NGOs vs. GoI: The Conflicts and Scrutinies

Foreign Contribution (Regulation) Amendment Bill, 2020


From UPSC perspective, the following things are important :

Prelims level: FCRA

Mains level: FCRA

The Centre is set to amend the Foreign Contribution (Regulation) Act and has proposed to make Aadhaar a mandatory identification document for all the office-bearers, directors and other key functionaries of an NGO or an association eligible to receive foreign donations.

What are the news Amendments?

(1) Prohibition to accept foreign contribution:

  • Under the Act, certain persons are prohibited to accept any foreign contribution.
  • These include election candidates, editor or publisher of a newspaper, judges, government servants, members of any legislature, and political parties, among others.
  • The Bill adds public servants (as defined under the Indian Penal Code) to this list.
  • Public servants include any person who is in service or pay of the government or remunerated by the government for the performance of any public duty.

(2) Transfer of foreign contribution:

  • Under the Act, foreign contribution cannot be transferred to any other person unless such person is also registered to accept foreign contribution (or has obtained prior permission under the Act to obtain foreign contribution).
  • The Bill amends this to prohibit the transfer of foreign contribution to any other person. The term ‘person’ under the Act includes an individual, an association, or a registered company.

(3) Aadhaar for registration:

  • The Act states that a person may accept foreign contribution if they have: (i) obtained a certificate of registration from central government, or (ii) not registered, but obtained prior permission from the government to accept foreign contribution.
  • Any person seeking registration (or renewal of such registration) or prior permission for receiving the foreign contribution must make an application to the central government in the prescribed manner.
  • The Bill adds that any person seeking prior permission, registration or renewal of registration must provide the Aadhaar number of all its office bearers, directors or key functionaries, as an identification document.
  • In case of a foreigner, they must provide a copy of the passport or the Overseas Citizen of India card for identification.

(4) FCRA account:

  • Under the Act, a registered person must accept foreign contribution only in a single branch of a scheduled bank specified by them.
  • However, they may open more accounts in other banks for utilization of the contribution.
  • The Bill amends this to state that foreign contribution must be received only in an account designated by the bank as “FCRA account” in such branch 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.

(5) Restriction in the utilization of foreign contribution:

  • Under the Act, if a person accepting foreign contribution is found guilty of violating any provisions of the Act or the unutilized or unreceived foreign contribution may be utilized or received, only with the prior approval of the central government.
  • This amendment Bill also seeks to prohibit the transfer of FCRA funds to other persons or organisations.
  • The Bill adds that the government may also restrict usage of unutilized foreign contribution for persons who have been granted prior permission to receive such contribution.
  • This may be done if, based on a summary inquiry, and pending any further inquiry, the government believes that such a person has contravened provisions of the Act.

(6) Renewal of license:

  • Under the Act, every person who has been given a certificate of registration must renew the certificate within six months of expiration.
  • The Bill provides that the government may conduct an inquiry before renewing the certificate to ensure that the person making the application: (i) is not fictitious or benami, (ii) has not been prosecuted or convicted for creating communal tension and (iii) has not been found guilty of diversion or misutilisation of funds, among others conditions.

(7) Reduction in use of foreign contribution for administrative purposes:

  • Under the Act, a person who receives foreign contribution must use it only for the purpose for which the contribution is received.
  • Further, they must not use more than 50% of the contribution to meeting administrative expenses. The Bill reduces this limit to 20%.

(8) Surrender of certificate:

  • The Bill adds a provision allowing the central government to permit a person to surrender their registration certificate.
  • The government may do so if, post an inquiry, it is satisfied that such person has not contravened any provisions of the Act, and the management of its foreign contribution (and related assets) has been vested in an authority prescribed by the government.

(9) Suspension of registration:

  • Under the Act, the government may suspend the registration of a person for a period not exceeding 180 days.
  • The Bill adds that such suspension may be extended up to an additional 180 days.

Significance of the amendment

1.Prevent misuse:

  • The annual inflow of foreign contribution has almost doubled between the years 2010 and 2019, but many recipients of foreign contribution have not utilised the same for the purpose for which they were registered or granted prior permission under the FCRA 2010.
  • Recently, the Union Home Ministry has suspended licenses of the six (NGOs) who were alleged to have used foreign contributions for religious conversion.

2.Strengthen National security

  • Many persons were not adhering to statutory compliances such as submission of annual returns and maintenance of proper accounts.
  • Such a situation could have adversely affected the internal security of the country.

3.Transparency and accountability

  • The new Bill aims to enhance transparency and accountability in the receipt and utilisation of foreign contributions and facilitating the genuine non-governmental organisations or associations who are working for the welfare of society.

Criticism of the FCRA Bill, 2020

  • The legislation may be used to target political opponents and religious minorities.
  • Effects NGO Functioning: Due to the 20% cap, many NGOs will shut shop and many people will become jobless.
  • Inconsistency: On one hand the government invites foreign funds, but when such funds come for educational and charitable purposes, it is prevented.
  • High compliance rate: According to the GoI’s FCRA dashboard, there are 22,447 active FCRA registrations in India today. In 2018-19, 21,915 annual returns were filed – a compliance rate of 97.6%.
  • Double standards: PM CARES fund had received exemptions from complying with FCRA provisions when it is headed by Union cabinet ministers and administered by PMO officials.
  • Licence-Raj on NGOs: The Bill assumes that all NGOs receiving foreign grants are guilty and thus makes Aadhar of office bearers as mandatory requirement.
  • Bureaucratic Discretion: There is a thin line between enforcing transparency and using rules to allow official interference and harassment in the sector. Much of the present bill crosses that line and introduces a questionable degree of micro-management.

Way Forward

  • NGOs are helpful in implementing government schemes at the grassroots. They fill the gaps, where the government fails to do their jobs.
  • The government must stick to the ancient Indian ethos of Vasudhaiva Kutumbakam as the framework for its global engagement and should not act with vendetta against the NGOs who criticize its working.
  • Seamless sharing of ideas and resources across national boundaries is essential to the functioning of a global community, and should not be discouraged unless there is reason to believe the funds are being used to aid illegal activities.

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