FCRA SHOULD BE AN INSTRUMENT OF FINANCIAL ACCOUNTABILITY NOT OF SECURITY

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THE CONTEXT: The cancellation of the Foreign Contribution Regulation Act (FCRA) license of Centre for Policy Research (CPR), one of the country’s famed think tanks, on the charges of multiple violations raises several critical questions.

CENTRE FOR POLICY RESEARCH (CPR)

• It is founded in 1973 and is a “non-profit, non-partisan, independent institution dedicated to conducting research that contributes to high quality scholarship, better policies, and a more robust public discourse about the issues that impact life in India”.
• It is a member of the Indian Council of Social Science Research and is recognised by the Department of Science and Technology.
• Its funders have included the government of India, the Bill and Melinda Gates Foundation, and the Ford Foundation, among many others in India and abroad.
• An FCRA registration is necessary to obtain foreign funding. The CPR used to raise more than 75% of its funds from outside India. By suspending its FCRA licence, the government had effectively crippled its finances.

THE FCRA SINCE 1976

• The FCRA was brought during the Emergency in 1976 in a bid to create surveillance regime for the NGOs and put it under the Ministry of Home Affairs (MHA).
• For all such entities receiving foreign funds through foundations, corporate grants and so on, the FCRA license administered by the MHA became obligatory.
• It has not only continued thereafter but has also become a permanent feature for the scrutiny of foreign funds for such entities. The FCRA has been amended four times since then.
• In 2010, the government tightened the FCRA in the wake of anti-nuclear protests driven by some human rights bodies in Tamil Nadu’s Kudankulam that were receiving foreign funds.
• Since the accountability of the voluntary sector in financial matters was questioned, the P.V. Narasimha Rao (1991-96) government had provided a window to them to explain, interact and cooperate with the government.

ISSUES

• Hindering the work of civil societies: Recent charges on CPR such as ‘hurting India’s economic interests’ by alleged ‘mis-utilisation of funds received from foreign sources for organising protests’ are serious. The state surveillance of its activities has been on since 2014. On September 7, 2022 it was subjected to an Income Tax survey and its IT exemption was cancelled on 30 June 2023. It eventually got redressal, both, from the Delhi High Court and the Supreme Court. It is now left with just the Indian Council of Social Science Research (ICSSR) grant since it is one of the 24 ICSSR funded institutes.
• Ambiguities: Entities such as CPR are created by societies registered under the Societies Registration Act, 1860. It permits a group of desirous persons to register a society for literary, scientific and charitable purposes, framing a memorandum of associations and rules for its functioning. A very broad spectrum of societies is registered under this Act, that creates anomalies at times which is used by government for charging NGOs for violating the terms of registration and memorandum of association.
• Funding administration: The concerns regarding the transfer and use of the funds, including administrative heads, are more contentious.  Rigid categorisation often does not work with such bodies as they do not generate a separate administrative grant. When some related expenses are adjusted against foreign grants, it gives the political dispensation an opportunity to ask uncomfortable questions and cancel the FCRA license.
• Increase in foreign funding in India: There has been proliferation of NGOs for varied objectives in recent years. By the 1990s there were efforts to redefine NGOs as voluntary or civil society organisations. However, there are very few funding sources within India and corporate philanthropy has been limited in India. Thus, foreign funding of such entities became routine in India.
• Distrust against the voluntary sector: The love-hate relationship between the government and the NGOs has continued in India with each regime. CPR and such institutions have been under scrutiny for years, irrespective of their emergence as an important segment of international developmental initiatives.

THE WAY FORWARD

• Transparent mechanism: Since the civil societies are a significant part of international and the Indian social life, they must function within the structures of accountability created by the government, which must also be uniform and transparent.
• Free civic space: A free civic space without undue interference from the state or other actors is the need of the hour to enable the citizen to participate in public affairs, express their views, and hold the government accountable.
• Financial accountability: Amending the Foreign Exchange Management Act (FEMA) with some relevant clauses for the social sector could maintain financial accountability without bringing in security considerations for organisations.
• Strengthen oversight mechanism: There is a need for strengthen the oversight mechanisms to prevent any potential misuse of foreign contributions. NGOs should as well be encouraged to provide clear and detailed reports on the utilization of foreign funds, ensuring that purposes and beneficiaries are explicitly disclosed.

THE CONCLUSION:

Advocating for the protection of constitutional freedoms and reviewing stringent laws impacting NGOs is the need of the hour. At the same time, there is a need for raising awareness about the importance of civic space in preserving India’s democracy.

UPSC PREVIOUS YEAR QUESTION

Q. Can Civil Society and Non-Governmental Organisations present an alternative model of public service delivery to benefit the common citizen? Discuss the challenges of this alternative model. (2022)

MAINS PRACTICE QUESTION

Q. The constitutional freedom of India’s diverse and vibrant civil society is under challenge. Analyse this statement with regard to recent cancellation of Foreign Contribution Regulation Act (FCRA) license of civil societies.

Q. Government wielding of Foreign Contribution Regulation Act (FCRA)as a blunt instrument shrinks vital space for NGOs, civil society. Comment.

SOURCE: https://thewire.in/law/fcra-should-be-an-instrument-of-financial-accountability-not-of-security#:~:text=FCRA%20Should%20Be%20an%20Instrument%20of%20Financial%20Accountability%20Not%20of%20Security,-law&text=Amending%20the%20Foreign%20Exchange%20Management,in%20security%20considerations%20for%20organisations.