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Blackened by money

Too many NGOs, not enough funds. As competition increases, several of these organisations are choosing to bend rules and bypass the law to survive. Samrat probes what keeps them ticking.

india Updated: Jun 18, 2006 01:50 IST

Swiss bank accounts. Foreign money. Operations criss-crossing across two continents. These are features of a case involving a human rights NGO in Delhi which is now being investigated by the European Union's anti-fraud unit, OLAF, and the Ministry of Home Affairs in India for alleged violation of norms.

The case, which came to light recently, has raised questions about hidden accounts, role of the government and the bureaucracy and also the alleged corruption involving NGOs at all levels.

In this particular case, among the things being investigated is an account in a Swiss bank in Geneva that was used to receive foreign money. Some of this money was transferred to four company accounts in the Bank of Panjab in India, according to the complaint received by the EU.

A senior official in the Ministry of Home Affairs’ Foreigners department says this is the first such case he has encountered. The MHA had blacklisted 8,673 NGOs in October 2005 for violation of the Foreigners Contribution Regulation Act (FCRA). All these were NGOs that had applied for FCRA in the first place — the bypassing of the entire system has not previously been investigated.

The NGO claims it receives no foreign funding, and the only foreign money coming to it is by way of consultancy fees. Those in the know, however, say there are more NGOs in India that operate hidden bank accounts in places as far afield as Mauritius and the Caribbean. Increasing difficulty in obtaining funding, primarily as a result of rising competition, drives many of them to stash away funds as a ‘safety net’ for the future, says a chartered accountant who has been closely involved with the sector.

Sanjay Bapat, founder of, estimates that there are around 10 lakh NGOs registered in India of which around 17,145 NGOs have received foreign funding. “Then only 1.7 per cent of the NGOs would be seen as getting foreign funding. But the funding is large. A scrutiny of the returns for the year 2003-04, submitted by the 17,145 associations, reveals that foreign contribution amounting to Rs 5105.46 crore was received during the year,” he says.

“The funding situation is very bad,” says Sunita Narain of the Centre for Science and Environment in Delhi. “Money has become difficult to come by, so NGOs are forced to adopt innovative approaches.” This means consultancies, says Narain, and consultancies come from corporates or governments. When corporates give money, they usually follow it up by expecting the NGO to do its bidding, she explains.

The alternative is to take on ‘outsourced government work’ and become an extension of the Indian government. “So, a joint secretary in the ministry gives a project and then comes as manager in the NGO… it’s become a retirement plan for bureaucrats,” she says. Those who don’t kowtow to government officials don’t get government money, says Narain. And of course, there is no money for those who don’t toe the sarkari line.

In a report on Working with the Government, former Planning Commission Secretary N C Saxena and Ashok Thakur had pointed out that “the federal government ministries are mandated to have a nationwide spread of projects and they cultivate a thinly spread but well-defined constituency of ‘good performers’. The selection is based on past experience, merit and mutual appreciation. For example, the NPO (non-profit organisations) constituency of the Department of Science and Technology typically operates like a mutual appreciation club.” NGOs that aren’t part of the ‘mutual appreciation club’ are excluded from government money as well.

Corruption in government is also a large part of the problem, says the director of another NGO in Delhi. Many NGOs are born in corruption because the lower bureaucracy is corrupt, he says. “From the time you seek the Deputy Commissioner’s recommendation for a project, you start paying. You pay up to the level of secretary. Of the project money, you end up paying 20 to 30 per cent in bribes.” The bribes have to be paid because there is no transparent system for allocation or evaluation of projects, he says.

All experts HT spoke to agreed that there is no official estimate of the amount of money the Indian government gives to NGOs. This is because various ministries and state governments give money separately, and no comprehensive account is maintained. There are also specialised agencies that operate independently. “The government cannot tell how much it spent by itself and how much it spent through NGOs on a programme,” says an expert.

Thus, while a tight vigil is kept by the FCRA wing of the Home Ministry on foreign funds, the government’s own funds to NGOs — which far exceed foreign funds — are not monitored as closely .

First Published: Jun 18, 2006 01:50 IST