Thursday, Dec 08, 2022

Enough of the ‘foreign hand’

Instead of arbitrarily discrediting NGOs for foreign funding,the government should address their funding dilemmas and have a comprehensive regulation to monitor their workings

Instead of arbitrarily discrediting NGOs for foreign funding,the government should address their funding dilemmas and have a comprehensive regulation to monitor their workings

Recently,many leading NGOs in Delhi met to protest and draw up an action plan against what they called a witchhunt by government agencies. Roughly 125,000 organisations classified as “development NGOs”, which are registered under the Foreign Contribution Regulation Act and receive foreign funding,have been reportedly sent notices by the IT Department,since last August. These are not only for tax arrears,but also threaten to cancel their registration as non-profit entities under the Income Tax Act.

This illustrates the funding dilemmas faced by civil society organisations who are caught between a rock and a hard place. If,as a matter of principle,they don’t accept money from government or foreign donors but rely only on charitable or corporate donations, they cannot go to scale,their impact is limited,and even their very survival may be at stake. If they try to supplement grant funds from income-generating activities,they fall foul of the 2008 amendment of the Income Tax Act,which narrowed the definition of charitable activity exempted from tax to mostly service-oriented work.

At particular risk are research and advocacy groups engaged in rights work. Because the line between advocacy and political action,especially in the field of human rights and governance,is very thin,their work is often suspect,especially in the government’s eyes. Even more problematic is the receipt of foreign funds — it is used as an excuse to discredit them. It is a tactic often used by politicians of countries that receive development aid,to divert attention from domestic troubles.

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Soon after the end of the civil war in Sri Lanka,when the world community was debating whether war crimes had been committed by the government of Mahinda Rajapakse,the Sri Lankan government vented its anger on the NGOs that they felt were responsible for the launching of the UN enquiry. They were accused of taking foreign funds and using them at the orders of their foreign donors. Their accounts were investigated,but they were not charged with any specific crimes,so that no legal recourse was available to them.

None of this is new to India. During the Emergency,the “foreign hand” became a bogey phrase,as the then prime minister Indira Gandhi began to see in it conspiracies to destabilise her government. The Foreign Contributions Regulation Act (FCRA) was enacted in 1976 to control and regulate NGOs receiving foreign aid. A commission of enquiry,the Kudal Commission,was ordered to investigate the activities and sources of funds,especially foreign funds of organisations known to be close to Jayaprakash Narayan. The enquiry,which lasted for several years found nothing adverse. But it served to warn others.

Every major protest movement since then has faced similar allegations of being driven by foreign money. The Left,in spite of its recent overtures to civil society,is again targeting NGOs’ foreign funding,as is the government itself. The fear of action under FCRA,now made more stringent by the new Act of 2010, has been used to rein in protesting NGOs.


No doubt,there are instances of foreign donors giving funds to covertly influence government policy or legislation,and even to support illegitimate activity. But using aid for political purposes is a well-known tool of foreign policy. Why else would India offer aid to other less well-off countries when its own problems of poverty are so great and in need of resources? However,NGOs as a whole should not be denied aid because of this; nor should the mere fact of receipt be used to silence legitimate dissent.

The fact is most NGOs would be more than willing to use domestic rather than foreign funds,especially for advocacy purposes,if only they were available,and if the funding practices of government or other indigenous donors were as sympathetic and progressive as those of foreign donors. The government’s own funding is difficult to get,tied up in red tape and liable to be withdrawn as an expression of displeasure. The government’s tax policy,instead of enabling NGOs to raise money from private sources by offering incentives to donors,or through supplementary “business” has become more,and not less restrictive of such efforts,admittedly due to the malpractices of some in civil society itself.

As for private donations,though people give generously to religious causes and to individuals in need,sustained giving for organised social transformation is yet to develop in India. Even when they give,the first preference is to give to agencies working for disaster victims,followed by work for the destitute or for children. Research and advocacy come last on the list,because there is little public appreciation of the need for such work. Corporate donations go mostly to their own organisations under their social responsibility mandate. Since advocacy,protest and supporting research is essential too,what is the solution to NGOs’ funding woes? To lessen dependence on foreign funding the public must be prepared to give more for research and advocacy work,and the government must incentivise private giving by improving the legal environment and fiscal policies; it must also encourage corporations to support more such work.


Finally,receipt of foreign funding should not,by itself be used to discredit NGOs. After all,FDI for industry is welcomed. If there is indeed misuse of funds,the government can punish the guilty through due process of law. Instead of bringing NGOs,whether receiving large government or foreign funds,under the Lokpal or Lokayuktas,a better course would be to set up an independent and autonomous Charities Commission such as exists in countries like the UK,and paralleling the regulatory bodies for telecom and power,to deal comprehensively with civil society,including monitoring sources and usage of funds. Creation of such a commission should form part of the broader reforms agenda.

Sundar is the author of ‘Foreign Aid for Indian NGOs: Problem or Solution?’ (Routledge 2010)

First published on: 01-03-2012 at 11:52:26 pm
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