Death By Detail: How The Govt Has Used Penalties In Law Controlling Foreign Donations To Cripple India’s NGOs

Manu Konchady
 
31 Mar 2024 16 min read  Share

While foreign funded NGOs have always been under scrutiny, the introduction of new laws in September 2020 intensified the crackdown. Among the methods used was a harsh penalty for a minor infraction, such as a late filing of an annual return by even one day. In 2021, 65 NGOs lost all their donations to penalties and Rs 22 crore was collected from over 500 NGOs who filed annual returns late due to the pandemic, according to our analysis of five years of government data, which from 2022 was no longer made public.

In recent years Prime Minister Narendra Modi’s government has cracked down on the foreign funds received by NGOs/ X

Bengaluru: On Christmas day in 2021, the Ministry of Home Affairs (MHA) said that it had cancelled the Foreign Contribution Regulation Act (FCRA) licence of the Missionaries of Charity, a global Christian NGO, after  receiving “adverse inputs”.

Although the “adverse inputs” were not defined, the Missionaries of Charity later addressed the concerns of the home ministry and the government restored their FCRA registration.  

Since the Missionaries of Charity was founded by the Nobel prize winner and Bharat Ratna Mother Teresa, the actions of the home ministry attracted a lot of attention worldwide

The government was sending a clear message that all NGOs receiving foreign funds would be scrutinised carefully and the prestige, fame, or recognition of an NGO did not matter.  

Along with the Missionaries of Charity, the FCRA registrations of other organisations, including prestigious educational institutions, such as the Indian Institute of Technology, Delhi, and the Jawaharlal Nehru University, were also suspended

Following a brief suspension and some clarifications, the registrations of these NGOs were  restored. 

Thousands of others have not been as privileged and have not escaped a growing crackdown on them by the government of Prime Minister Narendra Modi. 

Effects Of The Crackdown

To empirically study the effects of the crackdown, I scraped data for a five-year period from 2016 to 2021 from the FCRA portal, which previously published information about NGOs receiving foreign funds, including many details, such as the annual returns and the sources of funds. 

The government stopped making such information available from 2022, which is why my analysis is limited to data until that year.

A summary of the main findings:     

– Over the five year period (2016-21) the number  of both non-Christian and Christian NGOs with FCRA registrations declined, non-Christian NGOs falling by about 30%, from 16,000 to 11,200, and Christian NGOs falling about 18%, from 3,800 to 3,100.  

– Donations to Christian NGOs stayed relatively constant,  around $ 400 million, over this five-year period, as did donations to other NGOs, which remained largely about $ 1.75 billion. 

- Over 500 NGOs paid penalties for filing late annual returns in 2021, amounting to a total of over 22 crore.

- 65 NGOs lost their entire foreign donations to the late-filing penalty. Two NGOs even paid a penalty of over 1 crore.

- The number of NGOs filing annual returns declined by about 30% from 2018 to 2021.

- The number of NGOs  that reported receiving foreign funds on the Darpan portal is less than 15% of all NGOs.

- The top 100 (or 0.7%) foreign-funded NGOs received about 32% of all donations made in 2021. The top 1,000 NGOs or the top 7% received $ 1.5 billion or 75% of all foreign donations.

Inexorable Rise In FCRA Cancellations

The cancellation of registrations of a large number of NGOs under the 24-year- old FCRA law is not new. 

In 2012, the FCRA registration of over 4,000 NGOs or about 10% of more than 40,000 FCRA authorised NGOs were cancelled

However, the percentage of NGOs losing their FCRA registration in  recent years has increased substantially from the 10% in 2012. 

An average of about 15,000 to 20,000 NGOs have FCRA registrations and about 6,000 or about 33% have lost their FCRA registration since 2022. 

For the five-year period from 2016 to 2021, about 90,000 annual returns were filed by over 25,000 NGOs. The  table below shows the number of annual returns filed by year. Since 2018, the number of  annual returns filed has dropped by almost 30%. 

  Source: Foreign Contributions Regulation Act website  

Several thousand NGOs have either decided to not apply for or have been denied renewal of FCRA  registration. 

A small number of the NGOs are well known and when  NGOs such as Oxfam, Young Women’s Christian Association, and the Center for Policy Research  are denied FCRA  registrations, it becomes public knowledge after the media reports these denials. 

Yamini Aiyar, former head of Delhi think tank Center for Policy Research, which lost its foreign donations licence earlier this year.

Is FCRA Important For An NGO? 

A question that often arises is whether it is necessary to raise funds abroad when there are  donors within India. 

