Inter Press Services, September 03, 2010

Voluntary and charitable organisations in India are aghast at a new law to restrict foreign contributions, that was passed by both Houses of Parliament recently.

The Foreign Contributions Regulatory Act (FCRA), 2010 was passed by the Lower House of Parliament on Aug. 27 and by the Upper House a week earlier. Critics say the law violates the National Policy on Voluntary Organisations adopted in 2007, which promised to enable voluntary organisations to “legitimately mobilise necessary financial resources from India and abroad.”

According to a statement released by the Voluntary Action Network of India (VANI), a national umbrella organisation for civil society organisations (CSO), the new Act “places enormous discretion in the hands of officials to determine whether a CSO will be allowed to function or not.”

“The new regulations are a terrible step backwards because they give the government arbitrary and draconian powers to restrict the activities of NGOs that they might find uncomfortable to work with,” Nisha Agrawal, chief executive officer of the charity Oxfam-India, told IPS.

“Rights based organisations such as Oxfam-India and our partners play a vital role in a democracy to hold governments accountable for actually delivering on their plans and promises to build a truly just and equitable society,” said Agrawal. “We need funds to carry out this work.”

Agrawal said the functioning of NGOs in India already stands crippled by a tax regime that does not encourage local philanthropy. “There are very few local trusts and foundations that support rights-based work and only 50 percent of these make donations to NGOs. Estate taxes also do not encourage leaving a part of one’s estate to NGOs,” she added.

Pradeep Mehta, secretary-general of the Jaipur-based Consumer Unity and Trusts Society (CUTS), says that along with the new Act, the government needs to differentiate between non-government organisations (NGOs) and profit-making entities in matters of taxation.

“Proposals to uniformly tax surpluses of the NGO sector are unjustified as they club together voluntary organisations working on public welfare issues with trusts working as educational or religious institutions, chambers of commerce and so on,” Mehta said.

The laws dealing with NGOs in the provinces are even more archaic. Thus CUTS itself is governed by the Rajasthan Societies Act and clubbed along with educational establishments that have a clear eye on making profits.

Mehta agrees that bad eggs do exist in the voluntary sector. “There is need for regulation, but this should respect the role of NGOs that is clearly defined, for example, in the achievement of the millennium development goals of the United Nations.”

During the debate in the Lower House over FCRA, union minister of state for home Ajay Maken said the law was needed to prevent the misuse of foreign funds to “divide the country on religious basis” and also deal with organisations that have been found diverting funds from development activities.

According to Maken there were over 40,000 organisations in India that receive foreign contributions and, of these, only 18,000 submit accounts to the government.

The new law, Maken said, will require NGOs to renew their registrations every five years to weed out the dormant ones. Banks also will be required to report transfers that exceed one million rupees (21,327 dollars), enabling the government to quickly track the source of large funds.

Maken said the act prohibits certain individuals and organisations from accepting overseas funds and these include cooperative societies, election candidates, correspondents, editors and publishers of newspapers, judges, government officials, members of Parliament and political parties.

Legislators pointed out to Maken that NGOs were increasingly being by private companies to carry out corporate social responsibility projects and activities.

They added that many of the Act’s objectives were already being met by a plethora of laws such as the Unlawful Activities Prevention Act, the Prevention of Money Laundering Act, the Foreign Exchange Management Act, as well as the Income Tax Act.

A joint study of the new FCRA by VANI and the Commonwealth Human Rights Initiative (CHRI) said asking NGOs to renew registration every five years would place limitations on their ability to plan ahead and also increase the possibility of corruption. “We believe this will create an atmosphere of continuous intimidation and provide enhanced opportunities for rent seeking,” the study said.

While the government will deny registration under FCRA to political organizations, it has left the definition of “political in nature” vague and prone to be misused against “anybody whom the establishment wants to target without reasons directly connected to internal security.”

By preventing NGOs from investing their funds, under FCRA rules concerning “speculative activities”, the government is effectively preventing them from observing responsible housekeeping practices and becoming self-sustaining, the VANI-CHRI study said. “The government has been given the power to determine what kinds of activities are speculative and this amounts to unjustifiable interference in internal management,” it said.

Perhaps the most draconian feature of the new law is that it gives the police arbitrary power to search and seize, circumventing the well-established protections and norms of the criminal procedure code.

According to CHRI’s Maja Daruwala. “This dilution of due process is unconstitutional and signals the thin end of the wedge whereby future laws can more easily dilute constitutional protections act by act.” (END)

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