FCRA changes may cause coffers of political parties like BJP and Congress to swell

NEW DELHI: The central government is set to bring a notification under the Foreign Contribution Regulation Act ( FCRA) that’ll benefit both BJP and Congress.

Officials familiar with the matter, who spoke on the condition of anonymity, told ET the notification will describe any company registered in India as an "Indian company" irrespective of its shareholding pattern. Existing FCRA rules define a company as "Indian" only if 50 per cent or more shareholding is in Indian hands.

The new rule, which will modify Section 2, Clause 6 of FCRA, will make funding easier for big political parties like BJP and Congress, people familiar with political funding patterns said.

BJP and Congress are major recipients of corporate donations.

Political parties are banned from accepting foreign funding under FCRA and Companies Act. However, the new FCRA rule will allow more companies to legitimately donate to political parties.

A home ministry spokesperson confirmed to ET that such a "proposal is being examined", but added that the ministry "was not in a position to say anything on the matter at present".

BJP and Congress have both faced scrutiny on alleged foreign funding.

The Association of Democratic Rights (ADR) had filed a PIL in Delhi High Court on this issue, naming UK-headquartered Vedanta Industries as an alleged source of funds. The parties had argued before the court that Vedanta is owned by an Indian citizen – Anil Agarwal – and that its subsidiaries are incorporated in India and that therefore Vedanta funding was not foreign funding.

The high court had in May 2014 directed the government and the Election Commission to take action against BJP and Congress. The two parties then moved the Supreme Court, which has issued notices to the Centre and EC. The next hearing is slated for later this month.

Officials said the logic for the new FCRA rule is that such a redefinition will increase the corporate social responsibility (CSR) fund kitty since under the Companies Act only Indian companies are required to spend 2 per cent of their profits on CSR.

Officials also said the new rule will allow many more nongovernmental organizations (NGOs) to access funds that would have previously difficult to source since such resources would have come under the foreign funds category