Guidestar India, an organisation that maintains a database of over 10,000 Indian NGOs, publishes a list of pre-vetted NGOs that are ready to  partner with donors. The highest level of certification by Guidestar is the platinum level assigned to 118 NGOs. About 94% of the platinum certified NGOs have FCRA  registrations. 

The next two levels of certification are the Gold and Silver levels assigned to over  400 NGOs. About 88% of such NGOs are FCRA certified. An FCRA registration is clearly a  significant attribute for an NGO to obtain a high level of certification from a vetting organisation  like Guidestar. 

An earlier 2022 survey of the government’s Darpan portal that currently lists about 200,000 NGOs, showed that about  85% of all Indian NGOs do not have FCRA registration. The Darpan portal also lists the budgets for each of the NGOs, but this is self-reported data and not associated with any audited report. 

About 20% of all NGOs listed on the Darpan portal reported receiving donor funds. Of the NGOs  that reported some funding, 25% received less than Rs 100,000, 5% received over Rs 1 crore and the remaining 70% reported amounts from Rs 100,000 to Rs 1 crore. 

This type of skewed distribution of donations, also known as the Pareto principle, is fairly common in economics. Also known as the 80/20 theory, it says that the output of 80% of a system is determined by 20% of the input.

   Source: Foreign Contributions Regulation Act website  

The Darpan portal also included a field for the  source of NGO funds. The word “overseas” preceding the year implied that the donations were  received through foreign contributions. About a third of donations came from abroad. This fraction can vary widely for individual NGOs, with some NGOs receiving  75% or more of all donations through foreign sources. 

Most foreign donations are received by NGOs based in India’s major cities. The amounts below were  computed using a different source based on more accurate data extracted from the 2021 annual returns published on the FCRA website (this data is no longer made public).  

  Source: Foreign Contributions Regulation Act website    

NGOs in the metros received about half of all foreign donations. New Delhi NGOs alone received close to $ 500 million. The top five districts received over $ 1 billion in  2021. The remaining donations were widely spread across the remaining 565 districts listed on the FCRA website. 

While self-reported data on the Darpan portal can be unreliable, the contribution of foreign  funds to all NGOs is significant and may range from a third to half of all the donated funds.  

The more accurate amounts computed from 90,000 FCRA annual returns show that the annual foreign donations for the period 2019-2021 were consistently over $ 2 billion.  

The Effect Of FCRA Tightening In 2020 

Roughly 15,000 Indian NGOs collectively received over $ 2 billion annually from foreign sources in 2021, based on data scraped from the FCRA portal.  

Many have written about how donors and recipients of these funds have come under greater government scrutiny than ever and now operate under strict regulations

One of the stated goals of the Modi government is to reduce the alleged misappropriation of foreign funds for non-charitable purposes. In general, the policy of the government of India is to not encourage foreign donors but encourage welfare activities through schemes from various ministries.

A new law passed in September 2020 required all foreign-funded NGOs to open a bank account in a specific branch of the state-run State Bank of India in New Delhi to receive foreign funds. 

The government also limited the transfer of  foreign contributions to other NGOs or persons, lowered the administration-expenses cap from 50% to 20% of donations and strictly enforced both annual and quarterly returns that accounted for every rupee received and spent.  

A delay of even a day in filing an annual return would attract a penalty of lakhs and even  crores for some NGOs. Over Rs 22 crore was collected in penalties from over 500  NGOs for filing late returns in the fiscal year 2021-22.  

A further restriction added in the amendment to the FCRA Act in September 2020 was to disallow donor funds received for a designated purpose from being diverted to  another cause, no matter how noble or worthy the cause. 

This limited funding to  government authorised purposes alone.  

Limiting Foreign-Funded Activism

Among the aims of the government in passing an amendment to the FCRA bill in  September 2020 was to limit activism and religious activities. 

A foreign funded NGO,  “The Other Media”, was reported to be behind the protests against the expansion of the Vedanta’s Sterlite Copper plant in Tamil Nadu. These protests began in response to the environmental damage from the operations of the Sterlite Copper plant, and protesters  demanded that the plant be shut.  

In May 2018, 10 protesters including a teenager were killed by police. The government  believed that such foreign-inspired protests constituted interference in Indian affairs and should be prevented so that development was not hindered.  

“The Other Media” received an average of  $ 110,000 annually between 2016 and 21, based on the annual returns filed  with the MHA. 

The fact that an NGO receiving foreign donations amounting to about  0.001% of Vedanta’s net worth could prevent such a large multinational corporation from expanding its operations indicated that even minimal funding can influence public opinion.  

