The Foreign Contribution Regulation Bill of 2006

While the Government is liberalising the Indian economy and opening it up to various forms of foreign investment, its policy on foreign contributions to Indian NGOs is still beset by a knee-jerk paranoia and a strategy for social control that once ruled the for-profit sector.  For thirty years, the Home Ministry has used its power to grant and take away Foreign Contribution Regulation Act (FCRA) registration as an unsubtle political bludgeon to silence NGOs that do not conform with government policy. 

Although the FCRA’s stated objective – to halt the inflow of overseas funds purportedly intended to destabilise the nation – may be legitimate, the Act has had a negligible effect in accomplishing this goal.  Indeed upon reflection, it is obvious that the means chosen to achieve the Act’s ends would be ineffective.  It is absurd to assume that the “anti-national” and “separatist” forces supposedly targeted by the FCRA would seek FCRA registration for their activities and then be caught as a result.  Such groups or individuals continue to use illicit funds channeled through the “hawala” route for illicit activities and ignore the FCRA.  The FCRA only adversely affects legitimate groups that desire to play by the rules and work for India’s national welfare. 

In early 2005, the Government announced its intention to repeal the FCRA, but simultaneously introduced an even more draconian replacement, the Foreign Contribution (Management and Control) Bill (FCMC Bill).  After vocal opposition from NGOs, that Bill was dropped.  However in late 2006, the Government reintroduced what was essentially the same FCMC Bill as the Foreign Contribution Regulation Bill 2006 (FCR Bill).  The Government’s ploy of dropping ‘management and control’ from the Bill’s title is mere window dressing on an initiative intended to clamp down on India’s non-profit sector. 

Ironically, the FCR Bill also appears to run counter to the Government’s own 2006 Draft National Policy on the Voluntary Sector.  That Draft National Policy supports the creation of an “enabling environment for Voluntary Organisations (VOs)”, including reliance on legitimate, “necessary financial resources from India and abroad”.  And in fact, the Policy has a dim view of the FCRA as a law that “prescribes highly stringent screening norms that often restrict the ability for VOs to avail of foreign funds.”  Passing the FCR Bill would only make things worse. 

Problematic Aspects of the FCR Bill 2006  

Cleared by the Union Cabinet in early November 2006, the FCR Bill prohibits the acceptance and utilisation of foreign contributions for “any activities detrimental to the national interest”—a vague standard all but inviting politicisation of such contributions.  The Bill enlarges the categories of persons and organisations that are prohibited from receiving foreign contributions.  It also imposes enhanced penalties for violations of its provisions while failing to provide for grievance redressal mechanisms.  Under the guise of protecting India’s national interest, the Bill’s only accomplishment will be to empower the Government to interfere in the inner workings of NGOs. 

A discussion of a few of the more significant changes under the Bill and their implications follows: 

(1) Prohibition against foreign contributions to “organisations of a political nature not being political parties” 

Section 3(1)(f) of the FCR Bill has potentially far-reaching and grave implications for India’s non-profit sector—it contains a blanket prohibition against any and all “organisations of a political nature not being political parties” receiving foreign contributions.  Moreover, Section 5(1) grants the Central Government the authority to determine whether such an organisation is “of a political nature” based on its activities, ideology, programmes or association “with activities of any political party”.  Vesting the Government with such unchecked power over the finances of NGOs may foreshadow the death knell of India’s vibrant non-profit community. 

Almost any organisation or person can be said to be engaged in political activity, especially if they voice displeasure with the current state of affairs, advocate for improvements in the lives of the Indian people, or simply disagree with the government of the day.  All organisations working on advocacy issues – such as women’s rights, rights of ethnic minorities, or children’s rights, for example – are “political” in so far as they challenge existing power relations within Indian society.  Section 5(1) provides little guidance in determining whether any given organisation is “of a political nature”—it primarily lists examples of where to look rather than what to look for.  The FCR Bill invites the Central Government to engage in an entirely standardless, subjective exercise.  The end result will be a government with the powers to seize, control, hinder or prohibit an organisation engaged in advocacy issues that may potentially have a bearing on the government’s own political interests. 

The key term “organisations of a political nature not being political parties” must be more clearly defined in the FCR Bill as those organisations that have either formal or clear informal associations with one or several political parties.  Restricting foreign contributions to political parties and their affiliates has a legitimate purpose in protecting our democratic process from foreign interference.  Indeed, the Representation of People Act already obliges Indian political parties to account for their financing.  It would be a simple matter to amend that Act slightly to prohibit political parties and narrowly defined “organisations of a political nature not being political parties” from receiving foreign funding.  But the FCR Bill goes far beyond the legitimate purpose of safeguarding the democratic process.  There is absolutely no foundation in any democratic country for restricting funding—and thereby controlling the activities—of any non-political party organisation or person engaged in lawful, non-violent advocacy issues. 

(2) Prohibition against foreign contributions to journalists and news organisations  

Sections 3(1)(g) and (h) of the FCR Bill are among the most puzzling portions of the proposed law because they are so starkly at odds with the Government’s policy of opening up the media to foreign ownership.  These provisions would prohibit any association, company, correspondent or editor “engaged in the production or broadcast of audio/audio-visual news or current affairs programmes through any electronic mode” from receiving foreign contributions. This represents an expansion of the scope of the FCRA, which already prohibits correspondents, columnists, cartoonists, editors, owners, printers, and publishers of registered newspapers from receiving foreign contributions. 

