FCRA 2020 Amendment: Is the State Going Overboard With Its New Restrictions?

Soon after its promulgation, the FCRA 2020 Amendment received massive criticism.  Several aspects of the Act are currently challenged ahead of the Indian Court. For instance, recently three joint petitioners challenged the ‘severely restricted use of foreign funds’ and the mandatory condition of receiving funds in the New Delhi Branch of the State Bank of India. In the light of increasing government control and politically charged policies, the FCRA 2020 Amendment seems to indicate the state’s intentions. Aeshita Singh explains FCRA 2020 Amendment, tracing FCRA’s history and how it impacted the NGO-state relations over the years.

*Disclosure: In addition, the editor has made contributions to the text.

FCRA 2020 Amendment Act

By Aeshita Singh, a third-year law student at Symbiosis Law School, Pune and member of Lawctopus Writers Club. Aeshita is currently interning at Academike. 

Introduction

On September 29, 2020, the Foreign Contribution Regulation Amendment Bill (FCRA), 2020,[1] became effective, bringing significant changes to FCRA, 2010.[2] The Indian state always had a regulatory noose around NGOs even before the FCRA 2010 came to being. However, the 2010 amendment saw more extensive political interests in framing such regulations.

Seen in this context and the current political climate, the FCRA 2020 Amendment is facing excessive backlash for adversely affecting the nonprofit sector in India. However, the government reasoned its necessity, claiming that the Act will ensure that NGOs do not use foreign funds to harm India’s sovereignty and national interest.

This article will look at the history of FCRA that has affected the state-NGO relationship over the years. Then, it focuses on how the amendments that preceded the FCRA 2020 Amendment came into existence. In the end, it will look at several recent instances where the FCRA has been allegedly misused to curb dissent. Let’s dive deeper into this and understand the Act itself, along with the stipulated changes in the Amendment.

It’s What Doesn’t Meet the Eye: Understanding the History of FCRA in India

The FCRA is capable of more than just eyeing and monitoring the role of NGOs within the state. In fact, it has developed and transformed with the changing nature of the state and NGOs relationship in India.

While the Act started to prevent foreign fundings to political parties, its purpose was refaced during the Emergency. The Indira Gandhi government passed the Foreign Contribution Regulation Act in 1976 as a preventive measure against the mass movement that challenged her rule and the Emergency. (Kudva, 2013 237)

The new purpose of the Act was to gain ‘information and control over NGOs’, with a particular focus on those who had foreign support. (Kudva, 2013 243)

NGOs were under fire, especially since the government was wary of the ground-level mobilisation that NGOs at the time were doing. A few years into the Act’s promulgation and return of the Congress-led government, it was again amended in 1984. Only, this time, it got repurposed for safeguarding the nation against suspicious foreign interventions and manipulations that could destabilise the country. (Id.)

But during and time before liberalisation, the state started to withdraw from complete control over development schemes, seeking contributions from NGO donors. As a result, the funds received by NGOs were now diverted to disaster relief, social justice and education etc.

However, the state’s firm reliance on NGOs hit an aberration in 1999.[3] The state’s relation with NGOs became salty for the first time when a magazine titled ‘Communalism Combat’ by Teesta Setalvad and Javed Anand published eighteen advertisements against the Sangh Parivar.[4]

Thirteen NGOs were served with a notice for endorsing the same view, and thus, their role was seen in a political light. As a result, the FCR Bill was introduced in 2005, giving the state excessive regulatory powers. The same was reintroduced in 2006 in the Rajya Sabha.[5]

Protesting against the new iteration of the 1976 Act, Human Rights Watch had written to the Prime Minister and the Home Ministry.[6] At the time, the FCRB 2006 was referred to the Parliamentary Standing Committee.

The main grievance against the 2006 Bill was that it would ‘undermine the right of an organisation to seek and receive financial support’.[7] The letter also opposed including the word ‘national interest’ that could easily be misused based on political interests against those critical of the government. However, despite critiques regarding the use of the word ‘political nature’, it finally got passed in 2010.

Understanding FCRA 2010? Why Was It Significant?

The Act was introduced to ensure foreign funds do not harm national security. It modified the definition of foreign contribution (FC), stating that it will also include: a) donation, delivery, or transfer made by the foreign source, b) interest accrued on FC deposited in a bank or any other income derived from FC.[8]

However, according to the Central government, there were still some loopholes in this Act. In 2018 the Union Home Ministry released a statement stating:

“Registration of more than 13000 associations/NGOs had been cancelled during the last three years for violation of various provisions of FCRA, 2010 and Rules made thereunder. Offences of 86 NGOs have been compounded by imposing penalties amounting to Rs. 3,14,37,649/- since 2016.”[9]

In 2017 the government of India cancelled foreign donation licenses for more than two hundred local NGOs.[10] Thes NGOs are the Institute of Public Health, Navsarjan, and the Indian Social Action Forum (INSAF).[11] INSAF also challenged this order in the court.

