NEW DELHI: The confrontation between the government and Ford Foundation seems set to blow over with the two sides settling down for a resolution where the US donor has agreed in principle to register its Indian arm under the Foreign Exchange Management Act (Fema), 1999.

The home ministry has decided to reciprocate by allowing Ford Foundation to utilize funds from its bank accounts here to pay salaries to its 50-odd staffers.

Although Ford Foundation will not be taken off the “prior permission” list just yet and must get all its grants pre-approved by the home ministry , the understanding has defused the stand-off.

Ford Foundation, among the most reputed international aid agencies working in India and which has been associated with a number of initiatives, found itself on a sticky wicket for not registering itself under Fema, a mandatory requirement for all foreign agencies operating in the country. While previous dispensations never insisted on compliance with the law, the Modi government made it plain to the foundation that it could not be allowed to dodge the law of the land.

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The face-off, coinciding with a tougher scrutiny of international NGOs under the NDA government, worsened when the foundation argued for continuation of the arrangement where it was allowed to operate merely on the basis of an understanding with the finance ministry.

It relented after the home ministry put it on the “prior permission” list in April, and blocked credits to its two bank accounts here — with American Express and Citibank — through which it paid salaries to its Indian staff.

Ford Foundation approached the home ministry last month requesting it to at least clear the fresh credits made to its accounts to meet its Indian arm’s salary bill, even as the issues of its “prior permission” status and registration under an Indian law were resolved with the government.

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“The home ministry is sympathetic to this genuine plea. We want Ford Foundation to continue its charitable activities in India and will make sure that its staff, many of whom are Indians, are not put to inconvenience,” a senior ministry official said. “We may allow release of funds for payment of salaries, but with the rider that none of the funds in the accounts are utilized for grants,” the official added.

The official said indications so far suggested that Ford Foundation was agreeable to the government’s demand that its New Delhi office be registered under Fema.

“Given that Ford has clarified it has not received any grants for the past few years and that it is directly passed on to Indian NGOs, there is no requirement for it to register under FCRA. A registration under Fema will take care of our demand that its Indian operations be aligned with our domestic laws,” the ministry official said.

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Sources also denied that a registration under Fema would automatically mean removal of Ford Foundation from the “prior permission” category. “There are no such plans as of now, though a review on the US donor’s prior permission status cannot be ruled out in due course,” the official said.

