Way cleared for parties to receive donations from firms classified as foreign companies.
A discreet move to amend the Foreign Contribution Regulation Act (FCRA), 2010 through the Finance Bill that has gone unnoticed appears to have a twin purpose — unlock an estimated Rs. 10,000 crore that corporates want to spend on corporate social responsibility (CSR) activities in India and clear the legal path for political parties to receive donations from what were hitherto classified as foreign companies.
A senior government official said the amendment, which alters the definition of what is a “foreign source” when it comes to making contributions, would benefit parties such as the BJP and the Congress. Both have been charged with illegally receiving foreign funds for political activities from U.K.-based Vedanta Group from 2004 to 2012.
The Association of Democratic Reforms filed a PIL petition against the two parties for violating the FCRA. The Delhi High Court had held that the donations were illegal in 2014, but the two parties have challenged that order in the Supreme Court.
Pre-amendment, any company with a foreign direct investment (FDI) of above 50 per cent was deemed as a “foreign source”.
This has been altered with the introduction of the proviso that, with effect from the September 26, 2010: “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.”
The process of amending the FCRA was initiated in September 2015 when Union Finance Minister Arun Jaitley wrote a letter to the Home Ministry seeking its reply to a petition submitted by at least 22 companies — a list that included Infosys and Axis Bank among others.
The companies argued that while government policy mandated them to spend two per cent of the company’s profit on Corporate Social Responsibility (CSR) projects, the FCRA’s provisions which classified such funds as coming from a “foreign source” came in the way of this. They contended that the rules, which required the MHA’s clearance each time money was to be disbursed, were cumbersome.
The amendment was pushed through the Finance Bill even though the Home Ministry had already prepared a Cabinet note to amend the clause. Explained a government official: “Sending it to Cabinet would have meant that a Bill would have to be drafted and wait for the Parliament to pass the legislation. The amendment had to come into effect by March 31, 2016, when the last financial year ended. The companies had said that if the rules were not relaxed, they would not be able to spend the money of the last fiscal and it would go down the drain.”
This article was taken from here.