In the case, Indian Social Action Forum (INSAF) v. UOI, the powers of the government under this Act were contended to be violative of the Constitution of India.

Section 5 of the Act gave powers to the Central Government to notify an organisation political in nature and resultantly prohibit it.[12] It was argued that this section was violative of Articles 14, 19(1)(a), 19(1)(c) and 21 of the Constitution.

The court tried to strike a balance and stated:

“A balance has to be drawn between the object that is sought to be achieved by the legislation and the rights of the voluntary organisations to have access to foreign funds…Prohibition from receiving foreign aid, either directly or indirectly, by those who are involved in active politics is to ensure that the values of a sovereign democratic republic are protected. On the other hand, such of those voluntary organisations which have absolutely no connection with either party politics or active politics cannot be denied access to foreign contributions”[13]

So what’s the FCRA 2020 Amendment Now?

Despite the SC’s attempts to balance the powers under this Act, the Central Government has taken some really questionable steps in the past years.

For example, in the past three years, licenses of around 6,600 NGOs were cancelled in India.[14] More than 69 per cent of these NGOs were educational institutions.[15]

Further, the Act was amended again in September 2020. However, the timing was quite suspicious as the first wave of Coronavirus was ravaging the entire country.

The 2020 Amendment was drenched in the national interest narrative. Several NGOs or social welfare groups entitled to receive foreign donations came under its ambit as a repercussion to the political narrative.[16] Further, only registered organisations could get these donations.

This Act also mandated NGOs to have accounts in either nationalised or private banks to access security agencies.[17]

Listed down are some of the notable changes in the Act:

i. Section 3:

Under the 2010 Act,  election candidates, an editor or publisher of a newspaper, judges, government servants, members of any legislature, and political parties were prohibited from accepting any foreign contribution.[18] In the FCRA 2020 Amendment Act, Section 3, public servants were also included in the list.[19]  This becomes problematic because the Act does not explain why public servants cannot receive contributions. At the same time, PM CARES did not have to comply with this section, and thus it sounds arbitrary and hypocritical of the government.

ii. Section 7

Earlier in the 2010 Act, Section 7 permitted transferring funds by a registered organisation to another.[20] However, if the person wasn’t registered, then prior permission from the government was required for the transfer.[21] The Amendment Act restricts the transfer completely, irrespective of the transferee being registered or not.[22]   This Amendment can have severe implications for NGOs who largely depend upon sub granting.[23]

iii. Section 8

Amendment to section 8 brought down the administrative expenses from 50% to 20%.[24] This will be detrimental to the NGOs as it will directly affect the payment of salaries, wages of executive committee members, cost of accounting, cost of writing and filings reports.[25]

iv. Adding of the new Section 17

This section mandates that foreign contributions must be received only in an account designated by the bank as ‘FCRA account’ State Bank of India, New Delhi.[26] Otherwise, no funds should be received or deposited in this account. There are chances that organisations from other states may face difficulty in opening accounts in Delhi.

The central government stated that it became necessary to implement this Amendment to stop the misuse of foreign funds.  However, several NGO heads and philanthropists have expressed their discontent with this Amendment.

Jennifer Liang, the co-founder of NGO The Ant, worked for people in times of the pandemic. She said:

“ This legislation is costing lives. She told Newsnight the legislation had stopped her organisation from distributing oxygen concentrators from foreign donors and supplying them to the government, because they were unable to open a new bank account in Delhi.”[27]

Aakar Patel, former head of Amnesty International India, mentioned:

“The law criminalises the acceptance of aid by NGOs.Even if you’re working on Covid, the law makes it very difficult for you to be able to even accept foreign aid coming in without being in violation of the law,”[28]

Recent Ban on NGOs: Curbing Dissent?

Recently, the government restricted 10 International NGOs working on child rights, climate change and environmental projects. [29]

These NGOs have been put in the Prior Reference List (PRC) under the FCRA Amendment. This list mandates a prior clearance from the Ministry of Home Affairs before transferring money to the recipient Association in India.[30]

Currently, there are around 80 worldwide voluntary businesses on the PRC checklist. Some of which include: The European Climate Foundation; three U.S.-based NGOs: the Omidyar Network International, Humanity United and Stardust basis; two Australia-based NGOs: Walk Free Foundation and Minderoo Foundation; and U.K.-based Children’s Investment Fund Foundation, Freedom fund and Laudes basis.[31]

NGO-State Relation: Why the FCRA 2020 Amendment Could Pose Issues to Democracy?

