Saturday, 15 March 2014

Some observations on inflow of foreign funds to Indian Associations - 1

Summary: More than Rs. 10000 Crore foreign funds are received by various Associations in India every year. Major recipients are located on the Eastern Coast of India.


Acknowledgements
Much of the data that I have considered for this post comes from the FCRA database. I could not obtain state-wise data prior to 2004 on the MHA website. Fortunately, these were available from another site, which used to issue a newsletter called Accountable. I thank them both.

FCRA stands for Foreign Contribution (Regulatory) Act. According to the FCRA Wing, Foreigners Division of Ministry of Home Affairs, it is a national security legislation that regulates the acceptance and utilization of Foreign Contribution (FC). Related to the Act itself, is the FC (Regulation) Rules, 2011 (FCRR). The FCRA Wing has been doing a commendable job in disseminating information on the Act and have been issuing Annual Reports and detailed information regarding FC-6 reports submitted by Associations which have been receiving funds from abroad. 

 A summary of their Annual Report is what one reads once in a while in MSM.

Briefly, what is FCRA? Suppose I run a NGO/Association in India. I could be  interested in social service or activities involving sustenance & propagation of my faith. Or, I may want to educate children or help people with micro-financing or run an orphanage. Things of that sort. I need money to carry out these activities. I could ask either the State Governments or the Central Government for grants. If it is the latter, then I would have to go through their Portal and I file Annual Reports and Statement of Expenditures etc. to the respective Ministry/Department. 

 One can also receive money from foreign organizations or individuals living abroad. If one is desirous of this route, such an Association needs to register with the FCRA wing, a priori. This is the object of discussion in this post.

Guidelines of permitted activities under FCRA rules are given here . For instance, political activities of any kind are forbidden to be undertaken by an Association which receives FC. What should the Association do? It has to file online a voluntary report in a format called FC-6. Names of associations which fail to file this report are also displayed. Some times, Associations are also "prohibited" from receiving further foreign funds. You can also read this interesting Q&A in Rajya Sabha-18 Dec 2013 for statistics on NGOs who have not filed returns, cancelled NGOs etc..

Ok, Now to some stats:
  • As per this Rajya Sabha Q&A, out of 41844 NGOs registered with FCRA wing, 16756 NGOs did not submit the FC-6 returns, i.e., the rest of the discussion presented here depends on returns filed by approximately 60% of NGOs only. 
  • How much do the Indian Associations receive from abroad? Given below is that chart (Data for 2011 is provisional; Annual Report for 2012-13 not released by MHA yet):
  • Year mentioned in the graph is the starting year; i.e., the data pertaining to 2004-2005 is slotted under 2004 in the graph above.
  • There appears to be a change in the slope of the curve around 2001. It is flat for a couple of years (2002, 2003). 
  • However, there is precipitous change in slope in 2004 which is sustained until 2006. As if it rode a wave there. May be it was the Tsunami that hit the coasts of Tamil Nadu, Andhra Pradesh and parts of Kerala late that year.
  • Over the last several years, the total amount is more than Rs. 10,000 Crore per annum
  • A sum of more than Rs. 100,000 Crore has been received through this route over the last 16 years. It may appear small when compared to budgets (or budget deficits) of Government(s). However, 
    • given the low overheads of the receiving organizations (due to the commitment towards their respective causes), this sum can be taken as nearly the total amount that was spent on the actual activities
    • as mentioned above, 40% of recipients do not file returns. hence the actual total amount coming into Indian Associations could be larger.
  •  Where is the money going? The following graph shows money received by Associations registered in the following five states: Andhra Pradesh, Tamil Nadu, Kerala, Karnataka, and West Bengal:
  • In the above figure, data for 2003-2004 for Kerala and West Bengal were not available and hence were interpolated.
  • Although an Association may be registered in a particular State, one should not assume that all the money it receives is being spent in the same State. For instance, see here. The recipient in this case is Jeypore Evangelical Lutheran Church (JELC), Koraput, Orissa. However, one of its donor is Compassion East India (CEI), Salt Lake City, Kolkata. i.e., CEI has received foreign donation and it likely sent a part of it to JELC.
  • The spike in 2005 observed in the All-India receipts is also seen in receipts of various states (although that for TN is the highest).
  • In my studies, I have not come across any of the Associations receiving foreign funds to be either registered or to be receiving money that the Indian Government grants to NGOs. Why would Indian NGOs not ask the Indian Government for grants if they are interested in social service. Something to ponder about...
  • What is the nature of Associations which receive FC? We shall see that in the next Post.


























































Additional Resources
There is also a wonderful article (May 2012) on FCRA and its ramifications by Prof. R. Vaidyanathan. He recommends FCRA to be scrapped. That is my view, as well.

UPDATE [March 20, 2014]: One more example of how an organization in one State receives money and sends it to another NGO in another State is here. In this case, the mega-entity, Caruna Bal Vikas, based in Chennai sent money to Harvest Mission For Christ in India, Nagpur. 

Postscript 2 (on June 01, 2014): The 2012-2013 FCRA data continues to be actively updated on the MHA website. Hence the value for 2012-13 above can be taken as a lower bound. The 2011-2012 data too continues to be updated, but at a much slower rate and hence can be taken to be a "converged" value.

8 comments:

  1. in the foreign funds by state plot, there seem to be a lot of correlations between the states - is it in the funds source => if so, which country(s) is it coming from? may be worthwhile searching for correlations in other plots in a future post. Tracking down the source would be valuable.

    valuable posts.

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  2. Thanks Subra for the comment.
    Yes. I too would like to look at the donors. However, the FCRA database cannot be queried based on the donor. I posed a question on twitter (series of tweets). See below https://twitter.com/sighbaboo/status/444441189685551104

    Can someone HELP? Thanks.

    There are also benami donors (particularly from Texas); there are also benami Indian NGOs. I had tweeted some of these as well. I plan to write about these in a future post.

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  3. thx. 2 followup questions
    1. do these monies in the state-wise plot cover only evangelist NGOs or all NGOs (including the 'secular' ones')?

    2. in any case, the correlation in the spikes & dips across states in itself indicates non-randomness.. e.g,, the common spike in 2006 for example. why? or the dips in the end.

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  4. 1> Includes all NGOs
    2>
    2006: New government's effect? + Tsunami? (However, the Bhuj earthquake didn't attract as much foreign funds as the Tsunami did -- may be scale of damage differed).

    Dips in End: Yes, those are real. I have a feeling that MHA Babus (whom I admire and consider to be honest patriots) may have woken up to the perils of free money flow and trying to enforce norms & also do outreach. Google for FCRA Outreach Seminars held in 2nd half of 2013. 5 to 6 of them held in various cities -- Guwahati, Kolkata, Hyderabad, Chennai, Bangalore & Kochi (300 Top NGOs in each Seminar). Or that Rajya Sabha Q&A link in my Post. So, yes, there is definitely a dip in the last couple of years. But, the damage has been done, I feel. More later.

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  5. The church seems to have made hay while the UPA shined. The regime of Kiran Reddy seems to have reduced it somehow, appreciate him for that. The recent increasing trend in Karnataka is alarming. Steep slope of the kind of the ones in 2004 have to be avoided to preserve the heritage of our nation.

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  6. The decrease past 2011 is uniform across all States & not limited to AP. Don't worry about KA. It is the counterbalancing forces which contribute to the increase. Will showcase top fund receiving Orgs in each state in the next Post.

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  7. Steep change in slope as soon as UPA rule started.

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    Replies
    1. Yes of course. I have commented on that as well in this post.

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