Foreign firms can now fund parties

Updated - May 16, 2016 10:29 am IST

Published - May 16, 2016 03:11 am IST - New Delhi:

The government has admitted that the amended Foreign Contribution Regulation Act (FCRA), 2010, which they brought in through the Finance Bill route, will not only help foreign-origin companies to fund NGOs here but has also cleared the way for them to give “donations to political parties.”

Minister of State (Home) Kiren Rijiju told The Hindu that the amendment, which was cleared by the Lok Sabha in the recently concluded Budget session, will ensure that “donations made by such [foreign shareholding] companies to entities including political parties will not attract provisions of the FCRA, 2010.”

The statement assumes significance as such funding from foreign donors will bypass government scrutiny. The Representation of the People Act bars political parties from receiving foreign funds.

Retrospective effect Both the BJP and the Congress have supported the amendment. They have been accused by the Association of Democratic Reforms (ADR) of illegally receiving foreign funds for political activities from U.K.-based Vedanta Group from 2004 to 2012, thereby violating FCRA provisions and the case is being heard in the Supreme Court. The government has brought the changes with retrospective effect.

JD(U) slams govt. Janta Dal (U) leader K.C. Tyagi attacked the government for bringing in the amendment through the Money Bill route saying it would “endanger democracy” and from now on there will be no limit to foreign influence in the government.

Mr. Rijiju said different definitions of foreign-origin company existed as per the Companies Act, 2013, the FCRA, 2010 and the Foreign Direct Investment (FDI) policy of the government and they have clarified the foreign source now.

“As per the existing provisions any Indian company will fall in the category of foreign source if at any time more than 50 percent of its shareholding is acquired by foreign entity and would require to seek approval under the FCRA to implement its corporate social responsibility (CSR) activities as mandated under Section 135 of the Companies Act. Moreover the problem multiplies for listed companies as the shareholding pattern fluctuates on a daily basis. As such, such entities can transfer funds only to associations registered or granted prior permission under the FCRA,” Mr. Rijiju said.

He added that contributions made by the Indian companies with foreign holding up to the prescribed limit as per extant FDI policy will not be treated as foreign contribution.

“As these are still Indian companies registered and governed under the Indian laws for companies, treating their CSR contributions as “foreign contribution” under FCRA creates complications for the donor companies as well as the recipient associations. Similar problems have also come to notice in cases of donations by such companies to various political parties by such companies,” he said.

CPI’s D. Raja said, “this is subversion of democracy, the FCRA amendment was brought in through the Money Bill route and passed without any discussion in Parliament. This reflects the government’s authoritarian character, it will only fulfil the agenda of certain people.”

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