No Government Business In Philanthropy

The latest Budget attempts, once again, to draw private charitable resources into endowed funds under the state, unmindful of the fact that similar previous experiments have not been entirely successful. In the Budget, donations (other than CSR contributions under the Companies Act) made to Swachh Bharat Kosh and Clean Ganga Fund have been made eligible for100% deduction under Section 80 G of the Income Tax Act.

The establishment of autonomous endowment funds to attract and pool voluntary contributions from society for financing those programmes which, though important in themselves, have a lower claim on regular budgetary resources, has been tried earlier with the Bharat Shiksha Kosh, the National Culture Fund, and the Bharat Livelihoods Foundation. 

The National Culture Fund (NCF) was set up in 1996 to mobilise funds from private sources to promote and preserve tangible and intangible Indian culture. Though any individual was welcome to donate, business corporations in particular were expected to be big donors for specific projects, as in the present case. In order to encourage donations all contributions to the Fund were 100% tax exempt. 

The Government kicked off the Fund with a commitment of Rs 19.5 crore for the corpus but released only Rs 2 crore in the first year. As for private funds, the Fund received only Rs 25,000 from a company in the first year, and by 2005 the kitty had only Rs 50 crore as operating funds, on account of 12 MOUs signed with some leading corporations such as the Taj Group of Hotels, and the Apeejay Surendra Group, for conservation and maintenance of various monuments including the Taj, and Jantar Mantar.

Further government grants built up the corpus to Rs 13.3 crore by 2007, the last year for which figures are available from the NCF's web site. Since the total corpus was only Rs 19.67 crore, it means there was no significant addition from private donations. After nearly two decades of existence neither the amount raised nor the number of projects sponsored is said to be significant. According to newspaper reports, though projects elsewhere have moved, the Delhi projects of conservation are in a limbo.

The next attempt, Bharat Shiksha Kosh, the brain child of then HRD Minister Murli Manohar Joshi, was announced at the first Pravasi Bharatiya Diwas in Jan 2003. The aim was to attract contributions for higher technical and scientific education and research from rich overseas Indians, and to generate extra budgetary resources for them. The expectation was that high- worth NRI alumni of IITs and IIMs would be happy to donate substantial amounts as gurudakshina to their alma maters.

Instead of leaving the donor free to donate to an institute of choice, the HRD Ministry by an order dated 21 February 2003 mandated that all external donors who wish to donate to a particular institution of higher education should route their donations through the BSK which would in turn decide for what and how the donation was to be used. Predictably there was an outcry as both donors and the intended recipient institutions saw in the BSK an attempt to control the autonomy of the institutions as well as to indoctrinate education according to the rightist ideology of the ruling party. It led to the highly publicised withdrawal of the intended donation of $10 million by IIT Madras alumnus Gururaj Deshpande to his alma mater, and redirection to MIT instead. Other IITs suffered similarly. 

Even those who did not mind BSK as a mechanism for mobilisation of resources objected to routing through government. Strangely, ministry officials defended the decision to centralise donation on the ground that it was not easy to make a direct donation and that accountability could not be ensured! Not surprisingly the Fund could attract only Rs 1651 as donation from 4 individuals, none of whom was an NRI or a PIO, in the year and a half of its existence. Finally, with the change of government, the Feb 21 2003 order was withdrawn, and donors were allowed to make donations directly to the institution of choice. The Fund is now as good as defunct. 

The third example, the Bharat Livelihoods Foundation, was slightly different in concept. Jairam Ramesh, minister for rural development in the UPA government, envisaged the BRLF as an autonomous public-private partnership with a corpus of around Rs 1000 crore, of which around half would be contributed by government and the rest by private donors — corporations, national and international foundations, and banks — to fund grassroots NGOs. It was to replace the Council for Advancement of People's Action and Rural Development (CAPART), a body under the Rural Development Ministry which had become synonymous with inefficiency and corruption. Importantly its management would not be in government hands, and its Chair would be an eminent non political person. Its General Body and Executive Council comprised of well known civil society and non civil society names. 

A few months before the 2014 elections, the rural development ministry signed an MOU with the BRLF, making it a funding agency for NGOs across the country, and giving it Rs 200 crore as a first tranche, to be followed by Rs 300 crore over the next two years, out of an envisaged corpus of Rs 1000 crore. The idea of the BRLF was entirely laudable, professional arms length funding to insulate CSOs from the problems of accessing foreign funds, as well as the deficiencies of government funding such as red tape, corruption and inflexible grants. Before it could get off the ground and prove that the model was viable, it is facing an uncertain future with the change in government seemingly unwilling to honour the earlier commitment.

The proposal by the Chhattisgarh government to make companies compulsorily deposit all CSR contributions into a state fund, to be disbursed by the government, created such disquiet in the central government and outside, that the proposal was shelved. A more successful effort in terms of mobilizing private resources by the state was the Fund a School Initiative of the Madhya Pradesh state government which attracted online funding from several small donors. 

Thus as mechanisms for mobilising private resources, none of the Funds could be said to have been a great success. Nor can they be said to be successful examples of public-private partnerships. While the Government blames its private partners for promising but not delivering on the funds, the private partners cite red tape, a labyrinth of laws and bylaws and government procedures holding up the work. 

Some of the Funds mentioned were not successful because the heavy hand of the Government was still visible and acted as a disincentive to private donors. The idea of mobilising and creating a large pool of charitable resources to supplement government budgetary provision is not in itself bad. Individual corporate initiatives while useful in themselves remain limited in their impact in terms of bringing about sustained change on a large scale, because they have few linkages with large national goals and government programmers.

The state Funds can help provide this scale and linkages, and the synergy from a partnership can improve standards of performance and efficiency in implementation. The problem really is in operation — government does not have the mindset needed for making philanthropy, as also a partnership effective. Philanthropy requires vision, imagination and a willingness to take risks on potentially winning ideas. Merely calling a Fund autonomous does not make it so if all else — procedures and mindsets remain the same. So far nothing is known about how the latest two Funds will be managed.

Traditionally philanthropy has been society's way of compensating for the failure of both the market and the state in order to meet special social needs. The conclusion is therefore inescapable that the state should leave philanthropy in private hands encouraging it to supplement state provision and controlling the flow of funds into desired fields only indirectly through differential tax incentives and other means.

When will the government learn?