• UGI USER
  • Jul 25, 2023
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Q. The Foreign Contribution (Regulation) Amendment Act 2020 places more discretionary powers in the hands of bureaucracy and increases NGOs’ compliance burden. Analyze.

Approach:

  • Introduce by highlighting the need for the Foreign Contribution Regulation (Amendment) Act 2020.
  • Highlight the provisions of FCRA Amendment, 2020 and explain how it places more discretionary powers in the hands of bureaucracy and increases the NGO’s compliance burden.
  • Conclude accordingly.

Answer:

Between 2010-2019, the inflow of foreign contribution in India has doubled and there have been numerous cases of misuse and misappropriation of funds, leading to the government canceling 19,000 registrations since 2011. Faced with this situation, the FCRA Amendment, 2020 has been implemented to strengthen the compliance mechanism, enhance transparency and accountability in the receipt and utilization of foreign contribution (to ensure that foreign money is not used against national interests or anti-national activities) and facilitate genuine non- governmental organizations or associations who are working for the welfare of the society.

However, the FCRA Amendment, 2020 has been criticized because of increased bureaucratic discretion and compliance burden on NGOs, such as:

  • Identification requirements:

Aadhaar has been made mandatory for all office bearers, directors or other key functionaries of NGOs for registration.

  • Limit on expenses:

The amendment places a 20% ceiling previously capped at 50%. This limits investments in personnel, travel, technology, legal and financial services, reporting thereby preventing NGOS from building sustainability and performing key roles. Each of the above have significant financial and compliance implications for NGOs.

  • Banking restriction:

Foreign contribution must be received only in an account designated by the bank as “FCRA account” in such branches of the State Bank of India, New Delhi, as notified by the central government. No funds other than the foreign contribution should be received or deposited in this account.

  • Banning re-granting of funds:

NGOs prevented from re-granting funds to other licensed NGO’s. The increased transactional burden on foreign donors will create a significant deterrent to such funding.

  • Surrender of certificate:

For surrendering created using foreign contribution will be transferred to an authority prescribed by the government.

  • Renewal of FCRA license:

FCRA holders will be subject to inquiry at the end of every five years if they wish to renew their registration.

  • Power to prohibit:

The government can preclude receipt and utilization of foreign contributions if the recipient is found guilty of violating any provisions of the Act.

As the above provisions will further widen the trust deficit between NGOs and the center, further efforts need to be taken after consultation with all the stakeholders involved. While regulation and reform in the NGO sector are needed, we need to take into account that its contribution to advocacy of human rights and public awareness is significant in India.