Modi government’s crackdown on FCRA cripples civil society organisations

As prominent NGOs face suspension and cancellation of foreign funding licences, activists see worrying trend of government silencing critical voices.

The Panchayat Union Primary School at Karapakkam in Chennai, Tamil Nadu. World Vision India, in partnership with a private university, contributed in providing better infrastructure to the school. A file photograph. | Photo Credit: RAGU R.

Civil society organisations (CSOs) or non-profit organisations (NPOs) in India have a history stretching back several decades. There are special provisions under the legal system that allow their functioning and ensure their compliance. In recent times, however, non-profits, including some prominent ones, have come under the increasing scrutiny of the Central government over their activities and sources of funding. One direct consequence of this has been the suspension or the non-renewal or cancellation of their licences under the Foreign Contribution Regulation Act (FCRA). The FCRA licence allows these organisations to receive and use funds from abroad.

LISTEN: Critics argue that FCRA amendments and interpretations are arbitrary and used to silence dissent. This creates a chilling effect on civil society and weakens democratic rights.

In the second week of January, Centre for Policy Research (CPR), a 50-year-old think tank and public policy research organisation, and World Vision India, a charitable organisation working on child rights, received notices from the Home Ministry that their FCRA status had been cancelled. In effect, this meant their FCRA account was frozen. This in turn meant a drastic scaling down of their operations.

In a statement, CPR said “the basis of the decision was incomprehensible and disproportionate, and some of the reasons given challenged the very basis of the functioning of a research institution”. For instance, the publication of policy reports on the CPR website was equated with current affairs programming, which is not allowed under FCRA rules.

The cancellations follow the suspension in November 2022 and February 2023, respectively, of CPR’s and World Vision’s FCRA licences. An amendment to the FCRA allows the government to prohibit the use of FCRA funds already received or those in the pipeline if provisions of the Act are suspected to have been contravened. Earlier, such a freeze on accounts was possible only if the entity was found guilty. Now, FCRA status can be suspended for 360 days (against 180 days earlier) pending an inquiry.

CPR’s suspension was for 180 days and then extended. At the time, the following “violations” were cited: CPR had received and used foreign contributions for purposes other than those for which it was registered; it transferred contributions to entities and deposited funds in undesignated accounts; it published articles in violation of the FCRA and engaged in litigation and activism through one of its environmental projects. CPR was accused of irregularities in its accounts and of using foreign funds for “undesirable purposes” to harm Indian economic interests. CPR refuted all allegations.

In September 2022, Income Tax “surveys” were conducted in the CPR office and documents were seized. The think tank pointed out that these actions had “a debilitating impact on the institution’s ability to function”. They undermined the institution’s ability to pursue its objective of producing high-quality, globally recognised research on policy matters, for which it has been recognised for over its 50 years. It approached the Delhi High Court following its suspension and plans to continue to seek recourse in all avenues possible after the cancellation.

The organisation, “home to many distinguished faculty, researchers and members of the board”, said that it was in “complete compliance with the law and has been cooperating fully and exhaustively at every step of the process”. When the IT surveys were held at its premises, it had received several notices. It submitted responses to the department concerned and reiterated its commitment to compliance with the law. It said that it was “routinely scrutinised and audited by government authorities, including the Comptroller and Auditor General of India”, had statutory annual audits and all annual audited balance sheets were in the public domain. There was no question, it said, of “having undertaken any activity that is beyond our objects of association and compliance mandated by law”.

Impact for ‘vulnerable people”

On January 19, World Vision’s FCRA licence to receive international funds was cancelled with no recourse for three years. World Vision said it was “profoundly disappointed” by the cancellation after its “lengthy suspension’’. The organisation, which describes itself as a “Christian, humanitarian, development and advocacy organisation focussing on the well-being of children”, stated: “This ruling means that World Vision is no longer permitted to receive funding from abroad. It will have a significant impact for many vulnerable people across the country in the coming years.”

World Vision India was registered under the Tamil Nadu Societies Registration Act and has a Board of Directors. It said it “has had a presence in over 6,200 urban, rural and tribal communities spread over almost 200 districts in 24 States and one Union Territory”. Its Indian office, the global body stated, was “fully subject to local laws and regulations and has a long history of operating this way”. It reiterated its commitment to continue to operate, relying on generous support from within the country.