Immediately after Independence and during the 1950s, NGOs became silent ‘social actors’ with Nehruvuan ideas of development. (Ray & Katzenstein, 2013 3)

But the visibility and proliferation of NGOs in India increased from the 1980s. In this decade, NGOs started gaining traction, acting as an extension to the state’s welfare schemes.  Not only at the national level, but the real impact of NGO-state association found its usefulness on the local level for education and poverty alleviation. (Kudva, 2013 249)

According to research, the real impact of the same was gauged in states like Tamil Nadu, West Bengal and Karnataka. In these states, the relationship of the state and such organisations had enabled change. (Id,)

Therefore, it would be naive to assume that our nation can survive without these organisations. The biggest testament to their need became evident during the two Covid-19 waves in India. For example, during the peak of the Covid-19 pandemic, the government launched many schemes to ensure food for our citizens. However, in 13 states and union territories, NGOs fed more people than the government.[32]

Furthermore, as discussed and flagged before, this Act loosely mentions several terms, including ‘national interest’, which is described in an open-ended and vague. There is no rationale mentioned to designate an organisation as ‘working against the nation’s interest’. Furthermore, the Act provides no arbiter or appellate authority to hear the challenges of the government’s decision.[33]

Thus, the question remains: Why is the government implementing such laws when we desperately need NGOs to help people and the state at large?

Henri Tiphagne, executive director of social justice and human rights organisation People’s Watch, said:

“The government is determined to see no dissent. I completely uphold the principle that NGOs should be transparent and that is why we have been filing all the documents, and we have even put our accounts from the last 10 years on our website. It’s harassment for the NGOs. When things go wrong, we speak up. Perhaps that is what is irritating the government.”[34]

Law as bait to targeting individuals is not a new trick in the book. The cancellation of several NGO licenses also seem specifically targeted. For example, in May, licences for the ‘Lawyers Collective’ were cancelled regarding FCRA violations.

It should be noted that this organisation represents people in cases against the current government. For example, this organisation has been helping to seek justice for 2002 communal violence in  Gujarat.[35]

After knowing the background of this organisation, it is fairly easy to conclude that this move by the government was politically motivated. This indicates that owing to the open-ended words in FCRA. The government can easily crush these organisations which are working against them.

Kofi Annan, former UN Secretary-General, said:

“The 21st Century will be an era of NGOs.”

Clearly, we are opposing the very essence of this statement.

However, the Indian state has made several attempts to curb dissents using laws on the path of crushing dissent by the NGO’s, maintaining their autonomy over welfare projects and blocking out all the possible foreign aid to us.

Climate change and prolonged illness without access to medical facilities have affected the underprivileged the most in the current times. Thus, we need a robust mechanism to ensure freedom and financial aid to the NGOs. Therefore, like any other policy, the FCRA 2020 Amendment must be scrutinised and challenged to offer unrealistic restrictions.

References

Rita Jalali, International funding of NGOs in India: Bringing the state back in, 19 VOLUNTAS: International Journal of Voluntary and Nonprofit Organisations 161–188 (2008).

Mary Fainsod Katzenstein & Raka Ray, Social movements in India: Poverty, Power, and Politics (2013).

Mary Fainsod Katzenstein, Raka Ray & Neema Kudva, Strong States, Strong NGOs, in Social movements in India: POVERTY, power, and politics 233–265 (2013).

Endnotes

[1] Foreign Contribution (Amendment) Act, 2020, No. 33, Acts of Parliament, 2020, (India).

[2] Ankur Singhania & Karen Issac, Key Insights On The FCRA Amendment Act, 2020, MONDAQ, https://www.mondaq.com/india/government-contracts-procurement-ppp/1017466/key-insights-on-the-fcra-amendment-act-2020, (available at September 17, 4:22 PM).

[3]Meher Pestonji, Anyone Involved in Secular Action is Going to Be Targated?, 1999, Humanscape, http://web.archive.org/web/20021217191815/http:/www.humanscapeindia.net/humanscape/hs1199/hs11997t.htm

[4] Id.

[5]The Foreign CONTRIBUTION (Regulation) BILL, 2006, PRS Legislative Research, https://prsindia.org/billtrack/the-foreign-contribution-regulation-bill-2006  (last visited September 21, 2021).

[6] Human rights watch letter to Prime Minister Manmohan Singh of India, 2008, Human Rights Watch https://www.hrw.org/news/2008/04/10/human-rights-watch-letter-prime-minister-manmohan-singh-india (last visited September 20, 2021).

