The Planning Commission has unveiled the new National Policy on the Voluntary Sector 2007, which seeks to establish a “new working relationship between the government and the voluntary sector” and to do this “without affecting the autonomy and identity of voluntary organisations”.

The new policy clarifies some grey areas with regard to the definition and working of voluntary organisations (VOs), and their relationship with the government.

In India, the voluntary sector or non-profit sector is an all-embracing term that can include organisations, societies, associations, trusts and companies registered under various acts such as the Societies Registration Act and the Indian Trusts Act.

The new policy categorises VOs as “organisations engaged in public service, based on ethical, cultural, social, economic, political, religious, spiritual, philanthropic or scientific and technological considerations”.

VOs include formal as well as informal groups, such as: community-based organisations (CBOs); non-governmental development organisations (NGDOs); charitable organisations; support organisations; networks or federations of such organisations; as well as professional membership associations.

The new policy specifies that VOs should broadly have the following characteristics:

• They are private, i.e., separate from government
• They do not return profits generated to their owners or directors
• They are self-governing, i.e., not controlled by government
• They are registered organisations or informal groups, with defined aims and objectives.

History of voluntary sector in India

The origins of the organised non-profit sector in India can be traced back to Christian missionary activities in the 1800s. Church-based organisations set up education institutions and engaged in other development activities, albeit with the aim of religious conversion.

Social and religious reform movements such as the Brahmo Samaj and Arya Samaj, in the pre-Independence period, too can be viewed as voluntary organisations working to improve people’s mental and physical conditions.

In the early post-Independence period, the emergence of a large number of Gandhian non-profit organisations (NPOs) is attributable to initiatives taken by the newly-independent Indian State to involve such organisations in development work.

Many new trends appeared in the 1960s and 1970s, of which the most distinct was the emergence of ‘welfare-oriented’ and ‘empowerment-oriented’ non-profit organisations.

Welfare-oriented NPOs provided famine or flood relief, child sponsorship, etc, in the wake of national disasters and wars such as the Bangladesh war. Some of these organisations supported development projects that enabled the poor to provide for their own basic needs. Others added an empowerment element to their agenda, viewing poverty as the result of the political process and training communities to enter these processes to bring about social change.

Welfare and empowerment became the basis for the work of many non-governmental organisations (NGOs), as they came to be called, that emerged in the 1980s and 1990s. Many were formed by the educated middle-class and action groups dissatisfied with the model of development adopted by the State.

There was growing awareness that the government machinery was unable or unwilling to engage in development work in a meaningful manner, particularly in rural areas. The developmental NGO filled the gap, working in a variety of areas -– health, education, livelihoods-creation, water, sanitation, environment, women’s empowerment, land reform, advocacy, ensuring that people got their entitlements. They adopted, largely, a participatory model, working together with the people.

NGOs have often come together in a loose coalition. The Voluntary Action Network of India, or VANI an apex body of Indian voluntary organisations, is one of the largest of its kind. It has a network of 19 federations, 229 organisations and 41 individuals with a base of 2,500 voluntary organisations. It takes up issues concerning the NGO sector; it is currently spearheading opposition to provisions in the Foreign Contributions (Regulation) Bill, 2006. Read a related news item here.

Numbers

There is no centralised database on how many voluntary organisations operate in the country, or how many of them are engaged in developmental work.

According to the Society for Participatory Research in India (PRIA), there are an estimated 2 million diverse voluntary organisations registered under the Society and Trust Acts in the country. These include local youth clubs, mahila mandals, private schools, hospitals, etc.

Nearly 18,000 organisations are registered underthe Foreign Contributions (Regulation) Act (FCRA). They include a variety of organisations including religious ones.

The Planning Commission’s website lists 13,000 developmental NGOs, of which 1,500 have recently been validated by the Charities Aid Foundation (CAF)- India.

PRIA estimates that roughly 30,000 intermediary voluntary organisations are active in the country. A vast majority of these are small -- nearly 80% have one or two full-time staff and annual budgets of less than Rs 5 lakh, with total annual receipts of about Rs 3,000 crore.

