The Hindu Business Line : ECB route stays closed for charitable trusts

FUNDING of charitable work would continue to be difficult with the Ministry of Finance taking a firm view that charitable trusts would continue to remain out of the External Commercial Borrowings (ECB) fold.

"Charitable trusts would not be allowed to raise funds through ECBs. Since they are not commercial organisations they cannot take on foreign exchange risks," a senior Finance Ministry official said.

The decision would particularly affect the entities in the healthcare sector that are run as charitable trusts. There had been a demand from the healthcare sector that hospitals run as charitable trust should be allowed to access cheap funds through the ECB window.

The issue had been taken up with the Finance Ministry by industry associations and multilateral agencies interested in the growth of the domestic healthcare sector.

Echoing the industry's view, Mr Harpal Singh, Chairman and Managing Director, Fortis Healthcare Ltd said, "In order to expand any healthcare institute whether a charitable organisation or registered under the Societies Act or a corporate should have access to funds. The source of funding should be open for all and must be left to the individual to choose the best option."

At present, the ECB window is open for corporate entities registered under the Companies Act and non-government organisations engaged in micro finance activities. Healthcare industry sources said that the demand to open the ECB route for charitable trusts was made in view of the limited fund-raising capabilities of such entities. They pointed out that charitable trusts, being basically non-profit organisations, are also not allowed to access the capital market nor are they allowed to approach lending institutions.

An ICRA report has said that corporate presence in the healthcare in India began in 80s led by NRI doctors setting up some projects in India. Before this, private institutional presence in the medical care sector was primarily in the form of charitable trusts that established large hospitals such as Bombay Hospital in Mumbai and Sir Ganga Ram Hospital in New Delhi.

In fact, in the recent past there have been instances due to funds crunch that some hospitals run as trusts converted themselves into corporate entities. Prominent among these was the Escorts Heart Institute and Research Centre Ltd — promoted by the Nanda family in 1983-84 as a charitable society that was converted into a company in 2000.

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