[7] Id.

[8]TG Team, Synopsis of Foreign Contribution (Regulation) Act, 2010, TAXGURU, https://taxguru.in/rbi/synopsis-of-foreign-contribution-regulation-act-2010.html,  (available at September 17, 5:00 PM).

[9] Pavan Narang, Foreign Contribution (Regulation) Act, 2010: Background and current status, BAR & BENCH, https://www.barandbench.com/columns/foreign-contribution-regulation-act-2010-background-current-status   (available at September 17, 5:32 PM).

[10] Indian Government Cuts NGO Funding, Access to Foreign Donors, PND, https://philanthropynewsdigest.org/news/indian-government-cuts-ngo-funding-access-to-foreign-donors, (available at September 17, 7:05 PM).

[11] Id.

[12] Foreign Contribution (Regulation) Act, 2010, § 5, No. 42, Acts of Parliament, 2010, (India).

[13] Supra, note 6.

[14] Deeptiman Tiwary, FCRA licences of 6,600 NGOs cancelled in past three years: Govt to Lok Sabha, THE INDIAN EXPRESS, https://indianexpress.com/article/india/fcra-licences-of-6600-ngos-cancelled-in-past-three-years-govt-to-lok-sabha-6319507/, (available at September 17, 11:21 PM).

[15] Id.

[16] Vijaita Singh, What is Foreign Contribution (Regulation) Act, and how does it control donations?, THE HINDU, https://www.thehindu.com/news/national/the-hindu-explains-what-is-foreign-contribution-regulation-act-and-how-does-it-control-donations/article32590504.ece ,  (available at September 17, 5:17 PM).

[17] Id.

[18] Foreign Contribution (Regulation) Act, 2010, § 3, No. 42, Acts of Parliament, 2010, (India).

[19] Foreign Contribution (Amendment) Act, 2020, § 3, No. 33, Acts of Parliament, 2020, (India).

[20] Foreign Contribution (Regulation) Act, 2010, § 7, No. 42, Acts of Parliament, 2010, (India).

[21] Id.

[22] Foreign Contribution (Amendment) Act, 2020, § 7, No. 33, Acts of Parliament, 2020, (India).

[23] Key Insights on the FCRA Amendment Act, 2020, RAJAN ASSOCIATES, https://www.rajaniassociates.net/media/de-jure/DeJure%20-%20Key%20Insights%20on%20the%20FCRA%20Amendment%20Act%202020.pdf,  (available at September 17, 11:38 PM).

[24] Foreign Contribution (Amendment) Act, 2020, § 8, No. 33, Acts of Parliament, 2020, (India).

[25] Supra, note 17.

[26] Foreign Contribution (Amendment) Act, 2020, § 17, No. 33, Acts of Parliament, 2020, (India).

[27] Sima Kotecha, India Covid: How law stops NGOs distributing essential aid, BBC NEWSNIGHT, https://www.bbc.com/news/world-asia-india-57095591,  (available at September 17, 11:58 PM).

[28] Id.

[29] Scroll, Staff, Centre restricts funding for 10 NGOs working on child rights, climate change: The Hindu, SCROLL, https://scroll.in/latest/1005324/centre-restricts-funding-for-10-ngos-working-on-child-rights-climate-change-the-hindu,  (available at September 17, 12:23 PM).

[30] Suhasini Haidar, Govt. curbs funding for 10 climate change, child labour NGOs, THE HINDU, https://www.thehindu.com/news/national/govt-curbs-funding-for-10-climate-change-child-labour-ngos/article36437596.ece, (available at September 17, 12:27 PM).

[31] Govt. Curbs Funding For 10 Climate Change, Child Labour NGOs, URBAN PRESS, https://urbanpress.in/india/govt-curbs-funding-for-10-climate-change-child-labour-ngos/, (available at September 17, 12:31 PM).

[32] Mukesh Rawat, Coronavirus in India: In 13 states, NGOs fed more people than govt did during lockdown, INDIA TODAY,https://www.indiatoday.in/india/story/in-13-states-ngos-fed-more-people-than-govt-during-coronavirus-lockdown-1665111-2020-04-09, (available at September 18, 10:29 PM).

[33] Supra, note 5.

[34] Vidhi Doshi, India accused of muzzling NGOs by blocking foreign funding, THE GUARDIAN, https://www.theguardian.com/global-development/2016/nov/24/india-modi-government-accused-muzzling-ngos-by-blocking-foreign-funding, (available at September 18, 10:56 PM).

[35] Id.

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