India Regulatory Brief: 9,000 NGO Licenses Revoked, Maharashtra to Make Starting a Business Easier

May 11, 2015 Posted by India Briefing Reading Time: 4 minutes

Government Crackdown on Foreign Funded NGOs

The Ministry of Home Affairs (MHA) recently revoked the licenses of nearly 9,000 non-governmental organizations (NGOs). The MHA revoked the licenses for non-compliance with Section 18 of the Foreign Contributions Regulation Act (FCRA), which stipulates that NGOs must declare financial contributions from abroad to the central government.

Prime Minister Indira Gandhi’s government implemented the FCRA in 1976 during the so-called ‘Emergency’ – which was associated with the suspension of democratic exercises and curbs on civil liberties – to limit the political influence of foreign funded organizations. In 2011, the Congress-led government overhauled the FCRA, increasing the MHA’s discretionary powers and the number of compliances for NGOs. The overhaul followed several high-profile protest campaigns supported by foreign funded NGOs against large-scale infrastructure projects.

The recent license revocations followed an October 2014 warning issued by the MHA to NGOs – only 229 of the 10,343 notified organizations eventually complied with the warning. US Ambassador to India Richard Verma has criticized the Indian government for its crackdown on foreign funded NGOs, while local observers have noted that the government’s regulations for NGOs are simply too complicated for many organizations. Prime Minister Narendra Modi’s government is administering laws enacted by previous governments; however, critics allege that Modi’s government has been more proactive in investigating and enforcing FCRA compliance.

Maharashtra to Make Starting a Business Easier

The Maharashtra state Industry Department announced that it will reduce the number of procedures needed to set up a business in the state. There are currently over 75 permissions required, but Minister of Industries Subhash Desai said that the state government plans to remove close to half of the approvals. In addition, the state government plans to reduce the number of departments involved in granting approvals, and the time required to grant approvals.

The Doing Business 2015 report by the World Bank Group ranked India at 142 out of 189 economies in terms of ease of doing business. The same study found that Mumbai fell behind South Asian averages for the number of procedures needed to start a business, and the amount of time these procedures take to complete. If the state government enacts the proposed reforms as promised, it will significantly improve Mumbai’s ease of doing business ranking.

Maharashtra Regulators Investigate Snapdeal

The Maharashtra Food and Drug Administration (FDA) is investigating the sale of emergency contraceptives, erectile dysfunction treatments, and other prescription drugs on Snapdeal, a major Indian online retailer. Snapdeal has over 25 million users and is valued at around US$ 1 billion.

The investigation began after the Maharashtra FDA filed a police complaint against Snapdeal’s CEO, directors and distributors. Maharashtra FDA commissioner Harshadeep Kamble said the company’s actions contravened the Drugs and Cosmetics Act, 1940, which can carry a jail term of up to five years and minimum fine of Rs. 100,000 (US$ 1,562.73).

In response to the police complaint, Snapdeal maintained that it isn’t responsible for what merchants sell on their website. There are more than 100,000 merchants on its platform, contributing to an online retail industry worth an estimated $23 billion. The Maharashtra FDA is also investigating other online retailers like Amazon and Flipkart, but hasn’t begun formal legal proceedings.

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