The Foreign Contribution (Regulation) Amendment Act, 2020 (FCRA) came into force on 20th September 2020. The FCRA aims to regulate the receipt and utilization of foreign funding by Non-Governmental Organizations (NGOs) and other such associations that work for citizen welfare. However, with the recent amendments, the process under FCRA has been made more onerous and cumbersome than before.
The FCRA 2020 in its present state, has far-reaching negative consequences on the Indian social development sector. Though it was drafted with the intent of ensuring transparency regarding sources of funding for Civil Society Organizations (CSOs) like NGOs, FCRA 2020 has resulted in the creation of a “licence-raj” due to over-regulation of the sector. It has had an effect of limiting the functionary independence of nonprofit organizations in India, especially the ones at the grassroots, which work at the frontlines with the affected communities.
CHALLENGES TO FCRA 2020
1. Bans Essential Inter-NGO Re-granting of Funds
Section 7 of the FCRA 2020 curbs access to foreign contributions from international donors as a source of funding for CSOs. The amendment paralyses the operation of NGOs across India because of their inability to transfer funds to partner NGOs within the country. This prevention on re-granting foreign funds to other NGOs by bigger NGOs threatens the very existence of smaller CSOs that do not have the reach to access international donors. Additionally, restricting money transfers between NGOS ignores that many NGOs are funding bodies or sub-contract their operations to other NGOs. This restriction on onwards distribution by larger FCRA CSOs to other grassroots smaller FCRA organisations damages the collaborative network between NGOs. It compromises the functioning of NGOs and results in a direct attack on the civil liberties of not only the CSOs themselves but also their beneficiaries.
2. Imposes 20% cap on Administrative Spending
Section 8 of FRCA 2020 imposes a 20% ceiling on administrative expenses. This means that out of the total foreign funding received by an organization, only 20% can be utilized for administrative expenses. This was previously capped at 50% of the total funding received. Now, all administrative expenses including salaries of workers, professional fees, travel expenses, utility bills, etc. are deducted from this 20% cap. This makes it difficult for the NGO staff to manage their affairs on a day to day basis and perform tasks ranging from service delivery to research, training and advocacy. Moreover, this governmental interference with contractual terms that are between the donors and the NGOs results in legislative overreach.
3. Increases Red tapism and Arbitrariness
Section 13 of the amendment also increases the period of suspension of an NGO’s FCRA registration to 360 days from the prior 180 days. This negatively hampers the very survival of the CSOs whose operations might be paralyzed for almost a year. Another problematic amendment is the enhancement of power of the government officials who are conducting inquiries into the working of the CSO. The amendment removes the restriction on officials to complete inquiries within 6 months or impose punitive sanctions. This increases the chances of an organisation being harassed by the officials, especially if it voices dissent against the government’s actions. This is a direct attack on the working of CSOs that try to hold the government power accountable. This increase in bureaucratic power will contribute to red-tapism, arbitrariness and harassment on part of authorities.
4. Creates a Chilling Effect on Dissent
The law targets those CSOs that are critical of the government’s policies and it gives immense powers to the Home Ministry to disqualify any CSO. This results in the creation of an atmosphere of fear which prevents CSOs from challenging the law. This is because, going against the Ministry means that they risk being in the “bad books” of the MHA, which creates its own set of problems with respect to renewal of registration, receiving government funding, etc.
It also creates a chilling effect on effective public participation of CSOs in opposing government policies and taking on rights-based advocacy. It seeks to limit the role of CSO’s to merely delivery of services rather than allowing them to fulfil their role of challenging those yielding political power. Moreover, even if the CSOs do challenge the amendment or actions taken by the Home Ministry in pursuance of the amendment, it will take a huge toll on their resources. Such systemic repression of dissent and public debate goes against the very tenets of Indian democracy as it creates a chilling effect.
5. Mandates Use of a Specified Bank Account & Other Concerns
Under Section 17 of the FCRA Act, 2020, foreign donations can be received only through a designated ‘FCRA account’ opened in the SBI’s New Delhi Branch for all CSOs all over the country. This approach of centralisation seems ironic in the times of digitalisation and it makes it difficult for non-profits with lesser resources working in the remotest areas of the country to gain access to funds.
Additionally, FCRA 2020 imposes a mandatory obligation for all key office bearers to provide Aadhar cards. It also prohibits people falling under the “public servant” category from receiving foreign funding. These amendments create additional documentary hurdles for the NGO personnel and dissuade public servants from contributing towards NGO-facilitated welfare activities via foreign contribution.
6. Violates International Law
The International Commission of Jurists (ICJ) has condemned the FCRA amendments for failing to comply with India’s international obligations as well as its constitutional provisions. It violates right to freedom of association as mentioned under Article 22 of the International Covenant on Civil and Political Rights (ICCPR) as well as Article 19 of the Indian Constitution.
The FCRA 2020 significantly amends the Foreign Contribution (Regulation) Act 2010 (FCRA), which had also imposed disproportionate restrictions on the civil society. In 2016, the UN Special Rapporteur for Freedom of Assembly and Association Maina Kiai had noted, that the FCRA 2010 was violative of international law as it restricted the rights of CSOs to receive foreign funding pertinent for their operations that further protection of “political, cultural, economic and social rights” of the civil society. Thus, the 2020 amendments have further made it difficult for CSOs to function efficiently in India.
Not only are the substantive provisions of the FRCA amendment problematic but even the procedure which was followed to bring the law into force has been severely criticised. The Bill was presented in the Parliament without prior intimation, real deliberation, or stakeholder consultation. Its draft was not introduced in the public domain before it was introduced in the Lok Sabha and there was no pre-legislative public consultation. There were no efforts by a parliamentary committee to study the practical implications of the amendment. It was passed by both the Lok Sabha and Rajya Sabha after 4 days of being tabled and this shows hasty law-making that goes against the spirit of democracy. Even the timing of the amendment created issues for NGOs which are hard strapped for resources in the COVID-19 pandemic.
The need for these amendments was cited as greater accountability on part of NGOs and regulation of religious conversions by NGOs. However, instead of meeting these stated objectives, the Act has created bureaucratic hurdles that are unrelated to serving these purposes. Thus, there is a need to re-evaluate these problematic amendments and the way they have been brought into force in order to protect the non-profit organisations in India.
- Why civil society matters, Hindustan Times (September 22,2020).
- Amitabh Behar, Choking the NGO sector: The FCRA 2020 amendment deepens a licence raj that could throttle civil society, The Times of India (October 2,2020).
- Amitabh Behar, Behind the new rules for NGOs to get foreign funds, a clear political message – fall in line, Scroll (September 24,2020).
- Kabir Dixit, The FCRA Catch-22, The Indian Express (October 20,2020).
- Ian Seiderman, India: FCRA Amendment 2020 will undermine the work of Civil Society, International Commission of Jurists (September 24,2020).
- Ingrid Srinath, By law, the heat is on NGOs, Deccan Herald (October 4,2020).
- Shreya Mishra & Ayesha Bhattacharya, Foreign Contribution (Regulatory) Amendment Act, 2020: A Challenge for Non-Profits?, IndiaCorpLaw (October 20,2020).
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- Noshir H. Dadrawala, The Government Has Conducted a Surgical Strike on India’s Voluntary Sector, The Wire (October 12,2020).
- Special Rapporteur, UN rights experts urge India to repeal law restricting NGO’s access to crucial foreign funding, Office of the High Commissioner Human Rights (United Nations).