The Asian Age, March 06, 2015

By Pradeep S Mehta

A survey done by Institute of Rural Management, Anand showed that FCRA is an ineffective legislation as it controls only $2 billion, which is only about two per cent of the total foreign funds. So why should the voluntary sector be singled out for money-laundering?

Successive governments at the Centre and in the states in India have been wooing foreign investors. This is because foreign investment will help to fill the gap in raising resources domestically, albeit Indian businesses too are exporting capital following a liberalised foreign exchange regime.

The foreign exchange regime was governed under the Foreign Exchange Regulation Act, 1973, which has been replaced by a softer Foreign Exchange Management Act in 1998 by the Vajpayee government following a positive balance in our foreign exchange kitty. On the other hand, another regulatory law in the realm, the Foreign Contribution (Regulation) Act, 1976 (FCRA), is applied to regulate foreign donations to the voluntary sector in India, which has been in headlines over time in so far as trust is concerned. While on the one hand the government often co-opts the voluntary sector to create awareness and enhance the success of its welfare schemes, on the other hand, it uses tools like the FCRA against the sector. The FCRA is increasingly being viewed as an instrument to silence dissent by selective and general targeting of non-government organisations (NGOs) thereby shaking the very tenets of democracy.

The FCRA is one of the few remnants of the “Emergency” era, which was first enacted in 1976, to check the presence of then perceived “foreign hand” in the activities of the Opposition parties and remains one of the few laws that have not been liberalised in the reform agenda.

That FCRA is yet to be streamlined is evident from the fact that though it has been in existence for close to four decades, the nodal agency (ministry of home affairs — MHA) or anyone else for that matter, is not even aware as to how many of the 43,000 NGOs registered under it still exist. The government now intends to check the backgrounds, records and work of about 30,000 NGOs in 2016 to decide whether they can continue to receive grants under FCRA and has made it mandatory for NGOs to have the FCRA certification renewed every five years. This reflects the prevailing lackadaisical process of receipt and scrutiny of annual FCRA returns.

The act was amended in 2010, but the voluntary sector views it as a lever to suspend or cancel clearances under the garb of national security and public interest with the latter not having been defined anywhere. Here again, the infirmities in the act and the dubious actions taken thereunder, strengthen the growing feeling of the NGOs being targeted and are for all to see and interpret. Even the judiciary has often taken a view contrary to that of the government.

Responding to a writ petition, the Delhi high court passed a landmark judgment in September 2013, quashing a home ministry order that suspended the FCRA licence of the Indian Social Action Forum (INSAF). INSAF is a network of more than 700 grassroots organisations and people’s movements. According to the MHA, the activities of INSAF were “prejudicial to public interest” and hence its bank accounts were frozen and licence suspended. Setting aside the MHA order, the Delhi high court ordered that, “if the government decides to suspend an organisation’s certificate, it can only do so for reasons recorded in writing, which need to be incorporated in the suspension order itself.”

It may be recalled that INSAF filed a petition in the Supreme Court in May, 2011 challenging Sections 5(1) and 5(4) of the FCRA arguing that these are ultra vires and violative of Articles 14, 19(1)(a), 19(1)(c) and 21 of the Constitution.

A few weeks back the Delhi high court ordered the Centre to unblock about Rs 1.87 crore sent to Greenpeace India by its parent organisation in Holland and pulled up the MHA for its “very uncommon” investigations in the activities of the NGO. The court also took a dim view of the MHA failing to issue notice, listing the charges against Greenpeace, and not giving the latter a chance to respond. It is relevant that the decision came within days of offloading of a Greenpeace activist from a flight to the UK where she was to address British MPs.

Therefore, the question as to why NGOs are singularly targeted for maligning is relevant. After all, the voluntary sector is credited with some outstanding achievements, such as, Right to Information, Jan Lokpal, eradication of leprosy, DOT treatment for tuberculosis, joint forest management and watershed development, etc. At Consumer Unity & Trust Society (CUTS), we too have been working on economic reforms and better management of our economic governance system aided by foreign donations and surely added to the growth. Further, potentially anti-development and anti-nationalistic activities could also arguably be funded through hawala, domestic and foreign funds coming in through routes other than FCRA.

A survey done by Institute of Rural Management, Anand in October 2012 showed that FCRA is an ineffective legislation as it controls only $2 billion, which is only about two per cent of the total foreign funds that come into the country. So why should the voluntary sector be singled out for money-laundering, the study asks. Better monitoring mechanisms are required rather than curbing, it said.

Few would disagree that anti-nationalistic activities should be dealt with severely — whether it is by the voluntary sector or any other sector — but on conclusive evidence. For example, the recent Budget proposal to treat black money holders as criminals. Second, transparency in the functioning of the voluntary sector and regulation of foreign funds is also not in dispute. But finally, an archaic law that hinders the flow of inward investment for economic and social development and leaves a huge scope for its interpretation in the hands of the executive needs an impartial and contextual review, if not its scrapping altogether.

“It profits us to strengthen the nonprofits,” Peter F. Drucker, the famous management guru said in the Wall Street Journal in 1991 — an analysis that holds good even today!.

The writer is secretary-general, CUTS International. Rajeev Mathur of CUTS contributed to this article.

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