Voluntary organisations’ shrinking space amidst adverse impact on their financial sustainability


Reproduce below  is “Voluntary Organisations: Shrinking Space”, one of the 30 articles published in Wada Na Todo Abhiyan’s Citizens’ Report on four years of the NDA Government 2014-2018: Promises and Reality, released to mark the completion of the Central government’s four years on 25th May, 2018:

The formation of the National Democratic Alliance (NDA) government in May 2014 came as a ray of hope for the voluntary sector. The expectation was that it would strengthen the government-civil society engagement and usher in a work cohesive environment. The government’s relationship with the NGOs has, however, remained similar to its predecessor United Progressive Alliance (UPA) regime, oscillating between adversarial and collaborative. The BJP-led government has pushed development initiatives like National Health Mission, Swachh Bharat Mission and Beti Bachao Beti Padhao Mission. It has been appreciative of the civil society interventions in health, water, sanitation and education and lauded its reach into the remotest areas.

But it has also asserted control, ranging from generalised to targeted, through restrictive legislation and penalising practices on the sector as a whole, and particularly with regard to organisations working on certain thematic areas. Things took an unexpected turn soon after the government was sworn in. The news of selective leakage of an Intelligence Bureau report, terming voluntary sector as “anti-development” and raising doubts over its allegiance with foreign funding entities, made waves. A series of debates, articles and media coverage ensued, which immensely tarnished the sector’s image. Though the government did not react to the IB report, what followed was the imposition of stricter measures and controls to discourage foreign funding through the stringent Foreign Contribution Regulation Act (FCRA) rules.


The sector has been seeking an enabling environment from the government for long. A notable step was taken when in 1992, Prime Minister Atal Bihari Vajpayee proposed the introduction of a National Policy for the Voluntary Sector. The fairly progressive policy document was drafted in 2007 with intensive participation from the sector. But the incumbent or the previous government did nothing concrete thereafter. The NDA government replaced the Planning Commission with National Institute for Transforming India (NITI) Aayog.

An excerpt from NITI Aayog’s first Annual Report (2014-15) is heartening to read:

“The role of voluntary sector in the development of the country is well recognised. Voluntary Organisations (VOs) reach all corners of the country and their proximity to the people on ground is one of their biggest advantages. They are now treated as partners in development, instead of just being implementers of government schemes and promoters of awareness”.

Continuing with the positive trend to showcase democratization and participation, the NDA government too engaged with the civil society by organising pre-budget consultations and meetings. th India hosted the 8 BRICS Summit in October 2016. In order to get their voices heard by officials and ministers, a social event called BRICS Civil 2016 was organised by the Ministry of External Affairs, Forum for Indian Development Cooperation (FIDC), and Research and Information System for Developing Countries (RIS).

With the objective of creating and organising a collaborative space (with government) for smooth functioning of civil society in development agenda, Voluntary Action Network India (VANI) organised Prelude to International BRICS, in collaboration with FIDC. It was a mutual exchange and learning platform with civil society organisations from Brazil, Russia, China, South Africa, Bangladesh, Nepal, Philippines, Latin America and Zimbabwe. Since then, FIDC has been involving the civil society in various development agenda, including South-South partnerships.

Recently, the media reported about the Union Home Minister’s concern with the gap between Gross Domestic Product (GDP) and Human Development Index (HDI). The minister said “the rankings need to be bridged by the civil society NGOs and government working together”, adding that “these organisations operate in the remotest parts of India, including Left Wing Extremism (LWE)-affected regions where even the local administration finds it difficult to reach. For a stronger India, government, civil society and India need to work in cooperation for the development agenda”.

The minister’s statement comes as a positive signal to the sector which has always hailed government’s encouragement and support for unified efforts for the betterment of society. But the government needs to do more to enable the sector to play an important role. NITI Aayog recently formed a Voluntary Action Cell (VAC) and constituted a standing committee on Institutionalisation of Engagement of Service Delivery Civil Society Organisations (CSOs). The standing committee met in mid-March this year and five sub-committees were formed. One of the sub-committees would deal with the critical issues of Self-Regulation and National Regulatory Framework for the Voluntary Sector. This appears to be a step in the right direction.


