FCRA amendments to help both BJP and Congress

NEW DELHI: The central government’s decision to amend the Foreign Contribution (Regulation) Act, 2010, through a provision in this year’s budget was taken after serious objections were raised during inter-ministerial government consultations at the highest levels. The Ministry of Home Affairs had invited suggestions on the proposed change in the definition of ‘foreign source’ in December and withdrew the move after the government realised it may fail a floor test in Parliament.

ET was the first to report on October 22, 2015, that the government planned to tweak the act to ease the flow of donations from foreign companies in the name of corporate social responsibility. The amendment introduced in the Finance Bill on February 29 gives a breather to both the BJP and the Congress since it will be applicable with retrospective effect from September 26, 2010.

The two major political parties will be able to escape judicial scrutiny for receiving foreign contributions from Londonheadquartered Vedanta Group, said an official familiar with the amendments. In May 2014, the Delhi HC directed the government and the EC to take action against the BJP and Congress based on a PIL filed by the Association of Democratic Rights. The two parties subsequently moved the SC, which issued notices to the Centre and the EC.

The 2010 Act restricts parties from accepting contributions from foreign sources. There are also curbs on donations by companies that are registered in India and majority-owned by foreigners.

As per the amendment in the Finance Bill, this has now been modified as: “Provided that where the nominal value of share capital is within the limits specified for foreign investment under the Foreign Exchange Management Act, 1999, or the rules or regulations made thereunder, then, notwithstanding the nominal value of share capital of a company being more than one-half of such value at the time of making the contribution, such company shall not be a foreign source.” Officials told ET that the amended act will increase the CSR fund kitty since under the Companies Act, only Indian companies are required to spend 2% of their profit on CSR. “This will also help unlock the unutilised CSR fund.”