NGOs

World Bank defines NGOs as not for profit organisation which pursues activities to relive suffering, promote interests of poor, protect the environment, provide basic social services or undertake community development.

Need for regulation

• Check misuse of foreign funds: government has banned 14,500 NGOs registered under FCRA from access to foreign resources
• Non compliance: less than 10% have complied and more than 90% do not submit balance sheets
• Hampering development projects: IB report many ngo activities cost 2 to 3 % of India’s gdp.
• Religious and cultural encroachment: for eg. govt had to bar Compassion International from funding Indian NGOs over allegations of religious conversions

FCRA Amendment Act 2021

Central Bureau of Investigation report less than 10% of the 29-lakh registered NGOs across the country file their annual income and expenditure. Intelligence Bureau (IB) foreign-aided NGOs are actively stalling development projects and impacting GDP growth by 2-3% per annum.

The bill amends the Foreign Contribution (Regulation) Act, 2010 (FCRA).  The Act regulates the acceptance and utilisation of foreign contribution by individuals, associations and companies. 

Amendments-

• To regulate non-governmental organisations and make them more accountable and transparent
• To regulate religious conversions, which are supported by foreign funds
• To ensure foreign money is not used against national interests or for anti-national activities.

Provisions of the Amendment

• Prohibition to accept foreign contribution: adds public servants to this list. 
• Amendment prohibits the transfer of foreign contribution to any other person.
• Aadhaar, passport and OCI card for registration: adds that any person seeking prior permission, registration must provide the Aadhaar number of all its office bearers, directors etc. In case of a foreigner, they must provide a copy of the passport or the Overseas Citizen of India card for identification.
• FCRA account: foreign contribution must be received only in an account designated by the bank as ‘FCRA account’ in such branch of the State Bank of India, New Delhi, as notified by the central government.
• Restriction in utilisation of foreign contribution: Amendment adds that the government may also restrict usage of unutilised foreign contribution for such persons based on a summary inquiry, and pending any further inquiry
• Renewal of license: government may conduct an inquiry before renewing the certificate to ensure that the person has fulfilled all conditions specified in Act
• Reduction in use of foreign contribution for administrative purposes: must use it only for the purpose for which the contribution is received.  Further, Amendment reduces limit to 20% of the contribution for meeting administrative expenses. 
• Suspension of registration: for a period not exceeding 180 days. Amendment adds that such suspension may be extended up to an additional 180 days .

Concerns about the amendments in FCRA

• Lacks fund accessibility: because funds from donor agencies and larger NGOs, known as ‘regranting’ has been banned
• Restriction to explore: amount NGOs can spend on administration has been cut from 50% to 20%, mean many smaller NGOs will not be able to employ enough staff, hire experts and implement strategies they require to grow
• Compulsion of Aadhar: contravenes SC judgement on Aadhar said to ensure greater privacy of individual’s Aadhaar data and restricts governments access
• Not well scrutinised:draft was not put in the public domain till it was introduced
• Hamper delivery of social welfare schemes: because NGO’s provide last-mile connectivity for the delivery of government schemes in these fields.

Way forward

As civil society organisations seek accountability from others, it is a moral obligation for them to themselves be accountable and transparent in substantive ways and maintain the highest standards. However, regulation should balance with their freedom of functioning.  Some suggestions are:

Recommendations of Vijay Kumar Committee:

• Modernising registration process
• Details of NGOs should be made available as searchable database information.

2nd ARC report recommendations

• FCRA should be decentralised and delegated to State Governments/District Administration.
• Fine balance between the purpose of the legislation and functioning of the voluntary sector to avoid subjective interpretation of law and its possible misuse.

Regulation of NGO  Foreign Contribution Regulation Act (FCRA) 2010

• to consolidate the law to regulate the acceptance and utilization of foreign contribution by individuals or associations and to prohibit acceptance and utilization of foreign contribution or foreign hospitality for any activities detrimental to national interest and for matters connected therewith or incidental.
• It required all NGOs to apply for a license to receive foreign funding.
• NGO must be in existence for at least 3 years and spending at least Rs 1,000,000 over 3 years preceding the date of its application on its activities  
• It must have undertaken reasonable activity in its field for which the foreign contribution is proposed to be utilised.  
• NGO with permanent FCRA licenses now have to get these renewed every five years.
• NGO shall not spend more than 50% of Foreign Contribution received in a Financial Year to meet administrative expenses without prior approval of Central Government.

Foreign Exchange Management Act (FEMA)  

• It was introduced to consolidate and amend the law relating to foreign exchange with the objective of facilitating external trade and payments.
• Certain NGOs are also registered under FEMA come under Ministry of Finance.  

Other regulations

• Labour Laws: Any NGO employing more than 20 employees must comply with the Employees’ Provident Fund (compliance is voluntary if an NGO has less than 20 employees).  
• GST laws: It would apply if turnover of goods or commercial services exceeds a sum of two million Indian rupees in any fiscal year.
• Accreditation: Recently, New accreditation guidelines for NGOs had been formed on the basis of recommendations of Vijay Kumar Committee
• NITI Aayog has been appointed as the nodal agency for the purpose of registration and accreditation of NGOs seeking funding from Government.