Quite often, the spirit of the law is not upheld and arbitrary action, denying NGOs a fair chance of defence before the organisations concerned, is taken. The UPA government set a precedent in July 2012 and April 2013 when it arbitrarily froze the FCRA accounts of Centre for Promotion of Social Causes (CPSC) and The Indian Social Action Forum (INSAF). The present government continued it. While CPSC was protesting the setting up of nuclear plant in Kundankulam (Tamil Nadu), INSAF was engaged in resisting globalisation, combating communalism and defending democracy.

The NDA government suspended and then cancelled the FCRA registration of Greenpeace India because of its alleged retaliation campaign against coal and alluminium mining. Notwithstanding a rebuke from the Delhi High Court for its “irrational behaviour”, the government continued giving a raw deal to Greenpeace India and subsequently gave it an interim relief at the high court’s behest. Lawyers Collective was treated similarly. In March 2018, as many as 42 organisations were served notices for alleged FCRA violations. The list included the Bengaluru-based Centre for Internet and Society, which had reportedly highlighted the issue of breach of Aadhar data. FCRA aims to curb terrorism and money laundering.

It permits government action based on reasons and grants the right of defence to the other party. In April 2017, media reports said that FCRA registrations of around 10,000 NGOs were cancelled due to their suspected non-compliance with mandatory requirements over the past three years. But this was done in absolute secrecy, often denying NGOs a chance to defend themselves. The April-September 2016 period was full of anxiety for most voluntary organisations. It was the first year for the renewal of FCRA registrations. FCRA-registered organisations were expected to apply online for their renewal by June 31 and non-compliance could lead to the termination of their validity after October 31. Improper planning, lack of appropriate briefing, infrastructural and technical glitches (erratic internet services in remote areas and inability to upload documents due to server hang-ups) added to the woes of the NGOs. Many organisations managed to complete the online procedures and get the renewals. But a good number of NGOs, despite having clean and legally-compliant records, experienced a long phase of uncertainty since their online application status kept showing “under process”.

33338132_2017143275220084_6846301204104871936_nThe grievance redress helpline number was mostly non-responsive. The provision to meet Director FCRA once a month did not help as the likelihood of getting an appointment was extremely rare. The FCRA department’s recent annual reports, which could give a clear picture of annual receipts and foreign funds’ utilisation, are missing too. The recent suspension/cancellation of FCRA licences of 4,842 NGOs and organisations who did not file their annual returns from 2010-11 to 2014-15, lists academic institutions like Indira Gandhi National Open University (IGNOU) and Delhi’s Guru Teg Bahadur Khalsa College. This highlights issues concerning laws under which such organisations are registered.

Voluntary organisations in India are registered under three major laws — the Societies Registration Act 1860, the Indian Trust Act 1882 and the Indian Companies Act 2013 (Section 8). Most NGOs are registered under the 158-year-old Societies Registration Act. It allows registration of bodies, entities, organisations, institutions of varying composition, activities, size, role, under the generic aegis of ‘NonGovernmental Organisations’. The nature and work of voluntary organisations have undergone substantial changes since 1860. Penal actions resulting from regulatory non-compliance by organisations like those mentioned above have tarnished the image of the sector as a whole. Some of these bodies do not even qualify to be called civil society organisations.

The Income Tax Act 1961 has been amended for stricter time-frame adherence. The Finance Act 2017, for instance, has inserted Clause (ab) in Section 12A(1) of the Income tax Act 1961. The new clause mandates a charitable trust, society or company registered under Section 8 of the Indian Companies Act 2013 to apply afresh for registration under Section 12A in the new online Form 10A, in case they have changed or amended the objects of their organisation. This is to be done within “thirty days from the date of such adoption or modifications of the objects”.

The changes are made with strict deadlines, without considering the operational constraints under which most NGOs, especially those functional at the grassroots, work. Quite often, information about these changes does not reach the organisations on time, thus constraining them from taking appropriate action. The Goods and Services Tax (GST) introduced in July 2017 has impacted the sector’s sustainability. There is lack of clarity on its applicability on the voluntary sector. In cases where commercial activity is undertaken, GST has to be complied with. This has cost implications on the already cash-starved organisations.

