Context:
Recently the Union Home Ministry has cancelled the Foreign Contribution Regulation Act (FCRA) registration of the Centre for Policy Research (CPR), a leading public policy research institution in New Delhi.
The Foreign Contribution Regulation Act (FCRA)1976
- The FCRA was enacted during the Emergency in 1976 in an atmosphere of apprehension that foreign powers were interfering in India’s affairs by pumping in funds through independent organisations.
- The FCRA regulates foreign donations and ensures that such contributions do not adversely affect internal security.
Centre for Policy Research (CPR)
- CPR is a leading policy think-tank since 1973, which conducts advanced and in-depth research on a wide range of policy-relevant issues, with a focus on India’s 21st Century challenges.
Amendments:
FCRA amendment 2010
- To “consolidate the law” on the utilisation of foreign funds, and “to prohibit” their use for “any activities detrimental to the national interest”.
FCRA amendment 2015
- In 2015, the MHA notified new rules, which required NGOs to give an undertaking that the acceptance of foreign funds is not likely to prejudicially affect the sovereignty and integrity of India or impact friendly relations with any foreign state and does not disrupt communal harmony.
FCRA amendment 2020
- Ratio of fund utilization: NGOs earlier could use up to 50% of funds for administrative use, the new amendment restricted this use to 20%.
- Ban on public servants from receiving foreign funds: The Act bars public servants from receiving foreign contributions.
- The Act also prohibits the transfer of foreign contributions to any other person.
- Aadhaar number is mandatory for all office bearers, directors or key functionaries of a person receiving foreign contribution, as an identification document.
- The foreign contribution must be received only in an account designated by the bank as an FCRA account in such branches of the State Bank of India, New Delhi.
- No funds other than the foreign contribution should be received or deposited in this account.
FCRA amendment 2022
- Exemption from intimation to the government for contributions less than Rs 10 lakh – the earlier limit was Rs 1 lakh — received from relatives abroad, and
- Increase in the time limit for intimation of the opening of bank accounts.
Applicability: The FCRA applies to all associations, groups and NGOs which intend to receive foreign donations.
Eligibility of applicant/expectations from applicants?
To receive foreign contributions in India, an organization must meet certain criteria:
- Legal Registration: Be registered under the Societies Registration Act, Indian Trusts Act, as a Section 8 Company under the Companies Act, or any other required law.
- Track Record: Demonstrate a history of positive contributions to society through its activities in its chosen field.
- Financial Stability: Have spent at least 10 lakh rupees (excluding administrative costs) in the past 3 years towards achieving its goals. Audited financial statements for the past 3 years are required.
- Specific Application for New Organizations: Newly registered entities can apply for permission to receive foreign contributions for a specific purpose, or activity, and from a specific source through the “Prior Permission (PP)” method to the Ministry of Home Affairs.
Who cannot accept foreign funding?
- The Members of the legislature (MPs, MLAs, MLC) and political parties, government officials, judges and media persons are prohibited from receiving any foreign contribution.
- However, in 2017 the MHA, through the Finance Bill route, amended the FCRA law paving the way for political parties to receive funds from the Indian subsidiary of a foreign company or a foreign company in which an Indian holds 50% or more shares.
Mandatory provisions
- All NGOs must register themselves under the FCRA which intends to receive foreign donations.
- Filing of annual returns, on the lines of Income Tax, is compulsory for all such NGOs.
Grounds on which foreign contribution can be accepted
- Registered associations can receive foreign contributions for social, educational, religious, economic and cultural purposes.
Validity and Renewal Process:
- The registration is initially valid for five years and it can be renewed subsequently if they comply with all norms.
- NGOs are expected to apply for renewal within six months of the date of expiry of registration.
- In case of failure to apply for renewal, the registration is deemed to have expired, and the NGO is no longer entitled to receive foreign funds or utilise its existing funds without permission from the ministry.
Grounds for cancellation of registration?
- Foreign funding needed to be stopped as it was receiving foreign contributions for “undesirable purposes” likely to affect the country’s economic interest.
- It alleged that CPR transferred foreign contributions to other entities and deposited the contributions in non-designated accounts in violation of FCRA.
Suspensions in the past
- According to MHA data, since 2011, the registration of 20,664 associations was cancelled for violations such as misutilisation of foreign contributions, non-submission of mandatory annual returns and diversion of foreign funds for other purposes.
Association registered under FCRA
- As of September 11, 2023, there are 49,843 FCRA-registered associations.
Accounts, intimation and audits under FCRA:
- An entity registered under FCRA can receive the foreign contribution in a single account only through a branch specified in the certificate.
- The receiver of the foreign contribution must intimate the source and amount of the foreign contribution to the central government within the stipulated time.
- An entity registered under this act must maintain an account of any foreign contribution received and how it was used.
Inspection search and seizure authority:
- A Gazetted officer holding a Group A post under the Central Government may be authorised to inspect accounts or records.
- After inspection, the officer has any reasonable cause to believe that any provision of this act or any law relating to foreign exchange has been contravened, he may seize such account or record.
An appeal under FCRA:
The provision of appeal has been provided under this act, an aggrieved person can appeal in the high court against the order of session court.
Offence and Penalties under FCRA
Penalties:
• Violation of FCRA can attract severe penalties which could be as under:
- Seizure and confiscation of foreign contribution receipts.
- Fine up to 5 times the value of the foreign contribution spent.
- Inspection and seizure of accounts and records.
- Compulsory prior permission requirement even if the NGO is registered under FCRA.
- Imprisonment up to up to up to 5 years and/or fine.
- Prohibition on accepting foreign contributions for 3 years for persons convicted twice
Concerns related to FCRA
- Bureaucratic Hurdles: The FCRA demands mountains of paperwork and strict adherence to rules, making it tough for NGOs to navigate. Ambiguity in the law’s interpretation creates room for authorities to target specific organizations.
- Time-taking Processes: Lengthy procedures for registration and renewal can stall operations and hamper access to crucial funding.
- Lack of Clarity: Questions often surround how NGOs spend foreign funds received under the FCRA. Concerns mount when the intended purpose and beneficiaries of these funds remain unclear.
- Unequal Playing Field: The complex registration process acts as a barrier for many organizations organizations organisations, disproportionately affecting their ability to access foreign contributions (As compared to whom?).
- Political Interference: Whispers of political influence in the FCRA process raise concerns about unfair decisions regarding registration approvals and denials.
Way forward
- Increased Transparency and Objectivity: Clear guidelines and independent oversight mechanisms can ensure fair and transparent application of the FCRA, reducing accusations of bias and political interference.
- Simplified Registration Process: Streamlining the registration process and easing compliance requirements can reduce the burden on NGOs without compromising legitimate security concerns.
- Proportionate Regulations: Tailoring regulations to the nature and size of organizations organizations organisationsorganisations can balance risk assessments with the need for a vibrant civil society.
- Open Dialogue and Collaboration: Engaging in open dialogue with NGOs and civil society organizations can foster trust and cooperation, leading to more effective and balanced regulations.