ENHANCING INDIAN PRIVATE CAPITAL FLOW TO NON PROFIT ACTIVITIES

Mr Harnath Jagawat's Artcle on

ENHANCING INDIAN PRIVATE CAPITAL FLOW TO NON PROFIT ACTIVITIES
Non profit activities by non-Government sources in our country, is perhaps as old as Indian civilization. There has been strong philanthropist tradition in our country in which private, individuals as well as organizations have been contributing in various field of social development. However, such philanthropist activities have been mostly in the field of education, health, social welfare and religious, etc. These are the age-old traditional fields of philanthropist activities by the Indian private sector (non-Government sector). These are the fields in which huge amount is contributed by non-Government sectors. In the State like Gujarat, and may be few more, overwhelming majority of educational, medical, social welfare, institutions are funded and managed outside the Government sector. In this brief note I would deal with the private capital or private contribution in the field of rural development as it is relatively very new field which has not attracted the capital or contribution from the private sources on significant scale. On the role of private sector capital, for non-profit activities, I think, all the major non-Government funding agencies should give highest priority to the poverty alleviation programmes both in rural as well as urban centers. The poverty alleviation programmes in rural areas should be preferred for the support on the strong rationale that if rural people get livelihood in their own villages, to that extent pressure on urban centers will get reduced. In other words, rural prosperity will prevent several severe problems of urban centers. However, the fact is that by and large, Indian non-Government sectors including corporate companies and trusts are not very much inclined to support rural development programme. Ofcourse, there are few exceptions. I think, here there is a role for Tata Trusts and Tata House to take lead in mobilizing non-Government sector and form a kind of consortium which can support good rural development projects. Say, if 100 companies and 100 trusts jointly decide to form a consortium and then support good projects for 5 - 10 years, it would make significant impact. Such support should be given to not only proven practicing NGOs, but, there could be a condition to raise matching contribution in the respective project. In my opinion, Tatas are most qualified to take lead in the formation of such consortium for rural development. Few chambers of commerce do show some interest in rural development, but, the attempts are very adhoc and there is neither focus nor direction in such efforts. Hence, the importance of Tatas providing the lead. The resources are scarce, while demand from NGOs would be much more. The consortium should use the criteria of merit in selecting the NGOs, which can deliver the goods. I believe in rural poverty alleviation, there is no special need for experimentation or innovation as there are numbers of successful examples, which need to be replicated at larger scale. Therefore, setting aside all the ideological biases in favour or against of small NGOs, big NGOs, new NGOs, old NGOs, the principle of supporting proven NGOs should be adopted. In the competitive age that we are living, this is the only sound way in which competent organizations should be further encouraged. It would be ofcourse, the responsibility of such competent NGOs to support and sponsor new NGOs and CBOs in and around their area of operation. The support by such consortium to the NGOs should be well focused so that the impact could be tangible. The proposed consortium may also approach the Government for policy change to offer more incentive to the private sector donors under the Income Tax Act. For example, for the poverty alleviation programme, in the vulnerable drought prone regions and tribal regions, the 100 % tax benefit may be offered to the donors. With the financial resources of the State and Central Government, almost exhausted - and some States in almost bankruptcy conditions, the Government should provide attractive incentive to the private sector donors in rural development. In Nai Duniya edition of 17.04.2000, the Chief Minister of Madhya Pradesh, Mr. Digvijay Singh was quoted having said that 70 % of the State budget goes in the salary and perks to the Government employees, 18 % goes in repayment of loan and interest on the same and only 12 % remains for the real development. If we consider corruption, delays and all kinds of mal-practices and leakage in this 12 % utilization, one can imagine how much real development could take place on the ground. Perhaps, in context of this information, which may be commonly applied to many other States, our case for the support to competent NGOs by the private sectors become very strong. Infact, even the Government should encourage the involvement of NGOs at much larger scale on the condition that the NGOs would raise matching contribution from non-Government sources. This would, to some extent accelerate the development. Otherwise that 12 % amount, minus leakages, would make no dent in the rural development programme of the Government. In my opinion, I strongly feel that the Indian NGOs, particularly, competent NGOs should rely more on indigenous fundings from the Indian sources, both Government and private, rather than on foreign funding. I am not biased against foreign funding. We have received huge amount from foreign sources and we have progressed very much on account of such foreign support. Yet, at the end of the day, I believe, the indigenous funding could be more reliable and desirable and such indigenous funding should be ensured by the Government and non-Government sources. The international funding organizations go on changing their policies, programme priorities, the principle of “favoured nations” and “not so favoured nations”, raising issues of human rights, nuclear tests, so on and so forth against the poor nations and block the deserved grants to needy countries. The only way not to succumb to such whims of the foreign donors, we must create the conditions in which good programmes and good NGOs are supported indigenously. 18.04.2000
Mr. Harnath Jagawat Director, NMSWDF