According to a 2002 PRIA report, 53% of NPOs are rural, and 47% urban. At least 49% are unregistered.

Legal and regulatory framework

An NGO must be registered under the Societies Registration Act, 1860, the Indian Trusts Act, 1882, the Charitable and Religious Trusts Act, 1920, or as a charitable company under Section 25 of the Companies Act, 1956.

These legislations are not uniform, vary across states and contain laws, which, the new national policy acknowledges, have “over time become complex and restrictive”. The Planning Commission will therefore encourage state governments to review prevailing laws and rules and “simplify, liberalise and rationalise them as far as possible”.

Further, in order to facilitate registration of non-profit companies, the government will examine measures to simplify procedures under section 25 of the Companies Act (1956), including those for licence, registration, and remuneration to member-employees.

The government will also examine the feasibility of enacting a “simple and liberal central law” that will serve as an alternative all-India statute for registering VOs, particularly those that wish to operate in different parts of the country and even abroad.

Accepting that public donations are an important source of funding for VOs and should be encouraged, the new policy says government will:

• Encourage transfer of stocks and share options to VOs and consider suitable tax rebates for the same
• Simplify and streamline the system for granting IT exemption status to charitable projects
• Tighten administrative and penal processes to ensure incentives are not misused.

Inflow of funds from foreign agencies for the voluntary sector is regulated by The Foreign Contributions (Regulation) Act(FCRA) of 1976. Under a 1985 amendment, all NPOs receiving foreign funds had to register themselves with the home ministry, get a foreign contributions account number, notify the ministry about that number, and receive all donations into that account. The Act empowers the State to ban any organisation from receiving foreign contributions if it is perceived to be a political rather than a neutral NPO.

Citing security concerns and the increasing flow of money to the voluntary sector (Rs 6,250 crore was received by NGOs in 2004-05, according to home ministry figures), the central government framed amendments to the FCRA. The Foreign Contributions (Regulation) Bill, 2006 was introduced in the Rajya Sabha during the 2006 winter session of Parliament. Following criticism of its provisions, the bill was sent to the Standing Committee on Home Affairs for further deliberations.

Voluntary organisations and civil society groups have objected to several provisions in the new bill:

• A proposed blanket prohibition against foreign contributions to “organisations of political nature, not being political parties” gives the central government sole responsibility of determining what constitutes “political nature”.
• The government will issue a registration certificate approving foreign funding only after it is satisfied that the applicant has undertaken “meaningful activity in its chosen field for the benefit of the people or has prepared a meaningful project for the benefit of the people”.
• Registration has to be renewed every five years, and there is a fee for registration, renewal and prior approval. Renewal provisions are unnecessary, argue NGOs, because all NGOs are subject to audits and financial scrutiny.
• Only 50% of foreign funding can be spent on administrative expenses.

The new policy on the voluntary sector admits that there are some “stringent screening norms that often restrict the ability of VOs to avail foreign funds”, and has said that the government will review FCRA and simplify its provisions.

The Financial Act of 1983 limits the funds that non-profit organisations may receive from industries. This Act removed income tax exemptions that were previously given to industries for donations to rural development projects undertaken by NPOs. Around the same time, all tax exemptions from income-generating activities of NPOs were also removed.

Government support for NGOs

The government has accepted non-political non-profit organisations and recognised their role in the development process. By the late-1980s, NGOs could acquire more financial resources directly from the Indian government and para-governmental bodies such as the Council for Advancement of People’s Action and Rural Technology (CAPART).

CAPART is an autonomous body within the ministry of rural development registered under the Societies Registration Act. It is the single largest government agency supporting voluntary sector work for rural development. It visits NGO sites, appraises projects before releasing funding and carries out mid-term appraisals.

Several central and state government ministries and departments allocate funds for projects undertaken by NGOs. For instance, the Department of Family Welfare, under the Reproductive and Child Health (RCH) Programme, has identified Mother NGOs (MNGOs) and a committee selects smaller or field NGOs to work in districts.

The new Planning Commission policy lays out three instruments of partnership between government and VOs:

• Consultation through a formal process of interaction at the centre: State and central governments will set up joint consultative groups of government and VO representatives whose mandate is to “share ideas, views and information and the identify opportunities and mechanisms of working together”.

