Update on Foreign Contribution Management and Control Bill in India

21 December 2006

By Noshir H. Dadrawala, Executive Secretary of the Centre for Advancement of Philanthropy

In November 2006, the Union Cabinet approved the revised Foreign Contribution Management and Control (FCMC) Bill that seeks to regulate NGOs and other organizations which receive foreign funding. This Bill was introduced in the Winter Session of Parliament by the Minister of State for Home Affairs - Shri S. Regupathy. This revised bill is a much softer version of the original draft bill which had come under a lot of flack from various organisations and social activists.

The bill seeks to regulate the acceptance, utilization and accounting of foreign contribution and acceptance of foreign hospitality by a person or an association and repeal the existing Foreign Contribution (Regulation) Act, 1976 (FCRA).

The salient features of the bill are as follows:

  • The preamble has been reworded to prohibit acceptance and utilization of foreign contribution or foreign hospitality for any activities detrimental to the national interest.
  • Any amount received by any person from any foreign source by way of fee, payment in lieu of certain services rendered, etc. will be excluded from the definition of foreign contribution.
  • Organizations of political nature, not being political parties, will be placed in the prohibited category for accepting foreign contribution.
  • Association or company engaged in the production or broadcast of audio news or audio visual news or current affairs programmes through any electronic mode or any other mode of mass communication and correspondent or columnist, cartoonist, editor, owner of such Association or company will now be placed in prohibited category for accepting foreign contribution.
  • Use of foreign contribution or any income arising out of it for speculative business will be proscribed.
  • Administrative expenses have been capped at fifty per cent of the foreign contribution and any such expenses beyond that limit may be incurred only with the prior approval of the Central Government.
  • Provision is made to specify the persons who can and the areas where, the purpose for which, and the sources from which foreign contribution can be accepted only with prior permission of the Central Government.
  • Registration will be granted for a period of five years with a provision for automatic renewal for a period of five years to all applicants except those who are defaulters.
  • A specified fee will be charged for registration, grant of prior permission and renewal.
  • Reasons for rejection of registration/prior permission will be conveyed to the applications to ensure greater transparency and accountability. This will be in harmony with the provisions laid down under the Right to Information Act, 2005.
  • Registration certificate can be suspended for a maximum period of 180 days.
  • Provisions have been made for cancellation of registration after giving reasonable opportunity for hearing.
  • Foreign contribution will have to be received through a single bank account. However, unlike the present Act, the recipient organization would be permitted to open one or more account in one or more Scheduled Banks to utilize the foreign contribution.
  • Countrywide information/database about receipt of foreign remittances more than a specific amount, or suspicious transactions received by a person/association through banking channels shall be created, for keeping a watch over receipt and utilization of such foreign contributions.
  • Registration received by fraud, misrepresentation or false documents have been made punishable with imprisonment up to 5 years.
  • Provision has been made for disposal of assets created out of foreign contribution of defunct/inoperative organizations as per the prescribed procedure.
  • Provision has been made for compounding of certain offences under the Bill.

According to Mr. D.S. Rawat, Secretary General, Ministry of Home Affairs, “It is expected that the new law and its effective implementation thorough utilization of tools of information and communication technology (ICT) will put in place a more efficient system to regulate the acceptance, utilization and accounting of foreign contribution in the country by ensuring greater accountability, transparency and simplification”.