Funding of NGOs by the Government-Some Cautions

Over the past few years, the government funding to NGOs has risen to a very high level. There is no authentic figure available about the total amount disbursed to NGOs in the whole financial year by the GOI through its different ministries and Corporations. But definitely, there is a strong case for the compilation for such figure. NGOs have become a means of eating government money through back door without proper accountability.

Some Suggestions-

1.      Why should in the first place, the government give money to NGOs? The very term “NGO” means that they are supposed to take donations from society to serve the society. In this age, when there are so many rich people around and so much of balck money in the economy, there is no dearth of money for good cause. There is only a dearth of people with dedication. There are hundreds of people ready with their purse to provide every help to any organization whom they trust.

It is high time that we stop this loot of tax payer’s money by the wives, relatives and friends of politicians & bureaucrats in the name of NGOs. In most of the cases, the money is given to NGOs without adopting proper selection and bid process, which is against all financial rules and propriety.

2.      If at all we need to partner with any NGOs in order to expand Government’s reach, it should be done with following cautions-

a.       The standard PPP processes should be followed for selection of NGOs. That is there should be an advertisement, technical bids, financial bids etc. Financial rules should not be bent in order to justify NGO funding.

b.      There should be some minimum prescribed representation of women, SC/STs, minorities in the NGOs governing body in order to be eligible for Government funding. The NGOs talk of welfare of these sections but never practice what they preach.

c.       On every department’s website, there should be a link (or button) named “NGO funding”. All the funds of that department, no matter from what level  are  they being released, should be displayed in the following 7 column format on the website for every financial year-

Sl.No., Releasing Officer’s Name & designation, Letter no. & Date of Release, Name of NGO, Purpose of grant, Period for utilization, Remarks

In the release order, the exact link (website address) should be given where the information of that release order is displayed. Any release order without this link should be considered fake.

Increase Tax Revenues and check Corruption by scrapping big bills

India’s tax revenues have steadily risen in the last few years. This has been primarily due to three reasons, high growth rate of economy, widening of tax base and use of Information and Communication Technology for better tax collection with transparency, accountability and efficiency. But the government is still looking for ways to generate more revenues.
 
There is one big opportunity which we are still missing. That is of scrapping the higher denomination (Rs. 500 and Rs. 1000) bills. This is not a new proposal but we need to rethink about it under changed circumstances with the presence of credit card, net banking, mobile and other ICT applications.
 
The government needs to announce a cut off date (say 31st March 2011) about 2-3 months in advance for scrapping Rs. 500 and 1000 bills. In this 2-3 months period, people can go to banks (authorised for this purpose) with their existing bills of Rs. 1000/500 and exchange them for the bills of Rs. 100 denomination. All they need to produce there is a valid ID proof. They will be clicked by a camera there and their fingerprints (or IRIS image) would be taken. This will ensure that one person can’t exchange at more than one place using a fake ID. However, with the same ID, one person can change as many times as he wants to during the 2-3 months period.
 
As a result of this, people would be forced to resort to electronic means of payment for bigger transactions. For example, to buy a jewellery item worth  Rs. 2,00,000, a lady would have to carry 20 bundles of  Rs. 100 bills. It means a lot of inconvenience to her. To avoid that, people would resort more to electronic transactions like credit cards, debit cards, direct debit, cheque payment etc. This will bring more money in Tax net thereby increasing Tax revenues. This only creates inconvenience for the people with unaccounted or black money. For a person with hard earned white income, there are plenty of electronic means available to make payments.
 
Political parties and candidates would find it highly difficult to store huge amount of cash for election expenses and to spend it during elections. This would to a limited extent, also help in cleansing electoral politics. Electoral politics is one of the main reasons for existence of corruption.
 
Even during initial exchange period of 2-3 months, it will be very tough for the people with black money. Once the scheme is announced, generally people would hesitate in accepting these bills. People with lots of black money would not be able to convert it. If the government wants, it can announce a voluntary disclosure scheme (with a taxation of 50-60%) along with this to unearth black money.
 
It doesn’t affect more than 90% of the people of the country who rarely use the bigger bills.  It will only affect the corrupt ultra rich 2-3% people. It also doesn’t affect the people with white money no matter however rich they are. They can easily exchange it initially and also use electronic transaction to do business later on.
 
Thus, this scheme has the multiple benefits of increasing tax revenues, size of white economy and reducing black money and corruption. The size of black money economy is estimated to be three times that of white money economy.
 
No scheme is 100% full proof. This scheme also has its pitfalls. People would start using gold coins or other Hawala kind of tokens to make large payments. This may give rise to a parallel illegal currency. But chances of this are rare, as the acceptance of an illegal currency would always be very limited. Even if this happens, still it would not be worse than the present situation, where black money is as freely and legally used in market as white money. This would definitely create a lot of inconvenience to people with black money. Many fence sitters may decide not to become corrupt because of this inconvenience in handling black money.
 
People can use dummies like servants, relatives during the initial exchange period of 2-3 months to convert large amounts of black money. If the duplication check software is not strong or is not properly implemented, then a dummy person with a fake ID can exchange huge sums of money. Proper checks and balances would need to be designed in the scheme to control this. For example, we can put a limit on the maximum amount of exchange allowed per person. Above that amount, he would need to produce his Tax returns of last 3 years etc.
 
If one objectively examines this scheme, this is definitely in national interest, even if it may not be in the interest of highly placed corrupt politicians and bureaucrats. For whatever reasons, even if the government can’t implement it straight away, there is surely a case for further study or research or a committee’s appointment to examine this from all angles.