Foreign Contribution Regulation Act, 1976

Preamble
The Foreign Contribution (Regulation) Act, 1976 (hereinafter referred as ‘FCRA’) was passed by the Indian Parliament and received the assent of the President of India on 31st March, 1976. The preamble to the Act reads as follows :
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An Act to regulate the acceptance and utilization of foreign contribution or foreign hospitality by certain persons and associations, with a view to ensuring that parliamentary institutions, political associations and academic and other voluntary organisations as well as individuals working in the important areas of national life may function in a manner consistent with the values of a sovereign democratic republic, and for matters connected therewith or incidental thereto.

Genesis
The main purpose behind the enactment of FCRA was to curb the use of foreign funds and hospitality for nefarious and anti-national activities or purposes. The idea was to regulate the acceptance and use of foreign contribution so that the recipient institutions and individuals function in a manner consistent with the values of a sovereign democratic republic. The Ministry of Home Affairs, Government of India was assigned the responsibility of implementing FCRA. The protection of sovereignty, democracy and republican nature of the Indian Government forms the basis of FCRA.

The need for having such regulatory law was felt in the late sixties when foreign agencies including CIA were suspected of having links with various trade unions, student bodies, youth organisations, political organisations etc. The then Home Minister in 1969 raised this issue in both the Houses of Parliament and the need to regulate foreign funding was discussed. It was agreed that the government would not allow foreigners or foreign money to dictate or influence the functioning of the Government, Political Parties and Other Institutions of India.
 
Some noteworthy statistics
In 1968 the foreign funding into India was only Rs. 24 crores and it has risen considerably over the years and in 2004-2005 the total contribution received was Rs. 6,256.68 crores. The total number of organizations registered as on 31st March, 2005 was 30,321 and subsequently during 2004-2005 another 369 organizations were granted prior permission. The following data provide some insight about the foreign funding into India and the functioning of the FCRA :

i) 30,321 associations stood registered under the Foreign Contribution (Regulation) Act, 1976 as on 31st March 2005. During the year 369 associations were granted prior permission.

ii) 8,673 associations were reverted to prior permission category to receive foreign contribution during November, 2005; this was on account of their failure to furnish mandatory annual FC-3 returns.

iii) 18,540 associations filed returns for 2004-2005.

iv) The receipt of foreign contribution during 2004-2005 amounted to Rs. 6, 256.68 crores.

v) Among the districts in different States, Chennai (Rs 560.40 crores) reported the highest receipt of foreign contribution, followed by Banglore (Rs. 376.97 crores) and Mumbai (Rs. 321.82).

vi) Among the States and Union Territories, Tamil Nadu reported the largest receipt (Rs. 1,190.64 crores), followed by Delhi (Rs. 1,075.23 crores) and Andhra Pradesh (Rs.913.17crores).

vii) The United States of America (Rs. 1,926.95 crores) heads the list of donor countries, followed by the Germany (Rs.930.92 crores), and UK (Rs.764.13 crores).

viii) The leading donor agency was Foundation Vicent E Ferrer, Spain (Rs.183.31 crores), followed by World Vision International, USA (Rs.123.25crores), and Gospel for Asia, USA (Rs.110.12 crores).

ix) The largest recipient of foreign contribution was World Vision of India, Tamil Nadu (Rs. 133.57 crores), followed by Rural Development Trust, Andhra Pradesh (Rs.118.75 crores) and Sri Sathya Sai Central Trust, Andhra Pradesh (Rs. 77.57 crores).

x) Among the purposes, the largest amount was received for Establishment expenses (Rs.948.20 crores) followed by relief/rehabilitation of victims of natural calamities (Rs. 655.65 crores), and Rural Development (Rs. 582.48 crores).
 
Applicability of the Act
The provisions of the FCRA extends to the whole of India including the State of Jammu and Kashmir for which normally separate laws are made according to article 370 of the Constitution of India.

The Act applies to all citizens of India residing in India and also citizens of India who may be outside India. It would also apply to associates, branches or subsidiaries outside India of body corporate or companies incorporated or registered in India. The Act commenced with effect from 5th August 1976 as per the notifications issued by the Central Government vide GSR 755 (E), dated 5th August 1976.
 
Overall Summary
To sum up the discussions :
(i) FCRA was enacted in 1976. The main purpose was to curb the use of foreign funds and hospitality for nefarious and anti-national purposes.

(ii) FCRA is an internal security legislation and is not regulated by RBI. It is regulated by the Ministry of Home Affairs, Government of India.

(iii) In 1985, FCRA was amended and certain important changes were made:
(a) Funds received by subsequent recipient were brought under the purview of the act.
(b) Definition of political parties was enlarged.
(c) Section 6(1) was amended to ensure that foreign funds were received only after registration, and only through designated bank accounts.
(d) Section 15A was inserted to empower Central Government to inspect and audit books of accounts of organisations.
(e) Section 25A was inserted to ensure that acceptance of foreign funds was prohibited for 3 years after second conviction.

(iv) The inflow of foreign contribution through FCRA has increased from Rs. 24 crores in 1968 to Rs. 4535.23 crores in 2001.
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(v) The provisions of FCRA extends to the whole of India including the State of Jammu and Kashmir.