Hamstrung by rules and red tape, India’s NGOs are running out of oxygen

As Indians helplessly watched family members, friends, colleagues, neighbours and fellow citizens perish for lack of oxygen, a veritable army of people who could have helped was hamstrung, bound and gagged with red tape. Even when support in the form of oxygen, equipment, medication and cash started pouring in from across the world, those best positioned to respond most nimbly to critical needs across the country found themselves having to explain why they could not accept many of these offers.

Like their counterparts in business and government, NGOs in India have scrambled to support staff members and their families who are battling the virus, even as they re-prioritise programmes and recast budgets to cope with the changing context. Simultaneously, they are trying to assess the impact of this new, deadly wave on the health and livelihoods of the communities they serve.

Over and above these humanitarian pressures however, many NGOs are paralysed by the fallout of the amended Foreign Contribution (Regulation) Act (FCRA). Thanks to the amendments of September 2020, FCRA-licensed NGOs across the length and breadth of India can only receive international funds in new bank accounts to be opened at the New Delhi main branch of the State Bank of India (SBI). They have run from pillar to post to do so — ascertaining the documents and formalities necessary, accessing often far-flung board members for signatures, explaining to local bank officials what the prescribed procedures are, and following up with SBI in Delhi, itself struggling with virus-induced staff shortages, all while trying to keep their own staff and families protected. According to DevelopAid, a nonprofit advisory organisation, 13,852 NGOs or 62% of those with active FCRA licences had not yet been able to open their SBI accounts as of May 11. Reducing to a trickle what could have been a flood of critically needed aid.

Those who successfully opened the new accounts then ran up against the FCRA ban on sub-granting. International donors — businesses, foundations, diaspora groups and caring individuals — who had marshalled resources for India could not transfer them to the NGOs they know and trust since the amended FCRA prevents organisations from distributing these to other organisations, even those who are licensed under FCRA to receive international funds. Donors have to send their contributions — in cash or kind — separately to each local entity they identified, after vetting their credentials. We will likely never know what resources never made it to our shores because of FCRA constraints as donors were simply dissuaded from navigating the regulatory minefield.

As if these are not daunting enough, India’s NGOs are also contending with new registration requirements for receiving CSR contributions as well as looming deadlines for renewal of tax exemptions under Sections 12A and 80G made necessary by the Finance Act 2019.

Many countries from the US, UK and Canada to China and Russia have understood the critical value of NGOs through the pandemic and beyond. They have, therefore, extended to nonprofits support packages designed to protect jobs or increased incentives for philanthropy. In India, on the other hand, NGOs have been excluded from the schemes designed to help other sectors, with most philanthropic resources going to the PM-CARES Fund which can accept international contributions without submitting to FCRA constraints and offers its donors twice the tax deduction that other NGOs can. While everyone from the Prime Minister and NITI Aayog to the National Disaster Management Authority have yet again sought support from NGOs in relief work, NGOs’ own pleas for even temporary relief from onerous restrictions have thus far been ignored. In previous national crises, the 2001 earthquake in Gujarat, for instance, FCRA restrictions were relaxed and donors in India provided 100% tax deduction for disaster relief contributions. In this far more calamitous situation, neither has been forthcoming.

Like front-line health workers and those providing essential services, India’s NGOs and citizen groups have stepped up to deliver vital services by organising and validating scarce and confusing information, plugging the gaps in health services, connecting Covid-stricken families with ambulances, oxygen, medicines and ICU beds and providing humanitarian relief to affected communities. They have responded once again in every way they can at great risk to their staff and in the face of daunting odds. Many have been forced to downsize staffing and programmes to cope with funding cutbacks, as donors focus on Covid-19 relief to the exclusion of other social and development goals. The future looks even grimmer for the communities and causes they serve. The burnout is palpable. On a series of calls last week, NGO leaders reported feeling enraged, depressed, depleted but resolute. Like many of their fellow citizens gasping for breath, India’s NGOs too cannot run on fumes for much longer.

Ingrid Srinath is the founder-director of the Centre for Social Impact and Philanthropy at Ashoka University. The views expressed are personal

First published in the Times of India on May 16th, 2021.