Congress leaders said certain non-governmental organisations(NGOs) which were critical of government polices were on the firing line.
Senior Congress leader Verappa Moily said the present government is "very revengeful" and its actions amounted to curbing the movement of NGOs.
"The government is merely drawing inferences...This is not in the interest of the country. Creating an image that all the NGOs are not good is not good for the country," he said and added that if there was an erring NGO, it should be prosecuted.
"We are not being targeted for our accounts. The main issue why Greenpeace and some other NGOs are being targeted is because it has a voice of dissent. Because they have been working for tribal rights, land rights of communities and this has been an area of concern for the government.
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"The government is not ready to listen to the voice of dissent in the country," she said.
However, Minister of State Kiren Rijiju defended the decision, saying "action has been taken after getting specific inputs."
The US-based Ford Foundation has also been put in the 'watch list' last week by the Home Ministry last week which directed that funds coming from the international donor should not be released by any bank to any Indian NGO without mandatory permission from it.
In its order, the Home Ministry said notices were issued in October last year to nearly 10,000 NGOs to file their returns for 2009-10, 2010-11 and 2011-12 within a month.
However, only 229 NGO's filed their returns leading to cancellation of their registration issued under FCRA, the notification said.
Congress leader Rajiv Shukla asked the government to spare the NGOs who were working for good cause.
Congress MP Gaurav Gogoi criticised the government move claiming that the NDA regime has become intolerant to criticism.
"Government is trying to rein in critical voice. It has become intolerant which is not good," he said.