Resolution of Ford Foundation’s working in India
In April last year, Ford Foundation was put on ‘watch list’ by MoH. It created a huge stir within the NGO community as well as in diplomatic relations considering the clout of Ford Foundation in US Administration. Ford Foundation has been behind several think tanks and research endeavors in India. It is reported that it has invested some $ 500 million (as per a report in Huffington Post) in India since 1952.
While the initial action against the Ford Foundation may have been due to political reasons, it later turned out that Ford Foundation had never registered itself in India, despite the requirements, thus clearly putting Ford Foundation on defensive.
Requirement: Ford Foundation set up its office in India way back in 1952, when even Companies Act 1956 was not on statute book. Companies Act 1913 which was operative then required that all foreign entities incorporated outside British India, but starting a place of business within British India would need to be registered as Foreign Company under the 1913 Act. The same position continued under the Companies Act 1956, albeit British India replaced with India. It is not clear, if Ford Foundation took necessary registration under this Act. At that time situation was quite informal and several agencies got into India, based on even bilateral agreements between Indian Govt and the entities concerned. It is understood that Ford Foundation was operating under an invitation from former prime-minister Jawaharlal Nehru.
However in 1973 with promulgation of Foreign Exchange Regulation Act (FERA), RBI became the nodal agency for regulating all such entities with registration outside the country. This Act was replaced by Foreign Exchange Management Act 1999. RBI came out with an order notified through a circular in May 2000. This Order basically brought out specifics on how such agencies were required to become operative. One of the essential requirement was that every company having a place of business in India, but incorporated outside would formally apply to RBI for permission and obtain a UIN no. It seems Ford Foundation never complied with this regulation.
Thus the present resolution seems to be that Ford Foundation would be registered under FEMA, which it is understood, it has already done so and also approved by the Govt. However an Economic Time report states that it would still need to ‘inform’ MoH of all donations / grants that it makes to Indian NGOs and individuals, however whether this would mean ‘seeking permission’ or just ‘intimation’ can be said only after reading the RBI order that has allowed Ford Foundation to operate in India.
Although question remains how this ‘intimation’ vs ‘Permission’ reconciles with FCRA is anybody’s guess?
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Socio Research & Reform Foundation (NGO)
512 A, Deepshikha, 8 Rajendra Place, New Delhi – 110008
My understanding of the situation is that –
– Ford Foundation had to continue operations in India, so the easiest and quickest option was to register as a PLC under the RBI, MCA and FEMA regimes.
– To ensure receipt of funding via the PLC vehicle, getting away with the restrictions imposed by the MoHA was non-negotiable, hence it applied for revocation of Prior Permission caveat imposed under the FCRA.
Since, MHA has taken Ford Foundation off the Prior Permission list, now they can operate in a for profit capacity.
Well unless Ford Foundation does not have a mandate to float a ‘for profit’ company. Also there are several foreign organisations, who may not allow separate organiations. I believe it will work as a Liaison Office or Branch Office under RBI regulations.
The entire premise of this report is faulty as Ford Foundation is NOT a business, its a philanthropy. So the registrations and compliances mentioned by you are not applicable. Please stop spreading incorrect views. Also, whosoever wrote that copy needs to be better trained. Reports need to be worded in a non-aligned style of editorial writing. You cannot be writing statements like “Although question remains how this ‘intimation’ vs ‘Permission’ reconciles with FCRA is anybody’s guess?”. Its BAD and desperately overt political writing. Thanks
Thank you for comment. But LO / BO are as much applicable to business entities as philanthropic entities. Please do have a look at the RBI site for this. The last statement mentioned you has no political overtone at all. It is simply based on technical assessment. In FCRA Act there is no provision for intimation of foreign donors, either it has to be registration than annual return has to be filed, or prior permission. However the news report referred to in the article do not mention either of them. That is why the comment how would this situation be reconciled with the FCRA Act.
But thank you for your advice, we will certainly keep it in mind while writing in future.
INGOs functioning and operating in India have to get LO/BO permission from RBI and it is given only after thorough verification of background by MHA/MEA. So it is not so easy to get that permission even if the organisation does philanthropic activities only
I agree with the comment that RBI gives permission only after thorough verification, generally they would refer the file to MoF & relevant ministry depending on the activities of thee concerned organisation (e.g. in case of social sector related activities, file may be referred to ministry of social affairs. However file per se is not sent to MoH, they may require the organisation to obtain FCRA permission, where they feel the activities of BO require this. Since in case of LO no programme activities can be undertaken, FCRA may not be required at all.