• Strategic collaboration to tackle complex interventions where sustained social mobilisation is critical over the long term: The expertise of VOs will be utilised in collaborative national level programmes in the areas of poverty alleviation, population stabilisation, empowerment of women, combating HIV/Aids, etc.

• Project funding through standard schemes: G overnment agencies should continue to provide financial assistance to VOs for schemes such as surveys, research, workshops, awareness raising, training, etc after ensuring proper accountability.

Work/impact of the sector

Vibrant civil society institutions play a big role in keeping Indian democracy alive. Developmental NGOs work in the field of welfare of the disabled, SCs/STs, children, and women; in education, health, the environment, human rights, and on issues like resettlement and rehabilitation of people displaced by big projects, on the right to information and to work, and so on.

NGOs may work in a specific area or in several at the same time. Developmental NGOs can have varying numbers of staff and can receive funding from a variety of sources -- individual, international, or national donors, or government agencies. According to VANI’s website, local (people and corporate) funding is 80%, government funding is 13%, and international, 7%.

In India, NGOs play a vital role in the shaping and implementation of participatory democracy among marginalised groups. They work at the grassroots level often in remote areas and are more in touch with the ground realities than government administrators. They are less bureaucratic and are effective in ensuring people’s participation. Most importantly perhaps, the staff at NGOs is highly motivated and committed to improving the lives of the people.

Community action by NGOs to assert the rights of people often attracts hostility from the government, local politicians and other vested groups. The recent economic reforms have encouraged greater competitiveness, foreign investment and high technology, and led to weaker labour laws and benefits, less public sector investment and contraction of the labour force. NGOs have been involved in protecting the rights and livelihoods of poor people affected by these reforms.

In 2002, the Government of India declared that the Planning Commission is the nodal agency for GO-VOs interface, and the Steering Committee of the Tenth Five-Year Plan (2002-07) acknowledged the role of NGOs when it said: “The process of social mobilisation and development of people’s initiatives cannot be achieved without the active support and involvement of voluntary organisations.”

The Steering Committee called for greater efforts in building the capacity of NGOs: “It was recognised that there is a need to build up the capacity of the voluntary sector to act as a balancing force between the State and market institutions.”

The Steering Committee also called for greater partnership between the voluntary sector and private sector and panchayati raj institutions/municipalities. It recommended that procedures/guidelines for the involvement of NGOs should be simplified and that ministries should put in more effort to identify ‘good NGOs’ rather than rely only on those that apply.

Despite this acknowledgment of the positive role NGOs play, the government is reluctant to fully accept and work with them. This point was highlighted at a May 2003 regional consultation of Commonwealth CSOs to discuss how civil society can contribute to democracy and development. Some points that emerged during discussions were:

• The Indian government does not see CSOs as natural partners in development and only turns to them in a crisis.
• NGOs are taking on new roles as new issues have emerged on the national scene such as communalism, economic reforms, and electoral reform, which present CSOs with new challenges.

The contribution of Indian CSOs was seen in four broad areas:

• Innovations carried out leading to more sustainable and participatory development.
• Empowerment of weaker and marginalised sections, including panchayati raj institutions (PRIs).
• Relief and rehabilitation during natural and man-made calamities.
• Research and advocacy in issues of popular concern that help formulate policy.

NGOs have some disadvantages and shortcomings. One is their inability to cooperate with each other in a way that allows for coherent policymaking. Apart from registration, further accountability in terms of governance and programmes is not uniform. Not all NGOs have set up internal monitoring systems. Their operations are on a smaller scale due to financial and other constraints.

Though there are several NGOs doing excellent work, the sheer size of the sector and weak checking systems means that many NGOs have been able to get away with poor performance and bad governance.

In 2003, CAPART placed 100 NGOs in the Further Assistance Stopped (FAS) category for manipulating accounts and other misdemeanours. Of these, 70 are in Haryana, around 10 in Punjab, seven in Himachal Pradesh, six in Jammu and Kashmir, and seven in Delhi.

