FCRA License Cancellations Harm the Poor and Vulnerable

Centre for Financial Accountability Latest of 16,000 NGOs to Lose License

Newsreel Asia Insight #278
July 11, 2024

The Ministry of Home Affairs (MHA) on July 10 revoked the Foreign Contribution Regulation Act (FCRA) registration of the parent entity of the non-profit Centre for Financial Accountability (CFA), a group known for its rigorous analysis of financial institutions’ impacts on development, human rights and the environment. The cancellation was ostensibly due to improper financial filings from 2018 and 2019, but Joe Athialy, CFA’s Executive Director, suspects the timing and rationale are politically motivated, aimed at stifling criticism of government policies.

Athialy’s concerns are rooted in the CFA’s recent activities, including a report critical of additional projects in a Special Economic Zone managed by the Adani Group in Gujarat, which the CFA claims worsen local environmental and health risks, according to The Hindu. The CFA had also been active in dialogues about the challenges faced by public sector banks, having hosted an online meeting with the All-India Bank Officers Confederation in December 2023 to explore future pathways for these institutions, the newspaper noted.

The FCRA regulates the acceptance and utilisation of foreign contributions or hospitality by certain individuals, associations or companies to ensure that such contributions do not adversely affect national interest and are not used for any activities detrimental to the public interest. It mandates registration, stringent record-keeping and reporting requirements for organisations receiving foreign funding. The Act is administered and enforced by the MHA, which has the authority to deny or cancel registrations based on violations or non-compliance, impacting the ability of organisations to receive foreign donations.

The latest revocation is part of a trend observed since 2015, with over 16,000 NGOs losing their FCRA registrations on various grounds, leaving about 15,946 FCRA-registered NGOs operating across India as of the latest count, according to The Hindu.

This pattern, which has led to thousands of job losses in the non-profit sector, stands in stark contrast to the 70 Indian startups that laid off 17,000 employees in the first half of 2023, according to a report by the India Development Review (IDR) in August 2023.

Beyond the layoffs, millions of vulnerable families have been deprived of essential services previously provided by these 16,000 organisations.

Organisations like CARE losing nearly 4,000 employees, severely affecting their operational capacity and the delivery of essential services to vulnerable populations. These nonprofits, which according to a 2012 Ministry of Statistics and Programme Implementation report, account for more employment – 2.7 million jobs and 3.4 million full-time volunteers – than the public sector, serve critical roles in education, health, and community development, particularly in rural and underserved areas, IDR noted in its report.

The cancellation of FCRA licenses also jeopardises the trust and social contracts these organisations have built over years with local communities, IDR added, warning that this breach of trust has immediate and severe repercussions, halting essential services like child protection, immunisation programs and nutritional support in schools and anganwadis.

In addition to the individual impacts, the strategic suppression of FCRA licenses undermines the role of nonprofits in promoting civic engagement and upholding democratic values. This crackdown has led to a scaling down of operations and a significant reduction in staff at institutions like the Centre for Policy Research and World Vision India, both of which have had longstanding collaborations with various government bodies and international donors, the Frontline magazine noted in February.

The magazine added that the legal landscape surrounding FCRA has also evolved, with amendments increasing government scrutiny and control over nonprofit funding, particularly from foreign sources. These changes, it said, had made it challenging for nonprofits to maintain compliance and continue their operations without fear of reprisal.

The narrative emerging from the cancellation of FCRA licenses suggests a troubling shift towards using regulatory frameworks not just for oversight but as tools for political gain, potentially setting back the country’s progress by decades, the magazine concluded.