ON FCRA: Sitaram Yechury's Clarification

November 17, 2016

During my speech on demonetisation, the Finance Minister intervened to explain the amended Foreign Contribution Regulation Act (FCRA), 2010 as a mere "technicality", and not having any effect on the funding of political parties. This is yet again, a sleight of hand.

The FCRA was amended from retrospective effect not by introducing and debating a bill in parliament. The govt, instead, brought an amendment to FCRA in February 2016 through the 2016 Finance Bill to avoid scrutiny. It amended Section 2(1) (j) (vi) of FCRA, 2010, by adding a proviso with retrospective effect. The Representation of People's Act bars political parties from receiving foreign funds, but after this amendment, they can receive funding from foreign donors which will bypass government scrutiny.

The amendment was brought in retrospectively because the ruling party was charged with illegally receiving foreign funds for political activities from U.K.-based Vedanta Group from 2004 to 2012, thereby violating FCRA provisions. The case is still being heard in the Supreme Court.

After the amendment, a foreign company - often foreign multi-national giants - through their Indian arm/entity (where they may have more than 50% Indian holding) can fund Indian political parties. Effectively therefore, foreign companies can fund Indian political parties, through this arm. This raises serious concerns about circumventing the Representation of People's Act for foreign funding of Indian political parties.