Indian elections are the world’s biggest exercise in democracy but also among the most expensive. Parties and candidates need large sums of money for voter mobilisation, advertising, consulting, transport, propaganda and printing of campaign materials to reach voters in constituencies.
Opaque sources of finance –
- Corporate donations constitute the main source of election funding in India which is awash with black money, with business and corporate donations to political parties commonly taking this form.
- The public disclosure system that exists is limited.
- Only in 2008, using the provisions of the Right to Information (RTI) Act, the Central Information Commission allowed disclosure of income tax returns of political parties, though it is an open secret that actual expenditure is much, much higher than what is disclosed.
Idea of ‘electoral bonds’ –
In his 2017 Budget speech, while emphasising the absence of transparency in funding, Finance Minister Arun Jaitley introduced the electoral bonds to impart transparency in political funding. But the concern for transparency in political funding is at complete odds with the electoral bonds scheme.
- Simply put, anybody can buy electoral bonds in the form of bearer bonds from specified branches of the State Bank of India and donate it anonymously to a political party of their choice; the party must cash the bonds within 14 days.
- All donations given to a party will be accounted for in the balance sheets but without exposing the donor details to the public.
- Donors continue to prize anonymity as they fear disclosure could invite adverse consequences from political opponents. As a result, the Election Commission (EC), the Income Tax department and the voter would remain in the dark about it.
- However, the ruling dispensation at the Centre, if it wants, can ferret out information on who’s funding whom from banking authorities on some pretext or the other.
- The government’s principal aim is to reduce the role of unaccounted cash in the electoral process and not the corporate control of politics.
- Political parties don’t need to reveal the donor’s name for a contributions above ₹20,000 provided these are in the form of electoral bonds..
Concerns with the electoral bond scheme –
Electoral bonds must be seen in conjunction with –
- Lifting of the maximum limit of 7.5% on the proportion of the profits a company can donate to a political party, thus opening up the possibility of shell companies being set up specifically to fund parties;
- Amendment of the Foreign Contribution (Regulation) Act (FCRA) opening the floodgates of foreign funding to political parties, especially those which have a foreign support base; and
- The refusal of political parties to come under the RTI Act in order to conceal their sources of funding.
Other concerns –
- These three things will end up strengthening the business-politics nexus. There is thus a legitimate fear that policy decisions of political parties and politicians after being elected may be biased in favour of groups that fund them.
- These bonds are likely to reverse the small steps towards transparency of political finance that came as a result of RTI-driven public disclosure of income tax returns of political parties arguing that these disclosures were a matter of public interest and should be available to citizens.
- State funding of elections (in various forms) is a potential solution to this problem.
- The Indrajit Gupta Committee on State Funding of Elections had endorsed partial state funding of recognised political parties and their candidates in elections way back in 1998, but the lack of political will has prevented any serious discussion on this.
- The mechanics of this process need to be carefully worked out to establish the allocation of money to national parties, State parties and independent candidates, and to check candidate’s own expenditure over and above that which is provided by the state.
Based on the experience of countries that have total or partial state funding of elections, it will not be difficult to work out a formula that is both efficient and equitable to ensure that democracy works for everyone and not just for the wealthy few.
Electoral Bonds – An electoral bond is designed to be a bearer instrument like a Promissory Note — in effect, it will be similar to a bank note that is payable to the bearer on demand and free of interest. It can be purchased by any citizen of India or a body incorporated in India.
The bonds will be issued in multiples of ₹1,000, ₹10,000, ₹1 lakh, ₹10 lakh and ₹1 crore and will be available at specified branches of State Bank of India. They can be bought by the donor with a KYC-compliant account. Donors can donate the bonds to their party of choice which can then be cashed in via the party’s verified account within 15 days.
Question: Electoral bonds may not be the appropriate instrument that we need to establish a transparent system of political funding. Suggest appropriate solution to tackle the menace of opacity in political funding in India.