By law, the heat is on NGOs

The FCRA amendments give the government power to go after ‘inconvenient’ NGOs

Operations of thousands of NGOs across India were paralysed this week, unable to either receive funds from international donors or to transfer funds to partner NGOs within India. The chaos was caused by amendments to the Foreign Contribution Regulation Act (FCRA) that were rushed through Parliament, signed by the President, and made effective, all in just 10 days. With no clarity on the law’s applicability to ongoing grants, or information on the new banking requirements, NGO transactions and operations have frozen, in a mini replay of demonetisation in 2016. Like then, organisations serving children, the elderly, people with disabilities, marginalised groups, people needing treatment for HIV and a host of others were left wondering whether they could survive this devastating new blow to civil society in India.

It’s not clear why the amendments were presented in Parliament with no prior intimation or consultation, or why the bill could not be deliberated by a parliamentary committee as several MPs and sector representatives demanded. Or, indeed, why the law needed to be brought into effect without the information necessary to ensure operational continuity for over 20,000 organisations affected by its provisions.

In fact, it’s not apparent why the amendments are at all necessary. First instituted in 1976 during the dark days of Indira Gandhi’s Emergency to protect against the influence of “the foreign hand” on India’s politics, strengthened by successive governments thereafter to make its provisions more widely applicable and compliance more onerous, the government claims that further stringency is necessary to curb misuse and misreporting and to “ensure that the foreign money coming to India is not used against national interests, or in any anti-national activities.” The government has presented no evidence that this is the case.

It is similarly mystifying that FCRA funds totalling about Rs 13,000 crore can only be adequately tracked if they are routed through a single branch of one bank when over Rs 3,09,000 crore of Foreign Direct Investment (FDI) merit no such scrutiny. Or how FCRA funds pose a greater threat to ‘national security, national interest and public interest’ than either FDI or the thousands of crores coming into the kitty of political parties through the entirely opaque ‘Electoral Bonds’ that can be purchased by “any entity incorporated in India.”

The International Commission of Jurists (ICJ) has condemned the FCRA amendments for violating international laws guaranteeing freedom of expression, association and assembly and for being unconstitutional.

Specifically, they violate Article 22 of the International Covenant on Civil and Political Rights (ICCPR), which India acceded to in 1979, as well as Article 19 of the Constitution of India. The ICJ stressed that the bill’s provisions would “impose arbitrary and extraordinary obstacles on the capacity of human rights defenders and other civil society actors to carry out their important work.”

They echo views expressed in 2016 by the then UN Special Rapporteur for Freedom of Assembly and Association who pointed out that the law’s provisions were “overly broad, do not conform to a prescribed aim, and are not a proportionate response to the purported goal of the restriction. Such stipulations create an unacceptable risk that the law could be used to silence any association involved in advocating political, economic, social, environmental or cultural priorities which differ from those espoused by the government of the day.”

The amendments prevent NGOs from re-granting foreign funds to other NGOs who are also licensed to receive such funds by the Home Ministry. Such re-granting permitted support to smaller NGOs that do not have the wherewithal to access international donors directly, while reporting on such receipts and the utilisation of these funds to the ministry each quarter. Banning re-granting increases the transaction burden on international donors and diaspora Indians, creating a significant deterrent to such funding. Re-granting has also facilitated the process of building networks and coalitions of NGOs enabling scale, speed, efficiency and rapid dissemination of learning, especially during the Covid-19 pandemic. The ban hinders this kind of collaboration, lauded only recently by the Prime Minister and the CEO of Niti Aayog.

The 20% ceiling on administrative expenses appears similarly misconceived. While the law previously capped such expenses at 50%, it remains moot why the government should legislate terms between donors and the NGOs they seek to support. The new restriction limits investments in personnel, travel, technology, legal and financial services, even report writing, stationery and printing, preventing NGOs from building sustainability and performing key roles. It hits think-tanks and organisations providing advisory services particularly hard as their expenses skew towards these heads. It appears to be based either in a lack of awareness of the range of functions NGOs serve, or in the belief that NGOs whose work compensates for the yawning gaps in government services are OK, whereas those that work on policy design and analysis, seek accountability from government and business, and defend democratic rights and freedoms are not. No similar restrictions are imposed on FDI flows or on electoral bonds.

The amendments also doubled the period for which an NGO’s FCRA registration may be suspended from 180 to 360 days. Very few organisations in any sector could survive their finances and operations being frozen in this fashion for almost a year. It appears that the model tested on Greenpeace and Amnesty has now been extended to all NGOs receiving international support.

There are other provisions that make it more onerous to serve on an NGO board, to renew one’s registration or even to give up one’s FCRA registration. Each enables new avenues for harassment or persecution and worsens the ‘chilling effect’ that already deters organisations from taking on rights-based advocacy or anti-corruption work, for instance, and funders from supporting such work.

The timing of the move could not be more inopportune as it inflicts further losses in income, jobs and capacity to serve communities on a sector already stretched to its limits by the pandemic, confronting huge reductions in funding from every other source and competing for support with the PM-CARES fund, which enjoys every benefit and waiver without any corresponding accountability or transparency.

Coming on top of the systematic targeting of human rights defenders, protesters, journalists and activists, this law will further repress dissent and public debate. The government must immediately permit ongoing grants to be completed on the terms prevalent prior to the amendments. Those who wish Indian democracy well must urgently consider their response.

The FCRA Amendment, 2020

Public servants added to the list of people who are prohibited from taking foreign donations. Election candidates, judges, government servants, members of any legislature are already prohibited from taking foreign funds.

Prohibits transfer of foreign funds to any individual, an association, or a registered company. Earlier, such funds could be transferred to a person or association registered to accept foreign contribution

Any NGO seeking prior permission, registration or renewal of registration must provide Aadhaar number of all its office bearers, directors or key functionaries. Foreigners must provide a copy of the passport or the Overseas Citizen of India card for identification.

Foreign funds 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. No funds other than the foreign contribution should be received or deposited in this account. The person may open another FCRA account in any scheduled bank for keeping or utilising the received contribution.

If a person or organisation is found to be guilty of violation of FCRA, the government can restrict the usage of unutilised foreign contribution by them.

For renewal of FCRA licence, the government may conduct an inquiry to ascertain that the organisation is not fictitious or benami, has not been prosecuted or convicted for creating communal tension or indulging in activities aimed at religious conversion and has not been found guilty of diversion or misutilisation of funds.

Only 20% of the foreign funds can be used for administrative expenses such as salaries. Earlier cap was 50%.

An organisation can surrender its registration after a government enquiry.

At present, the suspension can only be for a period of six months. The amended Act allows for suspension up to a year.

The writer is the founding Director, Centre for Social Impact and Philanthropy, Ashoka University