Non profit activities by non-Government sources in our country, is perhaps as old as Indian civilization. There has been strong philanthropist tradition in our country in which private, individuals as well as organizations have been contributing in various field of social development. However, such philanthropist activities have been mostly in the field of education, health, social welfare and religious, etc. These are the age-old traditional fields of philanthropist activities by the Indian private sector (non-Government sector). These are the fields in which huge amount is contributed by non-Government sectors. In the State like Gujarat, and may be few more, overwhelming majority of educational, medical, social welfare, institutions are funded and managed outside the Government sector. In this brief note I would deal with the private capital or private contribution in the field of rural development as it is relatively very new field which has not attracted the capital or contribution from the private sources on significant scale.

On the role of private sector capital, for non-profit activities, I think, all the major non-Government funding agencies should give highest priority to the poverty alleviation programmes both in rural as well as urban centers. The poverty alleviation programmes in rural areas should be preferred for the support on the strong rationale that if rural people get livelihood in their own villages, to that extent pressure on urban centers will get reduced. In other words, rural prosperity will prevent several severe problems of urban centers.

However, the fact is that by and large, Indian non-Government sectors including corporate companies and trusts are not very much inclined to support rural development programme. Ofcourse, there are few exceptions. I think, here there is a role for Tata Trusts and Tata House to take lead in mobilizing non-Government sector and form a kind of consortium which can support good rural development projects. Say, if 100 companies and 100 trusts jointly decide to form a consortium and then support good projects for 5 - 10 years, it would make significant impact. Such support should be given to not only proven practicing NGOs, but, there could be a condition to raise matching contribution in the respective project. In my opinion, Tatas are most qualified to take lead in the formation of such consortium for rural development. Few chambers of commerce do show some interest in rural development, but, the attempts are very adhoc and there is neither focus nor direction in such efforts. Hence, the importance of Tatas providing the lead.

The resources are scarce, while demand from NGOs would be much more. The consortium should use the criteria of merit in selecting the NGOs, which can deliver the goods. I believe in rural poverty alleviation, there is no special need for experimentation or innovation as there are numbers of successful examples, which need to be replicated at larger scale. Therefore, setting aside all the ideological biases in favour or against of small NGOs, big NGOs, new NGOs, old NGOs, the principle of supporting proven NGOs should be adopted. In the competitive age that we are living, this is the only sound way in which competent organizations should be further encouraged. It would be ofcourse, the responsibility of such competent NGOs to support and sponsor new NGOs and CBOs in and around their area of operation. The support by such consortium to the NGOs should be well focused so that the impact could be tangible.

The proposed consortium may also approach the Government for policy change to offer more incentive to the private sector donors under the Income Tax Act. For example, for the poverty alleviation programme, in the vulnerable drought prone regions and tribal regions, the 100 % tax benefit may be offered to the donors. With the financial resources of the State and Central Government, almost exhausted - and some States in almost bankruptcy conditions, the Government should provide attractive incentive to the private sector donors in rural development.

In Nai Duniya edition of 17.04.2000, the Chief Minister of Madhya Pradesh, Mr. Digvijay Singh was quoted having said that 70 % of the State budget goes in the salary and perks to the Government employees, 18 % goes in repayment of loan and interest on the same and only 12 % remains for the real development. If we consider corruption, delays and all kinds of mal-practices and leakage in this 12 % utilization, one can imagine how much real development could take place on the ground. Perhaps, in context of this information, which may be commonly applied to many other States, our case for the support to competent NGOs by the private sectors become very strong. Infact, even the Government should encourage the involvement of NGOs at much larger scale on the condition that the NGOs would raise matching contribution from non-Government sources. This would, to some extent accelerate the development. Otherwise that 12 % amount, minus leakages, would make no dent in the rural development programme of the Government.

In my opinion, I strongly feel that the Indian NGOs, particularly, competent NGOs should rely more on indigenous fundings from the Indian sources, both Government and private, rather than on foreign funding. I am not biased against foreign funding. We have received huge amount from foreign sources and we have progressed very much on account of such foreign support. Yet, at the end of the day, I believe, the indigenous funding could be more reliable and desirable and such indigenous funding should be ensured by the Government and non-Government sources. The international funding organizations go on changing their policies, programme priorities, the principle of “favoured nations” and “not so favoured nations”, raising issues of human rights, nuclear tests, so on and so forth against the poor nations and block the deserved grants to needy countries. The only way not to succumb to such whims of the foreign donors, we must create the conditions in which good programmes and good NGOs are supported indigenously.

18.04.2000

Mr. Harnath Jagawat
Director, NMSWDF