NGOs cry foul over changes in foreign funds law

There is discontent among NGOs over the Foreign Currency Regulation Act Amendment Bill to regulate the flow of foreign funds. The Bill is to be tabled in this session.

NGOs feel the government, while removing almost all curbs on foreign investment for companies, is creating a new law to clamp down on them.

The Bill requires NGOs to register every five years and pay a fee. It also provides for a ban on disposing of any property bought with foreign funds. Default will lead to punitive measures including jail term.

The Bill bars NGOs from investing their corpus in securities and real estate and debars registered associations of political nature and media organisations from receiving foreign funds, according to VANI, a network of 2,200 NGOs.

The NGOs are upset as the government did not discuss the Bill with them. "On the one hand, they bring the Right to Information Act and on the other hand, they introduce a Bill secretly," says Helpage India CEO Mathew Cherian.

While some say the law is unnecessary, others point to the more restrictive provisions.

"Where is the need for a law to curb foreign funds to NGOs when the government has removed almost every restriction on foreign investment in the corporate sector? Many NGOs should consider setting up themselves as companies. I can today set up a 100 per cent foreign equity firm but not an NGO," Cherian said.

NGOs should consider setting up as companies, adds Cherian. There are several takers for such an option. Rajib Haldar, CEO of Prayas and PC Pande, CEO of VANI, say NGOs have been given a raw deal.

"For companies, FERA has been repealed, FDI limits have gone, but for us, there is one curb after other," says Haldar.

Pande has shot off letters to the prime minister, all Cabinet ministers and to the Planning Commission. "The Bill may affect the good work being done by many NGOs," he says.

The home ministry hopes the Bill will help it monitor funding of illegal activities like terrorism. But NGOs say they should not be singled out.

"The government is looking at all NGOs with suspicion because of incidents of terrorism. To paint us all in the same colour is not fair,'' says Cherian.

The clause on renewal of registration has also puzzled many NGOs. "We go through government scrutiny annually. I don't see any reason for this provision,'' says CRY chief executive Ingrid Sreenath:

The Bill has been drafted after watering down some of the more draconian measures suggested in its earlier incarnation, the FCMC Bill.

The Bill seeks to amend the 30-year-old FCRA Act, under which NGOs have to register themselves with the home ministry and get clearance for receiving foreign funds.

"This is a licence for more corruption in the ministry. Bribes have to be paid for every registration. Now the officialdom can celebrate a chance of wringing the NGOs every five years," says Cherian.

Home ministry officials deny these charges and say the re-registration will be automatic and online for all except a few troublemakers. There is no question of bribery, they point out.

Haldar does not agree. "The government should come out with a white paper on this. On the one hand, it is passing on most of its responsibilities in the social sector to NGOs and on the other hand, it is trying to snuff out foreign aid, which is so important for their very survival,'' he says.

"FCRA is the only window for getting foreign aid. They are trying to make it inaccessible,'' he adds.

The corporates which get all the funds will set up foundations rather than support NGOs, Haldar says.