Foreign Contribution Regulation Act (FCRA): Need, Recent Amendments, and Concerns

Context: 

This editorial is based on the news “Democratic backsliding: On the state wielding the FCRA as a weapon” which was published in The Hindu. Recently, the Government of India has canceled the Foreign Contribution (Regulation) Act (FCRA) license of the Centre for Policy Research (CPR). 

About Foreign Contribution Regulation Act (FCRA)

• Deals with: Foreign Contribution Regulation Act regulates and prohibits the acceptance and utilization of foreign contributions by certain associations for any activities detrimental to the national interest.
• Origin: During the Emergency in 1976 amid apprehensions that foreign powers were interfering in India’s affairs by pumping money into the country through independent organizations. 
• Duration of Approval Granted: FCRA registration is valid for five years. 

Amendments to the Foreign Contribution Regulation Act (FCRA)

• FCRA Amendment 2010: Enacted to consolidate the law on utilizing foreign funds, and to prohibit their use for any activities detrimental to national interest.
• FCRA Amendment 2020: The law was amended again, giving the government tighter control and scrutiny over NGOs’ receipt and utilization of foreign funds.
• Foreign Contribution (Regulation) (Amendment) Rules, 2022: Increasing the number of compoundable offenses under the Act from 7 to 12. 
  • The other key changes were: 
    • Exemption from intimation to the government for contributions less than Rs 10 lakh, the earlier limit was Rs 1 lakh. 
    • Increase the time limit for the intimation of the opening of bank accounts.

Need of Foreign Contribution Regulation Act (FCRA)

• National Interest and Security: The Foreign Contribution Regulation Act sought to regulate foreign donations to individuals and associations so that they can function with the values of a sovereign democratic republic.  
• Regulation of Foreign Funding: The FCRA provides a legal framework for regulating foreign contributions to ensure transparency and accountability in utilizing such funds. 
• Preventing Money Laundering and Unlawful Activities: The FCRA helps prevent using foreign funds for prohibited or unlawful activities under Indian law. 
• Ensuring Legitimate Purposes: The act is designed to ensure that foreign contributions are used for legitimate purposes such as social, educational, cultural etc, for benefit the people of India. 

Concerns Associated with Foreign Contribution Regulation Act (FCRA)

• Lack of Compatibility with International Law: The International Commission of Jurists (ICJ) condemned the adoption of the Indian Foreign Contribution (Regulation) Amendment Act 2020. 
• Erosion of Civil Liberties: The suspension of Commonwealth Human Rights Initiative and Oxfam India give rise to suspicion that independent assessments of the country are not welcome.
• Alleged Targeting of NGOs: Over the past seven years, the government has canceled the registration of more than 16,700 NGOs and thus, is facing allegations of targeting NGOs.
• Stringent Regulations: The FCRA imposes complex and stringent regulations on NGOs receiving foreign funding under the act and can be time-consuming.
• Potential of Misuse: The state can utilize Foreign Contribution Regulation Act as a tool to suppress organizations whose activities diverge from its goals, like environmental concerns, civil liberties, and human rights.
• Ambiguity and Subjective Interpretation: Some NGOs have expressed concerns about the vague and subjective language of certain FCRA provisions.

The Basis of Cancellation FCRA Registration

• A false statement in the application. 
• NGO is found to have violated any of the terms and conditions. 
• If it has not been engaged in any reasonable activity in its chosen field for the benefit of society for two consecutive years. 
• If it has become defunct.
• Other reasons for cancellation:  If in the opinion of the Central Government, necessary for the public interest and when an audit finds irregularities in NGO finances in terms of misutilisation.
  • Remedy: All government orders can be challenged in the High Court.

Way Forward to the Foreign Contribution Regulation Act (FCRA)

• Ensuring Transparency in Granting and Suspension of Foreign Contribution Regulation Act: Transparent processes uphold democratic values and protect organizational integrity.
• Streamlining FCRA Processes: The Delhi High Court has mandated the State Bank of India (SBI) to promptly open FCRA accounts for NGOs within 10 days of receiving approval from the Centre. 
• Engaging with Authorities: To comprehend the specific concerns leading to FCRA license cancellations. Constructive dialogue may present opportunities for resolution and clarification.
• Diversifying Funding Channels: NGOs should lessen reliance on foreign funds by seeking financial support with government initiatives within India.
• Promoting Credible NGOs: With the rising cancellation of FCRA license, there is rising mistrust around NGOs. There is a need to recognise, promote and even award hard working NGOs.

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