In 2002, the Central Social Welfare Board (CSWB), funded by the Department of Women and Child Development, blacklisted 3,000 NGOs for unsatisfactory progress.

There is a growing realisation, however, that the NGO sector is essential to the development process, and that any regulations and monitoring of the sector needs to be undertaken taking into consideration the new environment in which NGOs operate. The new national policy on the voluntary sector has addressed some of these concerns.

Self-regulation

By definition, the voluntary sector should adopt self-regulation rather than accept government regulation. The new government policy on the voluntary sector says: “There has been much public debate on the voluntary sector, particularly its governance, accountability and transparency. It is widely believed that the voluntary sector must address these issues through suitable self-regulation.”

To this end, the policy says, “government will encourage the evolution of, and subsequently accord recognition to, an independent, national-level self-regulatory agency for the voluntary sector.”

There are several modes of self-regulation. One is the model followed by VANI that requires members to put out annual reports, conduct audits, maintain a system of accounts, file regular income tax returns, and comply with FCRA.

Credibility Alliance (CA), a consortium of voluntary organisations set up in May 2004, is committed to enhancing accountability and transparency in the sector through good governance. It hopes to do this by getting a large membership base and holding consultations with members to evolve suitable guidelines based on voluntary disclosure of information.

CA is also developing an accreditation system to strengthen the legitimacy and credibility of individual organisations. The new voluntary sector policy too has suggested that accreditation would enhance the credibility of VOs and says it will “allow time for such methodologies to be debated and gain acceptability in the voluntary sector before considering their application to government funding of Vos”.

The Steering Committee report of the Tenth Planning Commission suggested some systematic monitoring and evaluation practices:

• Mid-term monitoring and evaluation so that the NGO has enough time to improve in the next stage of the project.
• The committee that sanctions a project should, if possible, also be associated with its monitoring and evaluation.
• Streamlining and computerisation of formats for reporting periodical progress; there is a need to adopt Computerised Monitoring Information Systems (CMIS).

• A panel of PRIs, district offices, beneficiary groups, senior citizens, academics, etc, of the area should monitor every project.
• Innovative or experimental projects should not be judged in a statistics-based evaluation, but should be judged more sensitively.
• Monitoring and evaluation should be outcome-focused and should try to elicit how much has actually reached the people.

Efforts are on to introduce much-needed reforms within CAPART itself. An important nodal agency for NGO-government interface, CAPART has been plagued by several controversies regarding political meddling, inefficient functioning and corruption. The mid-term appraisal of the Tenth Five-Year Plan recommended that reforms were essential, and, in 2005, a committee was set up for the purpose under Sayeeda Hameed, member of the Planning Commission in charge of the voluntary sector.

The committee, which included members from the voluntary sector, has submitted a report that suggests ways to make CAPART less bureaucratic and more professional and accountable. Some key recommendations are:

• The process of selecting a head for CAPART should be competitive and persons with a proven track record in rural development should be chosen whose performance will be periodically assessed.

• Excessive staff, bureaucratic delays in sanctions and the release of funds should be avoided and greater transparency and accountability fostered.
• The archaic information technology division should be overhauled so that information is readily available.
• No director should be allowed to unilaterally change guidelines and procedures.
• CAPART’s governance structure should be overhauled to make it more autonomous.
• CAPART should have a clear focus on certain programmes.
• CAPART must develop links with universities and research organisations that could help its NGO partners in the field, thereby linking land and lab.
• A new programme called Nature-Based livelihoods has been suggested to nurture rural livelihoods through sustainable development.

The 2007 voluntary sector policy has made several other suggestions to strengthen the voluntary sector:

• The government should recognise excellence in governance among VOs by publicising best practices.
• The government should support and encourage organisations that train aspirants to enter the voluntary sector, as well as those already working in the sector.
• The government should encourage and recognise innovative and pioneering work.
• The websites of various government agencies should be re-designed to provide links to key documents and databases, including those related to project funding schemes.

The role of the voluntary sector in development can only expand as the ability and will of the government to intervene shrinks. A well-thought-out policy that supports and encourages NGOs, and reciprocal efforts by NGOs themselves to assess and monitor their own performance, would be a win-win situation for all.