Ministries and institutions extend grants and assistance to voluntary organisations through tenders which project the participating voluntary organisation as “contractors”, thus attracting taxes, including GST, against service provisions. Exemption provisions for services of a charitable nature also lack clarity. Financial sustainability of the voluntary sector is getting adversely affected in many ways. Foreign funding to NGOs has dropped drastically from Rs 17,773 crore in 2015-16 to Rs 6,499 crore in 2016-17. The postdemonetisation economic slump has reduced the paying capacity of individual donors.

The scrapping of Section 35 AC of the Income tax Act after March 2017 has aggravated the situation. It has significantly reduced individual donations that allowed 100 per cent tax exemption on contributions to NGOs for eligible projects. The Companies Act 2013 came into effect from April 2014. It mandates corporates with net worth of Rs 500 crore, or revenue of Rs 1,000 crore, or net profit of Rs 5 crore to spend 2 per cent of their average profits of previous three years on social development activities. This too was seen as a welcome step by the social sector.

A news report published in October 2016, however, stated that Rs 1984 crore was the unspent CSR fund. Of the Rs 8,345 crore spent on CSR activities, majority went to education, healthcare, Prime Minister National Relief Fund and other funds set up by the Central and state governments. Now, there is a growing trend of corporates routing their CSR funds to their own ‘foundations’ rather than NGOs. India needs a buffer sector to provide services to those who cannot afford them from the market. Mandatory legislative and technically restrictive practices exclude civil society organisations from applying for government grants. The requirement of online registration of all NGOs seeking government grants on the NGO-Darpan portal is an example.

Many NGOs, especially those working at the grassroots, could not register on the portal within the stipulated time, due to technical snags. This has restricted their ability to receive government grants. Many organisations, which followed the home ministry’s orders of December 2017 and opened FCRA accounts with one of the 32 designated banks, are still facing problems with receipt of funds. They are unable to get access to funds because their applications, requesting a change in bank details (to the new bank), are still “under process”.

Such bureaucratic delays have threatened the very existence of small and genuine organisations, who mostly work on shoe-string budgets. On the partnership front, the government portrays itself as a firm believer in “inclusive decision-making”. But the reality is quite different. Despite the important role played by social organisations in implementing various government programmes, they are seen neither as confidante nor partners. India is a signatory to Agenda 2030 for achieving Sustainable Development Goals (SDGs). In July 2017, the government presented its first Voluntary National Report (VNR) and was ranked dismally at 116 out of 157 nations on the Global Performance Index. While the civil society is collaborating with the government and private sector in implementation of SDGs, their role as a key player is not being articulated well and monitoring is getting completely missed in the reports.

The sector feels that the government’s idea of pre-budget consultations to seek its inputs has turned out to be more “symbolic” than “substantive”. For instance, the government began the process of preparing Union Budget 2018-19 in September 2017 while the meetings with civil society were organised only in December 2018 and later. In a recent survey, India scored 48 out of 100 (even below Afghanistan and Nepal) in its Open Budget Index.

Way forward

The social sector acknowledges the need to bring in accountability and transparency in its work. But to enable it to increase its efficiency and contribute in the holistic development of society, it needs a supportive government that understands its constraints, acts as a facilitator and provides an enabling environment. The government and the regulators need to distinguish between genuine and errant NGOs. The sector supports the government in acting against the non-genuine NGOs. But for doing this, there is an urgent need for all stakeholders to estimate the exact size and shape of the sector. It is equally important to replace the archaic laws governing the sector with a comprehensive, vibrant, clear and enabling legislation.

This would help the sector establish itself as a credible and accountable entity and contribute towards social development. The government needs to incentivise individual contributions for social development by offering tax benefits. Clear policies are also required to increase the flow of corporate funds, as part of the CSR policy. The sector recognises the importance of effective governance, accountability and transparent activities. But with scarce resources, the capacity building of voluntary organisations, especially those working at the grassroots, becomes highly restricted. A Government-CSO-Corporate partnership model seems to be the order of the day.

There is also a need to create robust mechanisms within the government for frequent government-NGO engagement. Voluntary Organisation networks, which play an important role in collectivising the sector, can play an integral role in dissemination of critical information about regulatory requirements to grassroots organisations working in remote areas and also build their capacities around compliance.

*Click HERE to download full report


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s