October , 2020
Why is the latest FCRA amendment crucial?
17:36 pm

B.E. Bureau



The Foreign Contribution Regulation Act (FCRA) is considered to be necessary for the development sector, which receives significant foreign contributions for social, educational, religious, economic, and cultural purposes. The Act initially coined by the Indira Gandhi government in 1976 - regulates and monitors foreign donations to non-governmental organisations (NGOs) operational in India and ensures that there is no negative impact on India’s national security. After the first Narendra Modi government came to power in 2014, the FCRA was made quite stringent. For instance, earlier, the NGOs had to submit FC returns annually which was reduced to quarterly submissions.  

Significant changes

The FCRA Amendment Act 2020 stated, “Many recipients of foreign contributions have not utilised the same for the purpose for which they were registered or granted prior permission under the said Act.” The Ministry of Home Affairs had identified alleged misuse of foreign donations by eminent NGOs like Greenpeace, Amnesty International, Teesta Setalvad’s Sabrang Trust, Citizen for Justice and Peace (CJP), Compassion International, Lawyers Collective and so on. The licences of 13 NGOs have been suspended and bank accounts were frozen. Two of these NGOs operate in Jharkhand. The Hindu - an English daily - reported that the central government has also barred foreign contributors like the US-based Compassion International, Ford Foundation, World Movement for Democracy, Open Society Foundations and the National Endowment for Democracy. Some of them have been placed on a ‘watch list’ or in the ‘prior permission’ category.

Significantly, the central government has barred sub-granting of the funds to NGOs received from a foreign source.It is important to note that most of India’s small NGOs actually do not receive foreign funds directly - rather they obtain the funds through bigger NGOs and then operate locally in different fields.  

The amendments now prohibit ‘public servants’ from receiving foreign funding. Aditya Manubarwala, an advocate practicing in the Supreme Court of India, told BE, “In a nutshell, the amendments are a mixed bag. The geopolitical matrix that India finds herself entangled in makes government servants very susceptible to financial inducements of enormous proportions. A case in point would be the arrest of a J&K senior inspector recently for his role in acting as a facilitator for Lashkar-e-Taiba terrorists. I believe that the amendment to this extent is reasonable.”



The recent amendment has additionally reduced the use of foreign funds to meet administrative costs by NGOs - from 50% to 20%. On this matter, Manubarwala commented, “It ensures that an NGO is now committed to use 80% of the total funds only towards its stated philanthropic and social objectives. Undoubtedly, the cap at 20% will severely affect the functioning of some large international NGOs having a gargantuan staff size. I believe the government as per the mandate of the FCRA could have, instead of capping the administrative cost limit at 20%, set some form of supervisory regulation to audit on an individual basis to find out whether an organisation is indulging in wasteful administrative costs.”

The root 

In 2014, just after the Modi government came to power, the Intelligence Bureau (IB) submitted a report to the government stating few foreign aided NGOs are restricting developmental projects in India and that is negatively impacting economic growth. Some of the US, UK, Germany and Netherlands based companies went under the radar for stalling projects. Most significantly, four NGOs were accused for firing mass protests in 2012 against the Kudankulam nuclear project in Tamil Nadu. It’s quite clear that the recent amendment consisting of a number of changes originated long before 2020. The Supreme Court earlier this year identified dharna or sit-in protest, rasta-rokos and hartals as forms of peaceful protest and stated that this needs to be identified as common expressions of political action. The apex court added that expressing dissent should not be penalised and for supporting public causes, NGOs should not be deprived of foreign contributions. 

Dilemma with the act

Political parties have always been under controversy regarding FCRA. BJP and Congress were accused of receiving foreign donations for their respective political activities from Vedanta, a UK based group during 2004-2012. A Public Interest Litigation (PIL) was filed against these parties by an advocacy group for violating FCRA regulations. Later in 2017, the central government amended the Act that actually gave a nod to political parties for accepting foreign donations. Following this, the PIL had to be withdrawn.



