc/fc_amend_07102020_1.pdf

https://fcraonline.nic.in/home/PDF_Doc/FC-RegulationAct-2010-C.pdf

https://fcraonline.nic.in/home/PDF_Doc/doc00600120151214130739.pdf

https://www.cato.org/books/human-freedom-index-2021

Disclaimer

The views expressed in this article are the author's own.

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