Noshir H. Dadrawala is the chiefexecutive officer of the Centre for Advancement of Philanthropy (CAP) in Mumbai. For the social sector, the CAP is an indispensable organisation that works with them on advisory, compliance and advocacy issues. Dadrawala, an expert on laws and compliance policies governing non-governmental organisations (NGOs) and socially conscious institutions, has been following the Foreign Contribution (Regulation) Act, 2010 (FCRA) and its previous version, the Foreign Exchange Management Act, 1999 (FEMA) ever since the legislation began its journey in the late 1970s. Drawing on 35 years of experience, Dadrawala told Frontline that the issue of renewal was more about control of the sector and less about regulation. He is perplexed the government does not recognise the stellar work being done by the NGO sector, and says that this sector does the work that the government should be doing and is being punished for the same. Excerpts from an interview he gave Frontline:
Could you give us some background and discuss the rationale behind the government not renewing FCRA licences of so many NGOs?
Until December 2015, there was no concept of renewal [of FCRA licences]. This concept was introduced by an amendment of the FCRA rules in December 2015, and a majority of organisations that were registered until then obtained this first-time renewal around October 2016. Therefore, the licences of thousands of organisations that went through the process were expiring in October 2021, which the Ministry of Home Affairs (MHA) extended up to December 31, 2021. It would seem that renewal was first initiated in 2015 to weed out organisations no longer receiving foreign contributions and clean up the list of registered NGOs. In September 2020, major amendments under the Act and the Rules changed the process.
Earlier it was a straight-through renewal process, which meant: If you were compliant, filed returns and were a genuine welfare organisation, you got your renewal. Now because of the amendment, you will be treated like a first-time applicant. That allows the government to go into the antecedents of the organisation’s activities. For instance, they can question what the organisation does in the name of education, or say ‘We want to see your project site’ and so on. They will even look into the antecedents of your governing board members. Board members are required to give their Aadhaar card details and swear an affidavit that they have not been prosecuted under any offence or been involved in religious conversions or acted against the state and so on. Despite all these disclosures, some of these board members get calls that say ‘We would like to meet you at your office or come to your home’.
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I know of one case where the CEO was asked for personal income tax returns of all board members of his organisation. How difficult is it for the MHA to get it from the Department of Income Tax directly? There are horror stories of harassment. You must understand board members are working in a fiduciary capacity, there are moral and legal obligations as trustees and most board members do not receive remuneration for their time and services rendered to the NGO. So why should they be subject to all this?
Does the government believe the funds are a form of money laundering or that organisations are involved in activities they believe are against “national interests” ?
Yes, they genuinely believe foreign funds are a part of the money laundering system. In fact, they made a submission in the Supreme Court, less than two months ago, where they said the money received by NGOs is for training Naxals . They say in certain regions of north-eastern India, they are working on religious conversion, as if NGOs have nothing better to do or even have the ability to train Naxals.
There will always be misuse of funds in some pockets. I cannot rule it out. Yet name a sector where you will not find misuse of funds. Where there are human beings there will be abuse—whether it is in the government, business or social sector. I say this with a certain degree of authority after being in the sector for 35 years. I have known some of the best organisations, that are perhaps even more compliant than the business sector and are doing genuinely good work, who are being made to suffer needlessly.
You speak about the other regimes being equally responsible for their mistrust.
I am not being antagonistic towards one regime. I am raising points of law. I am not saying this is a rotten government. I am not even saying this government is singularly responsible. For instance, when you talk of a revenue model. Certainly, we can have organisations that have business activities in furtherance of their objects. Look at the law in the United Kingdom. An NGO can also have business activity which is related to its work and be taxed only on the business income. In India, however, the rule is that if you have business income more than 20 per cent of the total income of your organisation, donations will get taxed too. You lose your tax exemption. This was started in 2008 when P. Chidambaram was Finance Minister. So we cannot blame everything on this regime. Successive governments have damaged the sector.
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I have been around long enough to remember how easy it was to get FCRA licences. In the 1980s, banks said they would get the FCRA certificate if the organisation opened the bank account with them and they used to get the order from Delhi. Gone are those days. As I said earlier, from regulatory laws they have become control laws.
Demand transparency on finances, or filing of returns, but this is absolutely unacceptable control. Take the sub-grant clause. The law earlier said you could only grant funds to an NGO having FCRA, but even that is gone. Before the September 2020 amendments, if an organisation had FCRA but was an intermediary agency, not an implementing one (which meant it works with sub-parties and grassroots-level partners), it was entitled to sub-grant the foreign funds received by it to an implementing agency. However, that was removed in the amendment. What is the logic?
The foreign donor is either not interested in giving small grants or they do not know the grassroots-level NGOs, therefore they trust the intermediary who ensures that proper due diligence, monitoring and evaluation is done. The new rule is if you receive money you have to directly implement it. I think these are very regressive amendments.
I still say this regime made it more stringent, but successive regimes have been breaking the back of the sector. That element of mistrust was present even in the earlier regimes. Not on FCRA so much, but they still harassed [NGOs] on the income tax front. There was FCRA 1976 and then FCRA 2010, and that certainly did not happen during the Modi regime.
The years 2008, 2009 and 2010 were actually the turning points for income tax, FCRA and other crucial amendments. Do not lose track of the historical chronology. Who is the author of FCRA? The Kudal Commission, because in 1973 Prime Minister Indira Gandhi felt foreign contributions were coming into NGOs that supported Jayaprakash Narayan, who she believed would disrupt her government.
The social sector delivered when the government system failed. We saw that especially during the early days of the pandemic. This will be a massive setback to thousands of organisations that do exemplary work. Your thoughts on the impact of not renewing foreign funding licences.
