NGOs being starved of funds

Pushpa Sundar | Updated on May 25, 2020

Almost all big donations are now being diverted to the PM CARES Fund, as it provides 100% tax exemption and companies’ contributions to the Fund qualify as CSR

In every emergency or crisis , be it an earthquake, a flood, or a war, the government expects civil society organisations (read NGOs) to help out. The Covid-19 emergency has been no exception. At the beginning of the crisis, NITI Aayog CEO Amitabh Kant wrote to over 92,000 NGOs, appealing to them to help the government in its fight against the virus.

Even during normal times the government expects NGOs to pitch in and make a success of its various social sector programmes or schemes, be it Swachh Bharat Abhiyan or the Nutrition Mission.

However, it is niggardly in giving grants to NGOs to fund the work. Not only does the government not offer NGOs much financial help, but also puts obstacles in their attempts to raise money from other sources such as foreign donors or the private sector.

Take the present Covid crisis, for instance. Almost all big donations for meeting the emergency have gone into the PM CARES Fund, not only because of the high-pitched publicity, but also because of the 100 per cent tax exemption allowed for the donations. Since donations to NGOs are eligible only for 50 per cent tax deduction, most donors, small or big, have preferred to donate to the PM CARES Fund. Some of this money should have been given to NGOs for their Covid work, but they have received almost nothing from the Fund.

Foreign funds

Their struggle to find funds for their work is increasing, alongside their responsibility. First, the foreign aid tap was turned off. Foreign contributions to NGOs used to be an important part of their income till the beginning of the new century. Then various obstacles were put in the way by a rigid interpretation and implementation of the Foreign Contributions Regulation Act (FCRA).

Between 2014 and 2019, the registrations of over 16,000 NGOs were cancelled, which meant that they could not receive funds from foreign donors. According to a statement in Parliament, as many as 14,500 NGOs were banned in the last five years from receiving funds from abroad. The figures below tell their own story.

In 2015-16, NGOs received ₹17,773 crore from abroad. By 2016-17, the amount had shrunk to ₹6,499 crore, according to the statement of the Minister for State for Home in Parliament. The amounts received recently are likely to be even lower.

CSR contributions

Now the funding available to them from companies for partnering them on CSR activities has also decreased because CSR guidelines have been amended allowing companies to treat contributions to PM CARES Fund as part of the mandatory 2 per cent contribution to CSR activities mandated under the Companies Act.

With the attraction of a 100 per cent tax deduction, money that was flowing into more grassroots social development work through partnership with NGOs is now being diverted to the Fund. Close to ₹7,000 crore of CSR contributions is said to have gone into the PM CARES Fund. As I have pointed out in an article elsewhere (‘Using CSR Funds for Political Gain’, The Wire, December 22, 2018), this is yet one more instance of the government using CSR money as extra budgetary funds to finance its social programmes.

Public sector undertakings, in particular, have succumbed to the pressure to use their CSR funds this way. Between 2015-16 and 2017-18, CSR spends on heritage, art and culture increased from about ₹119 crore to ₹212 crore largely due to contributions by PSUs and others to the Statue of Unity, and other such government schemes. The spending on health or malnutrition through NGOs decreased.

Even without the Covid crisis, NGOs are in danger of being squeezed out of the CSR funds because of proposed changes in the CSR guidelines. Under the recently published Draft Companies (Corporate Social Responsibility Policy) Amendment Rules 2020, money spent on trusts and societies would not qualify as CSR. But the reality is that a majority of NGOs are registered as trusts or societies. If enforced, the rules will effecively cut NGOs out of the CSR funding.

Facing harassment

While NGO access to funding from any source has been tightened, reporting of all kinds has been made more stringent.

While the government and society expect NGOs to work for society with limited funds, there is neither appreciation nor help from them for what they do. Civil society activists have been harassed for working with the poorest of the poor, and derisively referred to as “bleeding hearts,” or worse, as Naxalites or terrorists. As for credit, it, like the funds, is diverted elsewhere.

In a reported instance, the food parcels paid for and prepared by an NGO for migrants, but distributed by a party’s volunteers, were branded with the name of the party.

Can we, at least in the future, stop the step-motherly treatment of NGOs and recognise and appreciate them as an important and valuable part of society, like we have at last recognised the Covid health workers.

The writer is the author of ‘Foreign Aid for NGOs’, amongst other books on funding for civil society.

Published on May 25, 2020

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