In 2024, the Supreme Court upheld the Tamil Nadu government’s decision to shut down the  Sterlite plant for its failure to monitor and limit air and water pollution. 

NGOs Lose FCRA registration 

Before July 2022, the FCRA website published a list of NGOs whose registration  had been cancelled for various reasons. Some of these NGOs may have failed to file annual or quarterly returns. 

The registration of about 6,700 NGOs was cancelled between 2016 and 2021. Most (85%) of the NGOs whose registration had been cancelled had not filed any returns over these five years. The locations of the NGOs with cancelled registrations were not  limited to any particular region or state. 

The annual return of every foreign funded NGO was earlier published on the website listed  by year, state, and district. After July 2022, two lists of new NGOs with authorised FCRA  clearance was the only publicly available information on the portal.  

The list of NGOs whose FCRA registration was cancelled included Greenpeace, Amnesty International and the Young Women’s Christian  Association Delhi. 

The year and reason for cancelling the FCRA registration of the seven NGOs:

2024: World Vision India, an NGO that has worked in India for over 70 years, involved in child education, disaster relief, and child health, was accused of having used foreign funds for religious purposes. 

2024: Center for Policy Research, a public policy think tank for the last 50 years, was accused of having used foreign donations to fund protests, legal battles against development projects and misused funds to affect India’s economic interests.  

2023: Center for Equity Studies, another think tank that researched and engaged with public policy for over 20 years, was accused of using foreign funds to publish articles in newspapers and engaging in activities that  were against the “sovereignty and integrity” of India

2023: Care India Solutions for Sustainable Development, an NGO working for the  empowerment of marginalised women and girls for about 70 years, was accused of receiving  foreign funds in a bank account meant for local funds in 2012-13.

2023: Save the Children India, an NGO working to improve the lives of marginalised children for  about 16 years, was accused of raising funds for malnutrition, an issue that was being addressed by multiple government programmes. 

2022: Commonwealth Human Rights Initiative, an NGO that works for human rights in  Commonwealth countries for over 37 years, was accused of not providing details of some of the projects it funded, disclosing a bank account and other violations of the FCRA. 

2022: Oxfam India, an NGO working for child education and towards the equality of marginalised  citizens for over 73 years, was alleged to have made sub grants to various partners, prohibited under the FCRA’s 2020 amendment.  

Of the seven NGOs who lost their FCRA registration over the 2016-2021 period,  World Vision India and Care India received the highest annual average donation of about $ 45 million and $ 26 million respectively. 

While Oxfam received an average annual donation of $ 6.1  million, the other four NGOs received smaller donations, ranging from $ 300,000 USD  to $ 3.2 million.  

Religious Activities

While the number of foreign-funded NGOs has decreased steadily over the last few years, it was not obvious if the number of NGOs of any particular religion faced more scrutiny than other NGOs. 

To compute these numbers, the first step was to identify the religion associated with an NGO purely based on the name of the NGO.  

Of course this is error prone, since it is not necessary for an NGO's name to be identified with the  religion of the founders. The religious denomination of a NGO is not specified on the FCRA website. 

There are several issues with assigning a religion to an NGO based on its name alone: 

– The average number of words in the name of an NGO is about 4.2 (too few to make an  accurate categorisation). 

– Many of the words used in a name, such as society, trust, development, foundation,  charitable, social, welfare, education, centre, association, and service, are common across  all religions. 

– Phrases such as charitable trust, development society, welfare society, rural development,  social service, and education society are also common in NGO names. 

– Often, words in a name may be mis-spelt. Christian is spelt as Chrisitian, Clarence is spelt as  Clearance, or Ministries is spelt as Minstries. 

– Sometimes, NGOs combine words to form phrases like Calvary Ashram or Seva Sangh Catholic Ashram that are not obviously associated with a particular religion. 

Yet, it is possible to construct a model that predicts whether the name of an NGO is a Christian  NGO or not using a training set of pre-categorized names and a list of words, such as Bible, Church, or Zion, which appear very often in Christian NGO names. 

  Source: Foreign Contributions Regulation Act website  

Out of about 25,000 NGO names, 17% or 4,400 NGOs were categorised as Christian NGOs. Often the same name is used for multiple NGOs. 

Each NGO is required to have a  unique registration number. A name like “Catholic Church” is used by over 200 NGOs, and, similarly, the name “Ramakrishna Math” is used by over 100 NGOs. 

Over the five-year period that I studied, the number of both non-Christian and Christian NGOs declined. The number of non-Christian NGOs fell by about 30%, from 16,000 to 11,200. Similarly, the number of  Christian NGOs also fell by about 18% from 3,800 to 3,100.  

