FCRA Amendment to Boost CSR and Relax Political Funding

The Government has proposed, an amendment with retrospective effect in the Foreign Contribution Regulation Act (FCRA, 2010) through the Finance Bill. This discreet move seems to have a twin purpose: the amendment would unlock an estimated Rs. 10,000 crore that corporates want to spend on Corporate Social Responsibility (CSR) activities in India and at the same time clear the legal path for political parties to receive donations from what were till date classified as foreign companies. The amendment will come into effect, as it is retrospective, from 26th September 2010, when the FCRA amendment was introduced.

 Background of the FCRA Amendment

Till date, Political parties are banned from obtaining funds from any foreign source because the original law, under the FCRA Amendment, 2010, defines “foreign source” to include any company with foreign investment of above 50%.

The amendment, that is going to change the definition of a ‘foreign source’ when it comes to making contribution, is going to benefit parties such as BJP and Congress. Both parties have been charged with illegally receiving foreign funds for political activities from UK-based Vedanta Group from 2004 to 2012. Both parties have challenged the order of High Court, Delhi in the Supreme Court.

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Process of FCRA amendment

The process of FCRA Amendment was started in September 2015, when the Union Finance Minister wrote a letter to the Home Ministry seeking its answer to a petition submitted by at least 22 countries. This list included names of Infosys and Axis Bank among others. In the petition, the companies came up with the argument that while the Government had commanded them to spend two per cent of the company’s profit on Corporate Social Responsibility (CSR) projects, the provision of FCRA that classified such funds as coming from “foreign source” created a hurdle in the way. Their contention was that the rules, that required the MHA’s (Ministry of Home Affairs) clearance each time the money was to be disbursed, were oppressive.

The companies, to put is precisely, had said that if the rules were not relaxed, they would find themselves unable in spending the money of the last fiscal and it would go down the drain.

What is FCRA?

It is the Ministry of Home Affairs that is authorized to administer the Foreign Contribution (Regulation) Act, 2010, for regulating the receipt and utilization of foreign contribution by the associations or NGOs.

Whenever, any adverse inputs of violations of provisions of the FCRA Act are receive against any association, immediately expeditious action is taken. The registered Civil Societies/NGOs, who were provided prior permission under FCRA, 2010, are required to follow the provisions of the Act, Rules and instructions issued in this context from time to time.

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