This portion of the FCR Bill is especially poorly conceived considering that on 25 June 2002 the Union Cabinet opened up the print media to foreign direct investment, thereby allowing up to 26% of foreign equity of the total holdings. Further, in June 2005, the UPA Government allowed 20% foreign direct investment in private FM radio services—a policy expected to “generate employment all over the country” and make radio services more competitive with the private sector.  Quite rightly, concerns about national security did not appear to be uppermost in the minds of the Central Government when it liberalised India’s restrictions on foreign ownership of the media.  Human Rights Features is at a loss to understand how shares of Indian media companies can on the one hand be for sale to foreigners while on the other hand “foreign contributions” to media companies are to be prohibited. 

(3) Heavier restrictions on prior permissions to receive foreign contributions 

The FCR Bill’s Statement of Objects and Reasons cites the “quantum jump in the amount of foreign contribution being received and large scale growth in the number of registered organizations” as rationales for the draft Bill.  Implicit in these rationales is an old-fashioned siege mentality where foreign contributions and civil society groups are still viewed as internal security issues.  As much as the Government would like to portray the FCR Bill as an exercise in financial probity, it is rather an expression of paranoia. 

Through the proposed FCR Bill, the Central Government seeks to exercise complete control over who receives funding, from whom the funds are received, how such funds can be utilised, and for what purposes.  This goes far beyond what the reach of the FCRA.  The draft Bill would result in nothing less than state control over every aspect of an organisation’s identity and functioning, making a mockery of the freedom of association. 

(4) Restrictions on granting the certificate of registration or prior permission 

A further example of the Government’s intent to control the content of NGOs’ activities is Section 12(3)(b) of the FCR Bill.  Assuming other conditions are satisfied, this provision states that the Central Government will provide a certificate of registration or prior permission for an organisation to receive foreign contributions if the Government is satisfied that the applicant “has undertaken meaningful activity in its chosen field for the benefit of the people” or “has prepared a meaningful project for the benefit of the people”.  By claiming the discretionary power to determine what constitutes “meaningful activity” or a “meaningful project”, the Government seeks to pass political judgement on the work of NGOs and other organisations.  Such standardless and subjective terminology is an invitation for abuse of power.  If the FCR Bill becomes law, Human Rights Features has little doubt that criticism of the Government will not be considered “meaningful” by the object of that criticism. 

(5) Renewals of Registration and Restrictions on Administrative Expenses 

In contrast to the liberalising spirit animating some of the Government’s recent economic legislation, the FCR Bill represents a triumph of meaningless bureaucracy over good sense.  The FCR Bill requires recipients of foreign funds to renew their registration every five years, and introduces fees for registration, renewal and prior approval.  Presently, registration under the FCRA is permanent and free.  Renewal provisions such as these are completely unnecessary because all NGOs, whether or not they receive foreign funding, are subject to audits and financial scrutiny under existing legislation such as the Income Tax Act.  The registration renewal requirement will generate uncertainty, inconvenience, and more seriously, harassment by petty bureaucrats.  And of course, it will also increase the scope for corruption—as Helpage India CEO Mathew Cherian recently commented, “[b]ribes have to be paid for every registration.” 

Further, in a move clearly intended to hinder the functioning of NGOs carrying out research and acting as government ‘watchdogs’, the Bill limits the maximum amount of foreign contributions that NGOs may spend on administrative expenses to 50%. Although less draconian than the 30% cap proposed in the FCMC Bill in 2005, many smaller organisations have only administrative expenses, and therefore they will be unable to legally spend foreign contributions without diversification of their operations.  

The FCRA is bad enough—India does not need the FCR Bill 

If a hostile organization receiving foreign funding were posing as a legitimate Indian NGO, the onus would be on the Intelligence Bureau (IB) or the MHA to investigate its activities and prove that they were unlawful.  Neither the FCRA nor the FCR Bill are necessary for this task.  For instance, the Unlawful Activities Prevention Act, 1967 criminalizes raising funds for terrorist acts and provides for seizure of proceeds of terrorism, cash that may be used for terrorism, and other forms of resources belonging to an unlawful organisation.  Furthermore, the Money Laundering Act, 2002 could also be used in this manner. 

The bottom line is that there is no reason to regulate NGOs in the way envisioned by the FCRA or the 2006 FCR Bill.  NGOs, like for-profit companies, are subject to the ordinary laws of the land, which are quite adequate to deal with any rogue organisations. Foreign assistance received by NGOs should be regulated in the same manner as foreign direct investment received by companies. A simple amendment to the Foreign Exchange Management Act (FEMA) could bring all foreign exchange transactions both under a single uniform civil law for all entities dealing with foreign exchange, and under the purview of the Finance Ministry. 

The administration of the FCRA by the Home Ministry, aided by the intelligence services, makes it an ideal tool for political use.  The FCR Bill will only make things worse for NGOs in India.

 Human Rights Features