How to Liberalise NGOs

A part from the government and business, non-government organisation (NGOs) are rising as a third major force in the socio-economic scene. We have 20,000 to 30,000 NGOs handling around Rs 3,000 crores per year, two-thirds from foreign donors and most of the balance from the central and state governments.

The staff strength of NGOs runs into lakhs. These estimates refer only to modem NGOs. If we add the traditional ones—religious, (charitable and caste-based organisations—the figures will probably double. In sum NGOs have more manpower and finance than some small state governments.

Inevitably, this Hood of money has attracted the usual vultures and jackals. Many crooks—politicians, naturally, are included— have set up bogus trusts and societies to siphon off funds. Recently CAPART, the government agency financing NGOs for rural development, blacklisted 564 bogus NGOs. The list would have been much longer but for pressure from dubious politicians to not expose other bogus outfits. So some people demand more controls on NGOs.

Funds from foreign donors are regulated by the Foreign Contributions Regulation Act (FCRA). Many critics (notably bureaucrats) feel that there is no proper check on these either, and so demand additional controls and checks.

This reaction is simply wrong. Notwithstanding many vultures and jackals, the rise of NGOs is an extremely important social, political and economic phenomenon which deserves intelligent support. The state has increasingly become callous, corrupt and wasteful, and in consequence almost all state governments are bust. They cannot shoulder the task of rural development fully, and we urgently need new institutions that can fill the breach and do the job better.

That new force must be a combination of panchayati raj institutions and NGOs. Panchayati raj will improve people’s participation, accountability, and reduce (though by no means eliminate) corruption and waste. But local governments lack expertise in many disciplines. NGOs can provide the necessary skills, and supplement the limited funds of panchayats. So they have an extremely important role to play.

We must liberalise NGO activity rather than strangle them by giving additional powers to inspectors and policemen who are more corrupt, overall, than the NGOs themselves. Many bogus NGOs have been created by, or with the connivance of crooked bureaucrats. We certainly need checks, but these should be sensible ones aimed at nurturing, not strangling the NGO movement.

The first, urgent step is to abolish the Foreign Contributions Regulation Act of 1976. This was an excess of the Emergency, aimed at crippling Gandhian institutions which supported Jayprakash Narayan’s movement against Indira Gandhi. FCRA is supposed to check spies and terrorists from getting foreign funds. But it is moronic to suppose that terrorists and spies depend on the NGO route.

Our laws allow anybody to send remittances to anyone on India, and such remittances now exceed $ 6 billion a year. Apart from this, the havala market handles billions more. These are the unchecked conduits used by dubious characters, where the police need to fish.FCRA must not be accepted as a substitute for police incompetence. Needless to say, FCRA has not enabled the police to catch any worthwhile spy or terrorist. The Act only prevents genuine NGOs from getting funds, and enables FCRA authorities to extract enormous bribes. It must be scrapped forthwith.

True, bogus NGOs may continue cheating foreign donors. But surely the donors should institute their own checks. If they are stupid enough to finance crooks, and irresponsible enough to neglect checks, they deserve to suffer. A fool and his money are soon parted.

We also need to liberalise many other regulations, such as registration of trusts and societies and income tax laws. These have become hotbeds of corruption. NGOs complain that officials in Bihar charge up to Rs 10,000 for registering a society or trust; clearance under section 80G of the Income Tax Act can cost Rs 20,000 to Rs 25,000; acceptance of audited accounts can cost even more. Supposed guardians of law force NGOs to pay black money, and then complain of the morals of NGOs! Checks cannot be abolished entirely. But why should some states demand re-registration every five years? Why should West Bengal and Uttar Pradesh demand fresh registration every year?

Most or all checks should be transferred from central and state governments to Panchayati Raj institutions. Panchayats know far better than central or state governments which NGOs are real and which bogus. Some people say panchayati control will merely decentralise corruption and harassment. There is unquestionably some truth in this.

But a study of panchayati raj in Karnataka by James Manor and Richard Crook showed that (1) decentralisation made corruption more transparent, making it easier for voters to identify and penalise the biggest crooks. (2) Big kickbacks to a few in state capitals were replaced by small kickbacks to a multitude of local more embezzlers, but the total sum embezzled declined! (3) The accountability of bureaucrats to locals increased.

On balance this is a distinct improvement on the existing mess. Panchayati raj and NGOs cannot end the mess, but can improve things significantly. All the more reason to liberalise their activity.

What do you think?