A recent set of changes to India’s foreign donation laws, however, has put hundreds of small NGOs like Arpan in a spot. “Our work has come to a halt after the donor agency asked us not to use funds till rules (arising from the new laws) are framed,” said Renu Thakur, who heads the non-profit. “It looks like we will have to let go of some of our staff and curtail our geographic spread.”
In late September, India’s Parliament approved sweeping changes to the Foreign Contribution Regulation Act (FCRA), 2010. From now on, larger FCRA registered organisations are barred from transferring foreign donations to smaller non-profits (a practice known as sub-granting) who often find it difficult to access donors on their own. Also, all FCRA registered non-profits have been asked to limit their administrative expenses to 20% of donations (from the earlier norm of 50%) which is likely to force them to reduce staff as well as curtail research and policy advocacy work.
To tighten the screws further, FCRA registration can be suspended now after a summary enquiry and the period of suspension can extend up to a year (from 180 days earlier)—a provision which will give the government more time for enquiry and halt the organisation’s work for an extended period.
These changes will impact not just the availability of funds but also the very nature of philanthropic initiatives. The focus of donors may shift from rights, advocacy and research to service delivery; in a few years, foreign donors might also redirect funds to other countries, experts warn.
The restrictions on NGOs were least expected by civil society organisations that have been stretched after a gruelling past few months helping communities (like migrant workers) affected by covid-19. Also, it’s ironic since political parties can now access foreign funds through electoral bonds.
During 2018-19, Indian NGOs received ₹16,881 crore in foreign donations, accounting for about a fourth of the overall philanthropic spending in India. At a time when most donor funds are directed towards covid relief efforts, the amendments could squeeze the once-vibrant not-for-profit sector of funds. The crunch is also because a chunk of the corporate social responsibility (CSR) funds which NGOs depend on went to the PM-Cares fund, a new national corpus set up to mitigate the impact of emergencies like the ongoing pandemic.
An analysis of CSR spending outlook for 2020-21 by Sattva, a consultancy firm, shows that more than half of the annual CSR budget of Indian corporations, or about ₹7,863 crore, was allotted for covid relief by early July. About 68% of this allocation went to the PM-Cares fund ( ₹5,324 crore). “With an estimated ₹8,000 crore going to the PM-Cares by now, availability of domestic CSR funds for NGOs will be back to normal levels by the second quarter of 2022,” said Parul Soni, managing partner at Thinkthrough Consulting.
There’s obviously been a mixed response to the changes. Soni, for one, defends the recent amendments, saying they will bring in