Ironically, both organisations have worked in close partnership with past governments. Founded in 1973, CPR says it has worked with “government departments, autonomous institutions, charitable organisations and universities in India and across the globe” and that full-time and visiting scholars at CPR include members of NITI Aayog, former diplomats, civil servants, members of the Indian Army, journalists, and leading researchers. It said it had worked with the Ministry of Environment, Forest and Climate Change, the Ministry of Rural Development, the Ministry of Jal Shakti, and the State governments of Andhra Pradesh, Odisha, Punjab, Tamil Nadu, Meghalaya and Rajasthan. 

At a meeting organised by Oxfam India and Bhumika Women’s Collective in Hyderabad in December 2012, domestic violence survivors talk about their trauma. | Photo Credit: G. KRISHNASWAMY

CPR officials said the suspension and now the cancellation of FCRA status would mean scaling down its operations significantly. At a hearing in the High Court in August 2023, CPR told the court that around 80 scientists and employees had left because of non-payment of salaries. A former CPR employee said its strength had come down to barely 10-15 people.

A Supreme Court advocate, speaking to Frontline on the condition of anonymity, said there were safeguards within the FCRA and the courts should uphold those. Barring a lone instance where an FCRA suspension was quashed by the Supreme Court, the experience of approaching the courts has not been very positive, he said. NPOs find it hard to sustain their work since judicial processes are long-drawn. The FCRA amendments in 2010 under a Congress regime and then in 2020 under the BJP regime have made renewal of licences difficult.

Experts told Frontline that the earlier system was liberal and renewal used to be a routine affair. Once organisations were granted FCRA status, it was for life. When the Act was promulgated in 1976 during the Emergency, the government had its eye on Gandhian groups. The focus shifted in the early 1980s to organisations with separatist leanings. A department was opened in the Home Ministry for the first time for registration. In 2010, the 1976 Act was repealed; organisations now had to apply for renewal every five years.

The 2020 amendments ensured that all FCRA accounts were held only with the Parliament Street branch of the SBI in New Delhi. They also prohibited the transfer of foreign contribution to non-FCRA registered bodies or individuals and reduced the ceiling on administrative expenditure from 50 per cent to 20 per cent. The Home Ministry’s annual report of 2021-22 said the amendments were made to discourage NGOs from spending on inflated salaries, posh buildings and offices, and luxurious vehicles. “We have journeyed from a phase where we began with just informing the government about our funding; then were told to register, and now every five years we have to apply for renewal without any certainty,” said a senior member of the NPO community.   

Before renewing FCRA licences, the government also reserves the right to ascertain that the applicant is not fictitious or benami, has not been criminally prosecuted or convicted for creating communal tension, has not indulged in activities aimed at religious conversion, and has not diverted or misused funds.

Highlights

• The Central government has increased scrutiny of NGOs under the Foreign Contribution Regulation Act (FCRA), leading to cancellation of licenses for prominent organisations like Centre for Policy Research and World Vision India. This has impacted their operations.
• The government cites violations like using foreign funds for “undesirable purposes” or publishing articles in violation of FCRA rules. However, NGOs deny these allegations and point out their compliance with regulations and audits.
• Critics argue that FCRA amendments and interpretations are arbitrary and used to silence dissent. This creates a chilling effect on civil society and weakens democratic rights.

The only silver lining

The only silver lining, an advocate told Frontline, was that every new order of suspension was now detailed, because the government knows it has to convince courts of the steps taken. But once a suspension or cancellation happens, it spells the death knell for CSOs.

Frontline spoke to Aditya Shrivastava, German Chancellor Fellow at Heidelberg University and a legal expert on FCRA. He said: “What we have been seeing with FCRA over the last decade or so is that it has become an increasingly denser and a more complicated minefield of compliance requirements for CSOs/NGOs. This is forcing CSOs to tread very carefully and avoid missteps, not just in terms of their financial records but more importantly on their rights-based work and activities. This self-censorship is what can be classified as the chilling effect. What is even more problematic is that these regulations are arbitrarily interpreted by the government to cancel FCRA licences.”