Absolutely. In fact, the NITI Aayog asked NGOs under FCRA to give data and a report on the work they have done. The NGOs gave it as they thought it was a compliance issue. There is enough data to prove the good work done during these difficult times. Nothing came out of that. That good work done needs to be acknowledged not punished. On January 5, the NITI Aayog has reached out again to NGOs to help the government in the battle against COVID-19.
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The Ministry likes to use the word “welfare oriented organisations”, and as long as you are welfare, you are reasonably and relatively fine. If you look at the Missionaries of Charity, they are welfare, but some branches have been seen purportedly in conversion activities, says the government. The government will not pick up a maggot-eaten man on the street, but these sisters do it. Why should they be targeted? It is shameful.
Yes, this will be a major setback not just in the short term but in the long term. These are the people who have a finger on the pulse of the community. Why is the term NGO used? These are organisations doing the government’s job without being [in the] government. Do understand the history of the term NGO. Essentially, the sector is there to fill gaps in the government’s delivery system. Why is it that advanced countries have fewer NGOs? Their governments take care of health care needs, education and so on. Here we have major gaps and that is what NGOs are filling.
Roughly it is estimated that Rs.20,000 crore comes in via FCRA donations annually. This is as much as the CSR [corporate social responsibility] contribution. I keep asking, though: does the government really think that Rs.20,000 crore will do damage to them? It is chicken feed when you compare it to the FIIs and FDIs that come in without all this rigmarole under FEMA. Who is monitoring that? FEMA is a management Act, this is a regulatory Act. FEMA is under the Minister of Finance, here it is the MHA, internal security wing. What does that imply? Does it mean they are all potential terrorist organisations?
You speak about FCRA being a regulatory Act. Could you expand on that?
I think it has become more of a control Act! What I meant to say is earlier FEMA was FERA. From a regulatory Act they made it a management Act, a friendly Act so to speak. I think they should make FCRA a FCCA or Foreign Contribution Control Act. With this government, everything is about control.
Even though one of my organisations’ licence is still “under process”, I am concerned because of the September amendment, which says even if you voluntarily surrender your FCRA licence, your FCRA assets will go to the government of India. It is absurd that no one is talking about the enormity of this clause. That means schools, hospitals, shelters, orphanages, even little clinics, ambulances and so on can be claimed by the government just because it was funded with foreign contributions received under licence of the government of India.
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If I have a corpus of Rs.50 lakh and I am fed up with the issue of foreign funds, I say I will give up the licence and live with local funding. If I do that, my FCRA corpus of Rs.50 lakh will go to the government. Earlier, there was no provision for voluntarily surrendering. We welcome the clause but that it takes away your existing assets is enormous. Imagine some of the bigger organisations who have built large institutions. It is appalling that no one is challenging this provision. This is what will have a serious impact on the community. This is the one that I have been crying myself hoarse about. Even the mainstream media has not caught on to it. This is a fundamental point. It is one of the most draconian pieces of law that I can speak about. Furthermore you are dealing with the MHA which has enormous powers to really put you down.
You have written extensively on the methods of funding in the social sector. Could you tell us about donor dependence, venture philanthropy and the ideal structure of funding, in the context of NGOs faced with the prospect of the withdrawal of foreign funds?
Increasingly I think we should shift our focus to looking at local avenues. You can call it all kinds of fancy words such as venture philanthropy, but essentially we are talking about people who will invest in your organisation in various innovative ways. The dependency should be on local funding. There is enough wealth within this country but it is not being adequately tapped. We should decrease our dependency on foreign contributions because it is only going to get progressively worse over time.
In one fell swoop the government has cancelled 6,000 licences. What is the legality of this?
Last heard we had about 20,000 NGOs registered under FCRA. At a shot, 6,000 were gone immediately after January 1, 2022. They have extended the due date for those still under process, up to March 31, 2022. However, for such organisations we may get a renewal or we may be told it has ceased. The basis they say is Section 16 of the Act, which allows the Central government to refuse renewal if they feel the organisation has violated certain provisions or rules in the Act.
What will be the status of foreign organisations such as the Bill & Melinda Gates Foundation and Oxfam, which have done a fair amount of work in India?
Not a fair amount of work but a substantial amount of work. Some are currently unable to make grants a) because sub-granting is now disallowed. b) because they are placed under “prior approval”, which means the overseas donor cannot send money to the NGO unless the MHA approves the transfer of funds from overseas to the NGO. This will have a substantial impact on NGOs who benefit from their grants.
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Most leaders in the NGO sector believe that this is not about corrective measures, but that there is a larger and more dangerous message behind this move. Your comments.
The root of the problem is mistrust of the NGO sector. Welfare organisations are somewhat tolerated. Advocacy and rights-based organisations, and even some research organisations, are seen as a threat by government. The government likes to believe that foreign funds come into India to disrupt mining activities, infrastructure development activities (through environmental activist organisations), train Naxals, incite farmers, and conduct religious conversion activities. Everyone knows the stellar role this sector has played during the pandemic. There are enough case studies to prove this. In fact, NITI Aayog has collected data, facts and overwhelming evidence of how much work the NGOs have done. Here it is a policy of ‘give a dog a bad name’ and hang him. The Missionaries of Charity, for instance. I have personally seen their homes. The kind of people they pick up from the street, no one will touch. Those sisters clean wounds, bring those persons back to life or at least give them a dignified death. And yet you target them because maybe you made them say a few prayers.
Moving forward, what legal recourse do NGOs have?
Already there are cases filed in various courts. But the wheels of justice grind slowly and in the interim, it is about reinventing yourself and being resilient, or just folding up and doing something else.