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Critical Policy Analysis- Foreign Contribution (Regulation) Amendment 2020

What is FCRA 2020?

The Foreign Contribution (Regulation) Amendment 2020, also known as the FCRA 2020, was introduced by the Indian Government in order to bring about a few revisions to the 2010 version of this act. A few key amendments brought about through this bill include:

  1. Reducing the cap for administrative expenditure with relation to the foreign contribution from 50% to 20%;

  2. Making it mandatory for all NGOs and civil-society organisations (CSOs) to receive their foreign donations and contribution through an SBI-bank account in the Parliament Street, New Delhi;

  3. Making it mandatory for all trustees, board members and stakeholders of NGOs to register with the FCRA authorities of the Ministry of Home Affairs (MHA) by producing their Aadhaar identification card, Overseas Citizen of India (OCI) card or Indian passport;

  4. Prohibiting the regranting or disbursal of foreign funds from the source NGO to other FCRA-authorised NGOs;

  5. Suspending the FCRA licenses and imposing strict legal consequences on those NGOs that don’t comply with the latest version of FCRA.[][]

FCRA 2020 has met with a lot of resistance from many NGOs and CSOs due to its stringent policies and threatening legal consequences for non-compliance and tight deadlines.


What are the pitfalls of FCRA 2020?

FCRA 2020 has further tightened the cap on administrative expenditure of NGOs, making it hard for them to pay their employees and meet with their operational costs. While the administrative expenses does not include the salary or remuneration of personnel involved in field researches or studies crucial for the welfare of individuals, the logistical expenditure such as the cost of publishing these reports/studies and the cost incurred during field research are included in the administrative expenditure.[] With the drastic reduction of allowance for administration expenditure, from 50% of the foreign contribution to 20%, including publishing costs into administrative expenses handicaps the NGOs as they have to prioritise the limited funds available towards other vital operational expenditure such as paying salaries of their non-research staff; logistically obstructing them from publishing their findings and observations.

Making it mandatory for all NGOs to open a bank account in the Parliament Street branch of SBI not only implies the attempt of the union government to centralise powers vis-à-vis regulating NGOs and CSOs, but also obstructs the functional efficiency of these organisations as not all of them are based out of New Delhi. Through FCRA 2020, the Ministry of Home Affairs has made these NGOs and CSOs dependent on SBI New Delhi branch. The tight deadlines of the ministry further complicated the process as paperwork piled the desks of SBI New Delhi officials. Stakeholders of many of these organisations argue that the bank as well as the department in MHA handling FCRA-related procedure were severely understaffed, delaying the process even more.

The government, through FCRA 2020, made it mandatory for every stakeholder, board member and trustee to register their Aadhaar card under the FCRA department of MHA. This infringes the opportunity for foreign nationals and non-resident Indians (NRIs) to be a part of these organisations. Experts suggest that the government has overreached into the functioning of these organisations as FCRA also requires these organisations to report the changes in board members, changes in bank account, change of address, and other administrative and logistical changes that concerns the organisation and the organisation only.[] CAF America has opined that the FCRA 2020 has tightened the foreign contribution to India, and had announced to the Americans who regularly contribute money to Indian NGOs that it may not result in the immediate tax benefit in the United States for these donors, thereby implicitly discouraging contributions to India in view of the increased bureaucratisation in the functioning of CSOs and NGOs.[]

The act also empowers the government to conduct ‘summary inquiries’ where officials from the FCRA department hold consultatory meetings with the board members of these organisations to investigate into the adherence and/or compliance of these organisations with the FCRA 2020 vis-à-vis administrative expenditure and overall functioning of the organisation. This is in contrast to FCRA 2010 where the government could call for consultative meetings with the board members of organisations only when there was clear evidence that the organisation had breached FCRA laws.[] It is a clear indication that the government has authorised itself to covertly supervise the work undertaken by each and every CSO and NGO, overreaching into the functioning of these organisations.

Another important aspect of FCRA 2020 is that it prohibits the regrant of foreign contribution from one organisation to another, notwithstanding the FCRA clearance of both organisations. Due to this, parent organisations are prohibited to transfer foreign funds it receives to their subsidiaries as well; the condition being that the act prohibits any transfer of foreign funds from one bank account to another without obtaining prior approval from the Ministry. In India, many NGOs and CSOs disburse foreign contribution to their subsidiaries that have a better reach in Indian societies. Experts are worried that the prohibition of this practice may have far-reaching repercussions on education, healthcare and the overall democracy in Indian societies.


Conclusion

Overall, FCRA 2020 has not been received well by civil-society organisations and non-governmental organisations, who feel that the government has closed in on their operations and has impaired their functioning. While many experts speculate that there is a strong political message conveyed through this act, this article has been written in a non-partisan way, focusing on the legalities of the Foreign Contribution (Regulations) Amendment Act of 2020.

The government must realise that impairing the functioning of NGOs and CSOs might in turn affect the efficiency of the operations and the delivery of the government as these organisations improve the delivery of government policies in remote areas that are usually not within the reach of the government. The implementation of this act indicates that the government is threatened by the efficiency of these organisations; the government has to understand that these organisations do not have the agenda of bringing political change, and even if a handful of these organisations do have it in their agenda, it is not rightful of the government to punish or infringe on the functioning of all NGOs and CSOs.


Bibliography

Vijaita Singh, “FCRA amendments crippling our work, say NGOs,” The Hindu, May 2021. https://www.thehindu.com/news/national/fcra-amendments-crippling-our-work-say-ngos/article34521449.ece

“Giving to India? Compliance with the Newly Amended FCRA,” CAF America. https://www.cafamerica.org/giving-to-india-compliance-with-the-newly-amended-fcra/

“Administrative Expenditures, FCRA,” Financial Management Services Foundation (FMSF). https://www.fcraforngos.org/administrative-expenditures

Dr Prashant Prabhakar Deshpande, “Critical Review of the Foreign Contribution (Regulation) Amendment, Act, 2020, Part 3,” The Times of India, October 2021. https://timesofindia.indiatimes.com/blogs/truth-lies-and-politics/critical-review-of-the-foreign-contribution-regulation-act-amendment-act-2020-part-3/

“Introduction to FCRA, 2010,” FCRA Online Services. https://fcraonline.nic.in/Home/PDF_Doc/fc_faq_07062019.pdf



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