As per wikipedia, Non-governmental organizations, nongovernmental organizations, or nongovernment organizations, commonly referred to as NGOs, are nonprofit organizations independent of governments and international governmental organizations (though often funded by governments) that try to improve the lives of other people through humanitarian, educational, healthcare, public policy, social, human rights, environmental, and other activism and services. In simple words, its a group of people which organize activities and tasks to make our society better and they do it without any intention of profit. Most of their costs are funded by Governments or Trusts, rest of the money is raised via donations.
In India, there different legal entities under which an NGO can be setup.
It could either be a Registered Society, which falls under Societies Registration Act, 1860. This requires any seven person who subscribe to a common Memorandum of Association. This memorandum is required to have name of society, objectives, addresses and occupant details.
Second path is via trust acts, The Public Charitable Trust Act or 1882 Indian Trust Act. Former is for public trusts which are given privileges and tax benefits. A state in India can have its own trust act, which is there in Madhya Pradesh and Rajasthan. A trust can be registered in one state, but it can operate in other states also. Private trusts are for managing private and religious properties.
And the other path is via registering as Non Profit Company under Companies Act, 2013. Non profit companies are exempt from some difficult compliances but are required to be associated with objective of promoting culture and charity.
According to section 25(1) (Companies Act, 1956): “Where it is proved to the satisfaction. of the Central Government that an association is about to be formed as a limited company for promoting commerce, art, science, religion, charity or any other useful objectives, intends to apply its profits, if any, or other income in promoting its objectives, and to prohibit the payment of any dividend to its members, the Central Government may, by license, l direct that the association may be registered as a company with limited liability, without addition to its name of the word “Limited” or the words “Private Limited”.
If NGOs are registered under any of above mentioned acts, they are eligible to get grants from Government and Private Sector. Apart from registering under the mentioned acts, it should also be clear about its motives.
Then there are multiple sources for fundraising :
In earlier times, when most of the India was in rural sector, where lack of basic services like education, sanitation etc was quite prevalent. NGOs flung to fill that gap and did their job decently well. NGOs became a sector and became a tool for government to deliver the improvements to non-connected people. As per CBI report in 2007, there are 32.97 lakh registered NGOs and voluntary organisations. By the number of NGOs is more than double the number of schools in the country, 250 times the number of government hospitals, one NGO for 400 people as against one policeman for 709 people. Though only very few of them have got their account audited.
Today the story is different, people are more connected, governments are more connected with local governments, hence the NGOs are struggling to find a role for themselves in this post-internet India.
The basic rights framework built over several decades of struggles (such as education, food, employment, and information) is increasingly being challenged, and government legislation are not helping them. Some of them are facing questions regarding their funding sources being foreign. So a lot of NGOs have forsaken the old paths and have become contractors for lot of projects or are going for the profitable path as funds are becoming scarce.
NGO themselves are to blame for this, despite getting the head start, they never had sound financial plans nor they had enough human resources to tackle such situations. These are the causes NGOs are asked questions.
Given India is moving towards being a more connected society, still there are sector of people who are facing the problems where they do not have access to basic services. So NGOs are probably required to understand problem in more details and be transparent about it. Rather than focussing on gaining political affidavits or lucrative fundings, they should stick to their core strengths which is to work at grass root level and understand problems of local people on the ground. They could form collation with local governments and organization to make a new kind of society, but all this requires sticking passionately with your values, that will test their strength of character.
This is a critical juncture for NGOs in India, here they can change as per society and create new models which involves markets and governments and at the same time able to have some value in that system which is irreplaceable.