NGO’s perspective

NGOs that receive foreign donations must inform the state the complete details of funding and projects.

It is a necessary regulation. But, the gradual development of the Foreign Contribution (Regulation) Act (FCRA) is allegedly moving towards a ‘controlling’ measure rather than a ‘regulatory’ measure. According to sector insiders, the latest amendments will make the operations of NGOs extremely difficult.


 Paramita Banerjee, the founder of Diksha (NGO) and an Ashoka scholar, shared her opinions with BE. 



Q. The amendment in FCRA was passed during a time when the country is busy fighting against the pandemic. Do you think the government could have chosen a better time? 

A. The time for the amendment is not very sudden – rather it is planned meticulously. It is now a tough time to protest - due to the pandemic. It’s an easy time to make such changes. On one hand, for the NGOs, the IT return submission deadline has been extended to November, 2020. On the other hand, a new Act was implemented on September 29 - after the President signed the bill on September 28. Also, no rulebook has been published. This is an unprecedented event as the time window was short and the Act was hurriedly pushed into play. Additionally, NGOs receive the funds in the first two halves (H1 and H2) of a fiscal. In October we, like most of the other NGOs, were supposed to receive the funds which has been totally disrupted now. Also, the day before this bill was passed, eight MPs were suspended and so they couldn’t oppose. It was all very calculative.

Q. How do you think the regulation related to particular FCRA accounts of NGOs are important? 

A. The new regulation states that NGOs will have to open an account in a particular branch of SBI in New Delhi.

Due to the pandemic, it is not at all a viable option for most of the NGOs - especially those that operate in eastern and southern regions. For small NGOs in rural areas, it will be an impossible option. This is contradictory to the digital India or no-cash economy conception. The previous amendments in FCRA were very much required to simplify and facilitate better functioning of this sector. But the latest amendment will constrain NGOs’ activities. 

Q. Few changes were introduced regarding the administrative costs. What are your observations? 

A. The administrative cost has now been reduced to 20% from 50%. But the major challenging change was done in a different area. For instance, the salary of field workers or the community-based social workers, programme co-ordinators have never been counted under administrative cost - rather it was calculated under the programme cost. Now this will have to be counted under the administrative costs. Earlier, the salary of the programme manager, office rents or other infrastructural costs were counted within administrative costs. So, the financial responsibility has expanded but the allotment possibility has plunged - making things very difficult. 

Another crucial change that was introduced was that no member of a government body can receive foreign contributions. To receive foreign funds, one has to leave membership of the government body. We had to fight a lot to achieve the stage where government bodies will have to have NGO representatives. Now if the positions stay vacant as we leave, these will be cleared for political recruitments. Additionally, no gazetted officer can stay as a voluntary member of the NGO’s board if it receives foreign funds.  

Q. A crucial amendment has been made that will impact the sub-granting of NGOs to small scale NGOs. Will this help your functioning? 

A. Sub-granting has been diminished in the amendment and it will have big impacts on small-scale NGOs. A large section of big NGOs raises funds from all over the world and distributes the funds to its smaller partners which will not be possible - as on now. For the small NGOs that operate in rural areas - they don’t have that much connection or infrastructure to manage large foreign donations. Otherwise, the small NGOs will have to completely merge with their umbrella NGOs to operate with adequate funds. It’s not a visible option as different NGOs function in different fields. Now these small NGOs will have to depend only on the meagre government funds which are anyway decreasing. Restriction of sub-granting is going to be one of the biggest challenges for us. 

Q. There has been a consistent allegation that NGOs are influencing Indian citizens in some areas in a way that is restricting developmental projects in the country. How do you respond? 

A. If the government says that NGOs are manipulating people to restrict developmental projects in India, I must say that not all NGOs are doing it. No one should generalise on this matter. Also, if the government says so, they will have to give substantial data against all the NGOs. No justification is available for a blanket amendment which applies to everybody.

NGOs gather information about social initiatives by government and let the underprivileged people know about these initiatives. When the NGO operations get hampered, this knowledge chain will also be broken.

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