Regulation of NGOs in India

2021 DEC 17

Mains   > Social justice   >   Development Processes & Industry   >   NGOs

WHY IN NEWS?

  • The Ministry of Home has informed Parliament that a total of 188 FCRA registered NGOs have been audited from January 2021 till date. The ministry said that the audit is being conducted to fulfil the responsibility cast upon the Government under The Foreign Contribution (Regulation) Act, 2010.

INTRODUCTION:

  • The UN Department of Public Information (DPI) defines the NGO as “a not-for profit, voluntary citizen’s group that is organized on a local, national or international level to address issues in support of the public good.”
  • Indian NGOs mainly comes under three segments:
    • Societies: Societies have to register under The Societies Registration Act,1860.
    • Trusts: Private trusts are registered under the central government’s Indian Trusts Act, 1882, and public ones are registered under the state legislation concerned.
    • Charitable companies: They are set up according to section 8 of the Companies Act, 2013. For charitable companies, the compliance requirements are high, as loans and advances are easily available to them compared to a trust or a society. They have to even pay Income tax under IT act 1961.

SIGNIFICANCE:

  • Bridging the gap:
    • NGOs endeavour to plug gaps in the government’s programmes and reach out to sections of people often left untouched by state projects.
    • For example: Providing aid to migrant workers in Covid-19 crisis.
  • Role in participative governance:
    • Many civil society initiatives have contributed to some of the path-breaking laws in the country, including the EPA-1986, RTE-2009, Forests Rights Act-2006 and Right to Information Act-2005.
    • Example: Mazdoor Kisan Shakti Sangathan >> instrumental in bringing RTI Act
  • Acting as a pressure group:
    • There are political NGOs that mobilise public opinion against government’s policies and actions.
    • To the extent such NGOs are able to educate the public and put pressure on public policy, they act as important pressure groups in a democracy.
    • They also mobilize and organize the poor to demand quality service and impose a community system to accountability on the performance of grassroots government functionaries.
  • Human rights protection:
    • The contribution of NGOs to human rights and public awareness is significant in India.
    • The recognition of the rights of homosexuals and transgender people, for instance, would have been unimaginable without the sustained effort of civil society organisations.
    • Example: NGOs such as Bandhua Mukti Morcha (BMM) was instrumental in tackling bonded labour in India
  • Protecting dignity:
    • NGOs are also rendering great service in restoring dignity of the deprived and discriminated sections.
    • For example: NGOs such as CARE India works for underprivileged women and girls in rural areas.
  • Education:
    • Examples: Many NGOs like Oxfam India, Save the Children etc in India work at the grass-root level to strengthen the education system
  • Service delivery
    • NGOs act as service delivery mechanism in the society complementing the state’s effort in public service delivery.
    • Example: Pallium India >> providing palliative care
  • Data collection and research for policy making
    • NGOs performs a significant role in conducting studies on various fields >> which aids the policy makers in effective formulation of policies.
    • Example: IndiaSpend, CMIE, Oxfam etc.
  • Environmental conservation:
    • Example: Narmada bachao Andolan was instrumental in bringing awareness on negative externalities of large dam projects across the Narmada River.
  • Animal Rights
    • Example: efforts of PETA >> led to ban of Jallikattu
  • Strengthening democracy:
    • Role played by NGOs in documenting and questioning state functioning and excesses is a necessary component of civil society activism >> which enhances democracy by securing accountability.

ISSUES FACED BY NGOs:

  • Lack of funding:
    • Many NGOs find it difficult to garner sufficient and continuous funding for their work.
    • While CSR partnerships offer a steady income, the majority of NGOs are excluded and for them gaining access to appropriate donors is a major challenge.
    • With FCRA amendment in 2020, many NGO’s will not be able to access foreign funds because the scheme under which they receive these funds from donor agencies and larger NGOs, known as ‘regranting’ has been banned.
  • Over-dependence on government
    • Over-dependence on funds from the government dilutes the willingness of NGOs to speak out against the government.
  • The absence of strategic planning:
    • Many NGOs suffer from the lack of a cohesive, strategic plan that would facilitate success in their activities and mission.
    • This renders them unable to effectively raise and capitalise on financial support.
  • Poor development approaches:
    • It is a common mindset for Indian NGOs to favour a “hardware” approach to development.
    • This focuses on building infrastructure and providing services instead of empowering people and institutions locally, which often have stronger impacts.
    • Resultantly, NGOs’ development approaches are not as flexible, sustainable and relevant to the community as they have the potential to be
  • Lack of transparency:
    • India’s disproportionate number of NGOs and the sector’s lack of transparency and accountability is clearly an issue that needs reforms.
  • Restriction to explore:
    • The amount NGOs can spend on administration has been cut from 50% to 20%, which mean many smaller NGOs will not be able to employ enough staff, hire experts and implement strategies they require to grow.
  • Increased cost of transaction and distance:
    • As FCRA amendment 2020 >> NGOs will have to open an account with a Delhi branch of the State Bank of India.
    • Which could be a thousand kilometers away for many NGO’s and increase the transaction cost.
  • Hamper delivery of social welfare schemes:
    • Due to overregulation of NGOs under new FCRA rules will have far-reaching the consequences for delivery of government schemes in these fields of education, health and social welfare.
  • Accreditation of NGO’s:
    • It is very difficult for National Accreditation Council to distinguish whether an organization wants to work for the cause or has been set up only for the purpose of receiving government grants.
  • Government high-handedness against NGOs:
    • Government regulations are misused to curb the voice of dissent.
    • Politicians threaten NGOs of removing funds or removing their certification. Over-regulation of NGOs hinder their work and efficiency.
    • Example: Amnesty International, which won the Nobel Peace Prize in 1977, had to halt operations in India because of the freezing of its bank accounts and intrusive scrutiny from state agencies
    • India now joins the ranks of countries such as Russia where the group has stopped operations.
  • Lack of human resource:
    • There is a massive crunch of qualified and experienced development sector professionals in India.
  • Poor governance and networks:
    • Poor or disorganised networking is another major challenge, as it can cause duplicated efforts, time inefficiencies, conflicting strategies and an inability to learn from experience
    • NGOs in many cases fail to maintain a healthy relationship with various government agencies– local, state level and the central government.
    • NGOs are commonly viewed as ‘opposition to the government’
  • Cultural hurdles
    • NGOs are often seen as encroaching on centuries-old tradition and culture of the people, and lead to mass protest at times.
    • Ban of Jallikattu after a Public interest litigation filed by PETA is one such example.

 

NEED FOR REGULATION OF NGOs:

  • Reduce corruption:
    • The operations or sources of funding of most NGOs are not available in the public domain.
    • This lack of transparency has resulted in abject corruption and misappropriation of funds among many Indian NGOs.
  • Concerns over national security:
    • There are concerns of terror funding through NGO route, arms trade, drug trafficking etc.
  • Anti-development:
    • As pointed out by an IB Report in 2014 >> many NGOs, with support from international donors, were disrupting the developmental activities and even funding anti-national activities, thus endangering Indian interests.
    • According to the IB report >> NGOs such as Greenpeace, Cordaid and Amnesty are serving as tools for foreign policy interests of western govt
    • They are also accused of organising agitations and scuttling development projects in India which cost India’s GDP 2-3% per year.
  • Check misuse of foreign funds:
    • Governments are trying to check the misuse of foreign funding because if unchecked, can hamper the country's sovereignty and foreign money can be used to influence policy and political discourse in India.
    • For this reason, the government has banned 14,500 NGOs, registered under FCRA from receiving foreign funds.
  • Prevent opaque operation:
    • In 2017, the CBI has informed that less than 10 per cent of registered NGOs filed their audited accounts (to registrar of societies).
    • Also, NGOs, except those substantially financed by the government, are outside the purview of the RTI Act.
    • Hence, there should be measures to ensure transparency in the operation of NGOs.
  • Religious and cultural encroachment:
    • NGOs are often seen as encroaching on tradition and culture of the people as well as misused their influence to sell foreign narratives, push vested interests and promote religious conversion.
    • Ex: Government has barred ‘Compassion International’ from funding Indian NGOs without its permission over allegations of religious conversions.
  • Prevent money laundering
    • Because of the positive public perception and Income tax benefits available to them, Indian NGOs are targeted for money laundering activities.
    • As a result, there is a growing tribe of NGOs called briefcase NGOs which exists only on paper and handle vast funds for laundering

REGULATIONS AND INITIATIVES:

  • Foreign Contribution Regulation Act (FCRA):
    • It aims to regulate flow of foreign funds to voluntary organisations with the objective of preventing any possible diversion of such funds to anti-national activities.
    • Under the Act, Ministry of Home Affairs (MHA) regulates the acceptance and utilisation of foreign contribution by individuals, associations and companies.
    • An FCRA registration is mandatory for NGOs to receive foreign funds.
    • A provision was made for the cancellation of registrations of NGOs if the Home Ministry believes that the organisation is political and not neutral.
    • As of 2020, there are 22,591 FCRA registered NGOs in India.
  • Foreign Exchange Management Act (FEMA), 1999:
    • There are certain NGOs that are registered under FEMA and continue to disburse foreign funds to various associations in India.
    • FEMA is regulated by the Ministry of Finance and was introduced to consolidate and amend the law relating to foreign exchange with the objective of facilitating external trade and payments.
  • Accreditation:
    • NITI Aayog has been appointed as the nodal agency for the purpose of registration and accreditation of NGOs seeking funding from the Government of India.
    • The Aayog has been also tasked with maintaining database systems to manage and disseminate information relating to NGOs.
  • Bombay shops and Establishment Act 1948:
    • NGO registered under the Bombay shops & establishment Act, must pay Minimum Wage to that employee irrespective of the strength of employment.
  • NGO under RTI
    • NGOs “substantially” financed by the government fall within the ambit of the Right to Information Act >> Supreme Court held in a judgment in 2019.
  • Social Stock Exchange
    • It is a platform for listing social enterprise, voluntary and welfare organisations so that they can raise capital
    • It was mooted in the Union Budget 2019-20.

 

SUGGESTIONS:

  • Rating system:
    • There is a need for a rating system to be in place for NGOs which ranks them on the basis of the seriousness of their work and their openness to getting audited and scrutinized.
  • Cooperation in government:
    • It is imperative to NGOs to maintain a healthy relationship with various government agencies – local, state-level and the Central Government.
    • It is an extremely wrong notion that in order to do their work, NGOs need to go against the government.
    • The truth is that NGOs need to liaison well with government entities and be a partner wherever needed.
  • Effective utilization of technology:
    • Utilize technology in recording actual data of the social work.
    • This information is crucial for effective decision-making process and better transparent working.
  • International collaboration:
    • NGOs in India must be supported to broaden their network beyond India’s territory and reach out the reputed philanthropy platforms globally
  • Monitoring:
    • There should be better coordination between Ministries of Home Affairs and Finance in terms of monitoring and regulating illicit and unaccounted funds.
  • Participation:
    • Citizens today are keen to play an active role in processes that shape their lives.
    • It is important that their participation in democracy go beyond the voting and should include promotion of social justice, gender equity, inclusion etc. while working with NGOs.
  • Improving governance:
    • Having a Board for governing NGO is one of the best ways to achieve good levels of governance.
    • Capacity building and training can help to provide crucial new skills. NGOs can more readily train staff and cultivate the necessary skills within the organisation to address challenges going forward.
  • Alternate sources of funding:
    • NGOs with assets can use any surplus to help generate income. Renting out buildings, offering training, providing consultancy, creating and selling products and trading on their name.
  • Should work in harmony with the communities:
    • NGO should try to know local cultures and should work in harmony with the communities.
    • They must make people aware of any discriminatory community practices and work with them, rather than going against the people.
  • Need for an National Accreditation Council
    • NAC consisting of academicians, activist, retired bureaucrats should be established to ensure compliance by NGOs.
  • Free regulators from the grip of political influence:
    • The role of NGO regulators should be to effectively secure compliance with the laws in a fair, transparent and non-partisan manner, free from political influence to enhance public trust and confidence in both the regulator and the NGOs
  • Government should tolerate constructive criticism:
    • Democratic regimes that are bound by constitutionalism should not consider critical activism by groups such as Amnesty as being adversarial, but instead view it as constructive critique of their functioning
  • Adopt recommendations made by Vijay Kumar Committee:
    • 'Light regulation' of NGO so as to reduce their harassment.
    • Modernize registration procedures Under IT Act and FCRA so as to facilitate the seamless operation of NGOs, without the need for cumbersome and intrusive processes.
    • Reduce the need for a physical interface between NGOs and public officials acting under the IT Act and the FCRA
    • Drawn up a framework of guidelines for the accreditation of NGOs, audit of their accounts, and procedures to initiate action for recovering grants in case of misappropriation.
    • Nodal Body:
      • NITI Aayog >> to be the nodal body to oversee the various interfaces between NGOs
    • Separate law for voluntary agencies engaged in activities of a charitable or public good nature to enable more effective and efficient regulation of the sector.
    • Uniform legislative framework
      • Recommended an overarching legislation with best practices that would replace various State-level and existing Central laws.
    • Information dissemination
      • Details of NGOs should be available as searchable database information.

PRACTICE QUESTION:

Q. “A regulatory mechanism to keep a watch on the financial activities of NGOs and voluntary organizations is the need of the hour”. Critically analyse

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