At the same time, donations to Christian NGOs stayed relatively constant at about $ 400 million. Similarly, donations to other NGOs did not change substantially from about $ 1.75 million. 

The religious identity of an NGO did not appear to be a significant feature in the cancellation of FCRA registration. The number of Islamic NGOs was more  difficult to compute since there were fewer examples to build a training set, and a poor model can lead to incorrect conclusions. 

A Harsh Penalty 

A late filing of an FCRA annual return attracts a harsh penalty. The description of the penalty comes in two parts. 

The first part states that “if the foreign contribution received during the period of non submission is less than Rs 100,000 then the penalty amount is the entire amount that has been  received during the non submission”. 

In other words, if an NGO receives Rs. 75,000 in a year, then the penalty is the entire amount or a 100% penalty. This penalty is imposed regardless of whether the delay in filing is a day or a year.  

The data collected for the annual returns filed for the year 2020-21 published on the FCRA portal showed that about 65 NGOs of 580 NGOs who paid a late-filing penalty lost their entire donations to this penalty.  

The second part of the penalty states that the fine will be Rs 1,00,000 or 5% of the  foreign contribution received during the period of non submission, whichever is higher. About 235 NGOs who received between Rs 100,000 and Rs 20 lakh paid a fine of Rs 100,000. 

For example, an NGO called the Mahila Dakshata Samiti, operating a women’s shelter in Bengaluru, received Rs 110,000 during the 2020-2021 period. The penalty for filing their late annual return by about a month was Rs 100,000 or roughly 90% of their foreign donations. 

The remaining 280 NGOs who paid a fine received more than Rs 20 lakh in donations, and their fine was over Rs 100,000. Another NGO, which requested anonymity—also based in Bengaluru, it rebuilds  government school buildings—paid a fine of over Rs 23 lakh on the Rs 4.6 crore that it received in  donations.  

  Source: Foreign Contributions Regulation Act website  

An NGO based in New Delhi, the Human Welfare Trust, paid a fine of over Rs 1.3 crore. The home ministry, which governs the FCRA, collected over Rs 22 crore from the 580 NGOs that filed late annual returns for the fiscal year 2020-21.  

A compounding fee of Rs 3,000 is also added to the penalty. 

In other words, an NGO  receiving Rs 100,000 in donations will not only lose the entire amount to the penalty but would also need to pay Rs 3000 more for the privilege of receiving foreign donations. The penalty has no upper limit. 

The home ministry announced on 31 March 2022 that the deadline for filing FCRA annual returns for 2020- 21 would be extended from 31 December 2021 to 30 June 2022. 

This meant that the Rs 22 crore collected in fines in the first quarter of 2022 would have to be returned to all the 580 penalised NGOs. The home ministry published a notification on August 12th 2022 asking NGOs to apply for refunds.  

While the 580 NGOs who missed the deadline of 31 December 2021 are likely to eventually receive a refund, the penalty rule still holds. Since the FCRA portal no longer provides access to the annual returns filed by NGOs, the number of penalised NGOs and the amounts collected in  penalties in subsequent years is unknown. 

The average penalty for the 580 NGOs was about Rs 380,000. The large amounts as penalties appeared to have opened the door for corruption at the home ministry.

On May 12, 2022, the Central Bureau of Investigation announced news of a raid at the home ministry and arrested a number of officials working at the FCRA division. The officers arrested were accused of accepting bribes in exchange for registration and renewal of NGOs.  

Initially, the duration of FCRA registration was indefinite. Later, it was changed to a duration of five years, which could be periodically renewed following home ministry certification. 

The FCRA certificate of any NGO with a penalty due will almost certainly not be renewed. An NGO with a penalty due attempting to renew its FCRA certification would face intense pressure to pay the penalty or lose foreign donations. Government officials know the dilemma that such NGOs face.  

When the fine for filing a late income-tax return is Rs 5,000 it is unreasonable to penalise NGOs in lakhs for filing late annual returns when no funds are due to the government. The 100% penalty is also illogical and unfair to NGOs who receive the least donations, less than Rs 100,000.  

(Manu Konchady is a trustee at Sukrupa, a school run by an NGO.)

Note: Data was collected from the FCRA website (https://fcraonline.nic.in) in 2022. Subsequently, the home ministry stopped making this information public. The information about the FCRA penalties paid by 500+ NGOs has been  verified by an independent source (https://accountaid.net). Data from the Darpan website  (https://ngodarpan.gov.in/) is still available.

Get exclusive access to new databases, expert analyses, weekly newsletters, book excerpts and new ideas on democracy, law and society in India. Subscribe to Article 14.