He said that picking on so-called abuses of FCRA began as a way to target and silence critics, but later became a way of cutting off funding to grassroots organisations. “These amendments have resulted in denying FCRA renewal to at least 1,200 organisations in the last couple of years,” he said.

Offices of the Amnesty International India in Bengaluru, closed following the “complete freezing” of its bank accounts by the Central government, in September 2020. The human right organisation halted its India operations and let go of its staff. | Photo Credit: K. MURALI KUMAR

According to him, the moves should be legally challenged. “There have been some setbacks in the judicial domain but many significant successes. The possibility of a long-drawn legal battle may not be appealing to organisations that are struggling individually, but it is essential for the survival of broader civil society and democratic rights,” he said.

Disquiet over adverse reports?

Reports and studies critical of the government, especially those showing poor health and nutrition outcomes, are not taken kindly. Adverse reports and studies on hunger and malnutrition among children have not helped the situation. The preoccupation to devise “indigenous growth standards” for Indian children as an alternative to globally accepted metrics of growth standards reflects disquiet in government circles about adverse global reports.

Some NGOs are accused of using foreign contributions for conversions. “Census data clearly show that there is no evidence of large-scale conversions. Besides, what conversion was an organisation like CPR doing? The majority of organisations follow rules of filing IT returns,” said the director of an organisation whose FCRA licence was cancelled.

Between 2016 and 2020, the licences of more than 6,600 NGOs were cancelled, according to a reply given to Parliament. As of March 10, 2023, there were 16,383 FCRA-registered organisations, the Minister of State for Home Affairs Nityanand Rai told Parliament. Between 2018 and 2022, the Ministry cancelled the licences of 1,827 NGOs citing violations. Greenpeace, Commonwealth Human Rights Initiative, Amnesty International, Oxfam, Save the Child Foundation, Care India, Rajiv Gandhi Foundation, and Rajiv Gandhi Charitable Trust are among organisations whose FCRA licences were cancelled.

Under the amended FCRA rules of 2010, some donor organisations also have to take clearance from the Home Ministry. The 100-odd such agencies placed in the “Prior Reference Category” need permission to support NGOs financially. In 2021, the RBI sent a circular to all banks to notify the Home Ministry if any funds were received from organisations on the PRC list.

A representative of a UK-based donor agency that works on child labour and trafficking in half a dozen States in India told Frontline that despite working closely with the government, it was on the PRC list. More than 1,500 staff members and volunteers were directly affected, he said.

“Several NGOs who were getting funds from us have not been able to get their FCRA licences renewed. Donor agencies can give funds only until the licence is valid. If it is not renewed, the money gets blocked. It affects the work of the NGO. I am not saying all NGOs are doing genuine work. There are bad apples everywhere, including in government. But there should be a system. We are open to scrutiny. The government can check if a bill was paid, if GST was given. But if a person’s daily movements are monitored, it is scary,” he said.

Challenge posed by FATF

FCRA cancellations are not the only issue. Henri Tephagne, executive director of the Centre for the Promotion of Social Concern, has been fighting a protracted battle in courts since 2012 to renew his organisation’s suspended FCRA licence. He said the Financial Action Task Force (FATF), a money-laundering and financial terrorism watchdog set up by the Group of Seven (G7) countries, was another challenge. Governments were placed on a “grey” or a “black” list depending on their FATF compliance. India became a member country in 2010. The FATF status of governments, in turn, determines foreign investment from G7 countries. Tephagne said that draconian laws and provisions like the FCRA, the Prevention of Money Laundering Act, or the Unlawful Activities Prevention Act were used to show that the government is complying with FATF guidelines.

The FATF admits there have been “unintended consequences” of its recommendations and has undertaken a Mutual Evaluation Review (MER); the final review is due in June 2024. In September 2023, Amnesty International wrote to the FATF Secretariat to “take on board key insights and concerns from the NPO sector when conducting the MER”.

Tephagne observed that the present government was focussed on cherry-picking organisations and individuals for selective treatment. “The government wants to be a member of the UN Security Council but does not want any of us to speak out,” he said. The FCRA licence for his organisation was suspended on the grounds that he had caused damage to India’s image.