Wednesday, March 14, 2007

The Empire Strikes Back


A 2-Pager by Ajit Chaudhuri

The development sector, when I drifted in to it, was still a space occupied by people looking to work in the farthest possible place and do something ‘different’. The decision to work in ‘an NGO’ guaranteed long-term penury, pity tinged with scorn from one’s peers from post-graduation, a low priority in the Darwinian marriage markets, and a life of conflict with the authorities. Somewhere along the way, while I was still avoiding the dreaded ‘what do you do?’ question at social occasions, development became mainstream. The government acknowledged that it was not doing, and was not capable of doing, enough to address the problems of poverty and hunger and began looking to NGOs to provide answers on the ground. Money began to flow in, people in immaculate khadis began stalking the corridors of power, development became a respectable career option, and all sorts of NGOs sprang up; quangos, gongos, dongos, development contractors, resource NGOs, etc., etc. The new lords of poverty had arrived, and NGOs are now a major employer and development a multi-million dollar industry.

There have been recent indications that things are going to change, and this two-pager looks at one of these indications, the FCMC, in some detail. No, this is not a short form of bi-lingual abuse – it stands for Foreign Contribution (Management and Control) Bill 2005. Foreign funding for NGOs is currently governed under the Foreign Contribution (Regulation) Act of 1976, or the FCRA, and the government proposes to replace this with the FCMC over the next one or two years. Accountaid, an organization that provides accounting support and advice to NGOs, has studied the FCMC, its differences from FCRA, and its implications, and published this in the newsletter Accountable (volumes 106-109), from which I have prepared this synopsis.

History: The FCRA seeks to ensure that foreign funding does not affect Indian elections. It was originally targeted at political parties, and NGOs were included as a safety measure. NGOs were asked to register under the FCRA so as to receive foreign funds in 1984, and about 30,000 have registered so far. The FCRA department now spends all its time registering and monitoring NGOs.

Since FCRA was not designed for NGOs, its implementation has created some problems. For example, an organization can receive all foreign contributions only in one designated bank account, and it has to be spent from this bank account. NGOs with activities in multiple locations have to either carry cash around or break the law. The FCRA is also vague on interest on foreign contributions, and on income from foreign contributions.

On registration: NGOs have to apply for registration under FCRA. There is no provision for renewal.

If an NGO is refused registration, reasons are not given.

The FCRA is centralized in Delhi. This causes major problems for NGOs located in remote areas.

No fees.

There is no provision for cancellation of registration.

There is a provision for prior permission to receive foreign funds in case an NGO has a willing foreign contributor but no FCRA registration, in which the department is to respond in a maximum of 120 days.

As of 1996, FCRA registration can be frozen if fifty percent or more of the governing body members change. This leads to NGOs avoiding elections.

If fellowships/scholarships/stipends to individuals are being provided from foreign funds, payments above Rs. 36,000 per annum have to be reported.

The government’s only prohibitory power is that it can direct that a specific person or NGO requires prior permission to receive future foreign contributions.

Organizations of a political nature can receive foreign funds after getting prior permission on a case-by-case basis.
The FCMC shifts focus from politics to anti-national activities, and is targeted primarily at NGOs. While anti-national activities are not legally defined, ten activities are listed (terrorism is not one).

Foreign contribution can be accepted into only one designated bank account, but can be shifted to other bank accounts (as long as these are used exclusively for foreign funds) according to operational needs. These bank accounts can only be in scheduled banks.

Interest on foreign contribution is foreign contribution. Income from foreign contribution is still vague.

NGOs will have to apply for registration under FCMC, and renew the registration every five years.

The grounds for refusal of registration have been officially listed, and the grounds for rejection will be conveyed in writing.

It appears that the FCMC registration and administration will be decentralized.

NGOs will pay fees for registration, renewal of certificates, appeals, etc.

The government can prescribe the percentage of foreign contribution an NGO can spend on administration.

The FCMC lays down a provision for cancellation of registration. All foreign funds with the NGO at the time of cancellation become the government’s.

The provision for prior permission continues, without mention of time limits.

There is no mention of this.

There is no such requirement.

The role of banks has increased. Banks are prohibited from allowing credit to or withdrawal from foreign contribution accounts unless the concerned NGO has FCMC registration or prior permission.

The government has considerable prohibitory power. It can put onto a prior permission list an entire class of people or NGOs, a geographical area, any specific purpose, or any specific source.

Organizations of a political nature cannot receive foreign funds at all.

Other points to note are –
· The FCRA will be withdrawn once the FCMC Bill is passed in parliament.
· NGOs registered under FCRA will not get automatic registration under FCMC. They will have to register under FCMC within two years of the Bill becoming law.
· In that window period, FC returns have to be filed in new formats and the new provisions will govern transactions.
· Registering 30,000 existing FCRA holders in this two-year period is likely to be a bureaucratic nightmare.

The FCMC’s potential for bureaucratic harassment should be generating concern in the NGO sector – yet there is not a peep from a sector that has an opinion on most things. Perhaps this is because it is the fourth attempt to straighten out the FCRA since 1988; the other three did not see the light of day because of changes in the government before the bill could become law.

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