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Anup Tiwari: It's 'reining' restrictions for NGOs

In the season of reforms, a spate of insensitive regulations is threatening the very existence of the non-profit sector

Anup Tiwari 

The recent turn of events in India, both political and legislative, is making it harder for non-governmental organisations (NGOs) to carry out their mandated social good. The irony being that all of it is happening at a time when the government of India is opening up foreign direct investment (FDI) to historically restricted “for-profit” sectors. Does anyone care for the non-profit sector? Are NGOs and the work they do really worth anybody’s attention?

Even if we discount the positive social impact created by NGOs, an issue that is sometimes viewed with half belief, the non-profit sector is one of the largest institutional sectors in India. The Central Statistical Organisation’s “Compilation of Accounts for Non Profit Institutions in India”, 2009, puts the number of non-profit institutions in India at 3.3 million. Any sector this big and working for public welfare would have ideally received support and encouragement from the authorities. On the contrary, a spate of insensitive regulations is threatening its existence.

During the recent protests against the Kudankulam nuclear power plant, the government went on to brand NGOs funded by foreign sources as instigators. A knee-jerk reaction was cancelling Foreign Contribution (Regulation) Act, or FCRA, registrations of thousands of NGOs, almost 20 per cent of which were from Tamil Nadu. This in itself is a terrible disservice to the third sector, especially in a democratic set-up that mandates independent watchdogs. Such large-scale cancellations will imply closure of welfare programmes and, hence, loss to disadvantaged sections of society that benefited from it. Anyway, during the National Democratic Alliance regime, many bilateral donors like Swedish International Development Agency were asked to shut shop. These were traditional and bonafide sources of support for NGOs. NGOs in India had hardly recovered when another succour of foreign philanthropy has been snatched now.

The moment is also right to ask, if the government does not want NGOs to raise funds abroad, is it doing anything to support them to raise resources within India?

It surely has no such intentions. Sample this. In the 2012 Budget provisions, certain services that were rendered by NGOs to sustain themselves have been brought under the ambit of service tax. Agreed, there are few causes that are exempt and all NGOs can render services up to a limit of Rs 2.5 million in a year, but the provisions throw up hitherto unseen vagaries. For example, an NGO that receives a donation, but as part of the agreement has to display the funder’s logo will need to levy 12.36 per cent service tax and deposit it with the exchequer. And to top it all, for NGOs that provide education to poor children, their activities would be considered a “service” and liable to tax. This is clearly not helping the cause at all. It is bringing NGOs on a par with contractors and making it even more difficult for donors to give. On the one hand the government is planning to make corporate social responsibility mandatory, and on the other, such provisions would only deter corporate contributions.

The list does not end here. All large and small NGOs use telephones to call prospective donors and raise funds from individuals within the country. NGOs do not have big marketing budgets like commercial outfits and telephone fundraising is an economical way for raising funds. But the government has already put a spanner in the wheel. Earlier regulations by the telecom regulator allowed NGOs to call prospective donors even if they were registered under the “do not disturb register”. However, the new regulations have withdrawn this exemption making it even more difficult for NGOs to raise funds within the country. There is no doubt pesky calls should be disallowed, but charitable issues need differential handling. The hue and cry against unsolicited telephone calls had much to do with commercial selling than non-profits. Just before these regulations were to be implemented, a group of NGOs tried appealing to the regulator but were sent from one table to the other. Obviously, NGOs did not have any lobbyists to back their cause.

In countries like the US, postal authorities provide NGOs special rates for mailing their fundraising communication in bulk. Nothing like this exists in India. Such measures help NGOs raise funds over and above the costs incurred. Therefore, it is not a big surprise that NGOs in India are increasingly no longer sending letters to prospective donors. It is not that India Post has not provided special rates to anybody. For some years now it has a discounted service, called “Bill Mail Service”, which greatly benefits commercial companies that send out bills on a regular basis. But why it has not provided, like its counterparts in elsewhere, discounted postal service for NGOs, needs some honest answering.

The Indian Income Tax Act, 1961, provides certain privileges under section 80G according to which donors can seek for tax refunds on donations. This promotes, to some extent, giving to NGOs. However, if the government is really serious for more and more NGOs to raise funds within the country, then it has to do more. For example, in the UK the tax authorities have a special benefit called “Gift Aid” for donations by individuals who pay tax in the UK. If the donor makes the Gift Aid declaration on a simple form, then the NGO can go to Her Majesty’s Revenue & Customs and claim 20 per cent of the amount on top of the donation. Such measures go a long way in promoting domestic giving and should be considered by the Indian government too.

True, doubts have often been raised on the credibility of NGOs. Any sector can have black sheep and NGOs are no exception. And, agreed, that foreign funds should not be the mainstay for NGOs. After all, India has a huge middle class and robust businesses, so why do foreigners need to donate for our public welfare. The issue of reducing foreign funds to NGOs should be rather viewed in this positive light than as a means for controlling activism. However, the government and its various authorities have to urgently take steps that enable NGOs in raising funds within the country. Otherwise, it may be throttling the very NGOs that it needs to further its public welfare mandate.

The writer is the Honorary Chairperson, South Asian Fund Raising Group, a think tank on sustainability of the NGO sector

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First Published: Thu, September 27 2012. 00:12 IST