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Foreign Contribution (Regulation) Amendment Bill, 2020 – The Big Picture – RSTV IAS UPSC

  • IASbaba
  • October 27, 2020
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The Big Picture- RSTV, UPSC Articles
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Foreign Contribution (Regulation) Amendment Bill, 2020

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Topic: General Studies 2, 3:

  • Role of civil Society in a democracy. Formal/informal associations and their role in the Polity.
  • Important International institutions, agencies and fora- their structure, mandate.

In news: Parliament has passed Foreign Contribution (Regulation) Amendment Bill 2020 in the recently concluded Monsoon Session. 

Key Provision of FCRA Bill, 2020 are:

  • Aadhaar has been made mandatory identification document for all the office bearers of an NGO or an association seeking foreign donations.
  • Foreign contribution can now be received only in an account designated by the bank as “FCRA account” in a 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.
  • Limiting administrative expenses drawn from foreign donations to 20% as against the current 50%
  • The amended Bill includes “public servant” and “corporation owned or controlled by the Government” among the list of entities not eligible to receive foreign donations

How else can one receive foreign funding?

The other way to receive foreign contributions is by applying for prior permission. It is granted for receipt of a specific amount from a specific donor for carrying out specific activities or projects.

But the association should be registered under statutes such as the Societies Registration Act, 1860, the Indian Trusts Act, 1882, or Section 25 of the Companies Act, 1956. A letter of commitment from the foreign donor specifying the amount and purpose is also required. 

When is a registration suspended or cancelled?

  • Financial Irregularities of NGO: The MHA on inspection of accounts and on receiving any adverse input against the functioning of an association can suspend the FCRA registration initially for 180 days. 
  • Restriction on Functioning of NGO: Until a decision is taken, the association cannot receive any fresh donation and cannot utilise more than 25% of the amount available in the designated bank account without permission of the MHA
  • Public Interest Violation: The government can refuse permission if it believes that the donation to the NGO will adversely affect “public interest” or the “economic interest of the state”.
  • Recent Example: In 2017, the MHA suspended the FCRA of the Public Health Foundation of India (PHFI), one of India’s largest public health advocacy groups, on grounds of using “foreign funds” to lobby with parliamentarians on tobacco control activities. 
  • After several representations by the PHFI to the government, it was placed in the ‘prior permission’ category.

Criticism of the FCRA Bill, 2020

  • The legislation may be used to target political opponents and religious minorities.
  • Affects Fundamental Rights: The FCRA restrictions have serious consequences on both the rights to free speech and freedom of association under Articles 19(1)(a) and 19(1)(c) of the Constitution.
  • Cripples NGO Functioning: Due to the 20% cap, many NGOs will shut shop and many people will become jobless.
  • Double Standards: On one hand the government invites foreign funds, but when such funds come for educational and charitable purposes, it is prevented.
  • 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. 
  • Open the doors for Bureaucratic Harassment: 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.
  • Democratic Functioning: NGOs perform vital role of interest aggregation and interest articulation in Democratic process. Disproportionately restricting their functioning will hamper Democracy in long run.
  • Liable to misuse due to Vagueness in law: The Act gave the government the power to frame rules whereby an organisation can be declared to have political objectives — without defining what a ‘political objective’ is.

Significance of NGOs

  • Interest Aggregators and Interest Articulators: Non-profit organisations play vital role in mobilizing public attention to societal problems and needs. They are the principal vehicle through which communities can give voice to their concerns.
  • Complements Government Machinery: NGOs implement and monitor the government’s welfare policies, operating at the grassroots level where the official apparatus is often non-existent.
  • Hold Government Accountable: NGOs broaden government’s accountability by ensuring government is responsive to citizens at large rather than to narrow sectarian interests.
  • Constructive conflict resolution: In the international arena Track II diplomacy (involving non-governmental bodies) plays a crucial role in creating an environment of trust and confidence.
  • Acts as Safety Valve: NGOs also provide a voice for marginal groups and social movements, offering a safety valve that prevents the country’s millions of local mutinies from becoming uprisings.
  • Enriches Democratic Functioning: NGOs foster pluralism, diversity and freedom. They also perform the role of Capacity Builders – providing education, training and spreading awareness.

What is the FCRA?

  • Objective: First enacted in 1976 FCRA regulates foreign donations and ensures that such contributions do not adversely affect internal security.
  • Applicability: The FCRA is applicable to all associations, groups and NGOs which intend to receive foreign donations. It is mandatory for all such NGOs to register themselves under the FCRA
  • Accountability: Registered associations can receive foreign contribution for social, educational, religious, economic and cultural purposes. Filing of annual returns, on the lines of Income Tax, is compulsory.
  • Modified rules in 2015: New rules by Ministry of Home Affairs said all such NGOs would have to operate accounts in either nationalised or private banks which have core banking facilities to allow security agencies access on a real time basis.

Connecting the Dots:

  1. India’s non-profit sector
  2. Examine the key amendments and its implications of the recently passed FCRA bill.
  3. Restraining non-profit organisations is equal to restraining democracy itself. Discuss.

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