Why Modi govt’s proposal to amend ‘foreign funding’ law to political funding is problematic

The Narendra Modi-led government has come under fire for its reported decision to permit foreign companies to contribute to political parties, a move which would benefit both the BJP and the Congress.

According to an Economic Times report, the government has proposed amendments to the Foreign Contribution (Regulation) Act, 2010 which would permit foreign funding to political parties and election candidates. However, there were serious objections from ‘highest’ levels of different ministries, according to the report.

What is the current law?

Under the Foreign Contribution (Regulation) Act, 2010, political parties, election candidates and other specified groups of people are not allowed to accept money from companies registered in India but which have a foreign investment of over 50 percent.

What the amendment will change?

Basically, the amendment will tinker with the definition of what constitutes a foreign company.

If the amendment is passed, it would allow companies with a majority foreign ownership to make political contributions as long as they met the sectoral investment cap and other conditions, Mint reported.

With this amendment, it would no longer be illegal for the Indian subsidiary of a foreign company to make donations to political parties.

Will it be tabled?

The bill was tabled on February 29 under the budget proposals, and is likely to be passed in May during the second half of the current budget session.

Why it matters

The question of foreign funding to political parties has been looked upon with suspicion as it is considered as foreign interference or influence over the sovereignty of a country.

Both the Congress and BJP are fighting cases in the Delhi High Court precisely for accepting foreign funding under the current law. The Association for Democratic reforms had approached the Court alleging that both the Congress and BJP had violated FCRA norms when they accepted donations from the Indian subsidiaries of British mining company Vedanta, which is owned by Indian-born billionaire Anil Agarwal.

In March 2014, the Court ruled that the two political parties had indeed violated the FCRA. The Delhi HC had also directed the government and the Election Commission to take action against the two parties.

The two parties then approached the Supreme Court challenging the Delhi High Court’s ruling. The matter now rests with the country’s highest court.

What are people saying?

After news website The Wire broke the story, the AAP on Saturday had called the move  one of the worst examples of ‘political opportunism and a clear attempt to subvert justice’.

On Monday morning, as several media houses also carried the story, #ForeignFundedModi began to trend on Twitter.

Incidentally, the BJP had raked the issue of foreign funding in Delhi accusing the AAP of flouting rules and gain illegal foreign funding in the run up to the assembly elections in the national capital.

What has the govt said?

Minister of State for Home Affairs Kiren Rijiju said in July 2015 that there was no proposal to amend the law.

However, in December last year, the MHA had invited suggestions on the proposed change in the definition of 'foreign source' in December but withdrew the move fearing it may fail a floor test in Parliament.