NGOs and Foreign Funding-Polity(13 April)

Polity 

NGOs and Foreign Funding

Need for regulating funds received by NGOs – 

•        Various reports, including of CBI and Intelligence Bureau, have shown misappropriation of funds by a large number of NGOs, which could cost India around 2-3% of its GDP.

• Between the years 2010 and 2019, many recipients have not utilised the fund for the purpose for which they were registered or granted under FCRA Act. This led the central government to cancel certificates of registration of more than 19,000 recipient organisations during the period between 2011 and 2019.
• CBI report stated that less than 10% of the 29-lakh registered NGOs across the country file their annual income and expenditure.

Provisions regarding Regulation of NGO in India

• Foreign Exchange Management Act (FEMA), 1999 regulated by Ministry of Finance: There are certain NGOs that are registered under FEMA and continue to disburse foreign funds to various associations in India.
• Rules under FCRA (Ministry of Home Affairs).

• About FCRA – It is meant to ensure that foreign contribution is received from legitimate sources and utilised for legitimate purposes by any person.
  • First enacted in 1976, it has been amended in 2010 and 2020.
  • To receive foreign funds, it is imperative for NGOs to get themselves registered under the Foreign Contribution (Regulation) Act (FCRA) and certificates are renewed every 5 years.
  • NITI Aayog is the nodal agency for registration and accreditation of NGOs seeking funding from the Government of India.

FCRA Amendment 2020 have the following provisions –

• It requires any organisation that wants to register itself under the FCRA to have existed for at least three years and to have spent a minimum of Rs 15 lakh on its core activities during the last three financial years for the benefit of the society.
• Prohibition of transfer of funds from one NGO to another.
• Decrease of administrative expenses through foreign funds from 50% to 20%.
• Making Aadhaar mandatory for registration.
• Obtaining registration or prior permission to receive foreign funds. New accounts can’t be activated without Home Ministry’s nod.
• All foreign contributions are to be received in a bank account opened with SBI’s main branch in New Delhi.
• Certain persons are prohibited to accept any foreign contribution: election candidates, editor or publisher of a newspaper, judges, government servants, members of any legislature, and political parties, among others.
• The act gives government powers to stop utilization of foreign funds by an organization through a “summary enquiry”.
• Act allows the central government to permit a person to surrender their registration certificate.

Issues 

• Hinder NGOs’ Humanitarian Work
• Discouraging Constitutional Rights
• Repressing Freedom
• Non-Achievement of SDGs and Foreign Aid/ Donations
• Incompatible with International laws

• In a recent ruling, SC has ruled that Parliament can stop NGOs from receiving foreign funds.
• SC stated that no one has a fundamental or absolute right to receive foreign contributions, while upholding the FCRA amendment 2020
• SC also made the following observations:
  1.  It is open to a sovereign democratic nation to completely prohibit acceptance of foreign donation on the ground that it undermines the constitutional morality of the nation.
  2. Foreign contributions can impact the socioeconomic fabric and polity of the country.