Govt yet to make progress on rules for political donations

Govt yet to make progress on rules for political donations

New Delhi: More than a year after the Congress-led United Progressive Alliance government (UPA) proposed 100% tax exemption for political donations to ‘electoral trusts’, it is yet to notify the definition of such trusts and make rules to govern them, leaving in limbo a key attempt to reform the system of funding political parties.

Three state assembly elections have been held since finance minister Pranab Mukherjee, in his FY10 budget speech, outlined the proposal, which was to have been followed by a formal notification defining the trusts and the drafting of rules under which they would function.

Loading video

The absence of follow-up action by the government signals a lack of political will, some analysts say. “The government is obviously not serious but it does want to create a notion that business can make legitimate contributions to elections," said Jagdeep Chhokar, founder-member of the Association of Democratic Reforms, a New-Delhi based non-government organization.

The process of funding parties, which receive donations mainly in the run-up to elections, is one that has been found to lack clarity.

Mukherjee, in last year’s budget speech, said donations to electoral trusts would be allowed as a 100% deduction in the computation of the donor’s taxable income.

“The House will agree that it is desirable to bring about transparency in the funding of political parties in the country," the finance minister had said.

The trusts would be set up as pass-through vehicles for routing donations to political parties and be approved by the Central Board of Direct Taxes (CBDT), he said.

“No progress has been made so far but this remains on the agenda," said a senior finance ministry official, who did not want to be identified.

Even the plan to create such trusts and make donations to them tax-free had met with criticism. The Left opposed the move, saying it would legalize the corporate funding of parties and risk perpetuating corruption.

“What the Left wants is state funding of elections. We any way do not want corporates to contribute to that fund," said Nilotpal Basu, a leader of the Communist Party of India (Marxist).

“The government should call a meeting of all political parties and go for state funding. That is what will help address the entire issue of money power in politics and during elections," he said.

Parties are trying to seek government funding with election expenditure having risen steeply over the past few years, said Chhokar.

“Unless there is complete financial transparency, there should be no case for public funding for them," he said.

With the assembly election in Bihar due next month and some crucial state polls scheduled for next year, transparency in political funding assumes greater significance.

“One year is more than enough to demonstrate seriousness about the issue but the government has done nothing." said N. Bhaskara Rao, chairman, Centre for Media Studies, or CMS.

“None of the agencies concerned have taken any steps—the law ministry hasn’t uttered a word, the Election Commission (EC) has also not said anything about this specific matter.

“It is time we seriously take up the issue, before the next round of elections in 2014 and some crucial state elections," Rao added.

The Election Commission has been making efforts to monitor spending. It started a new division devoted to monitoring such spending last year for closer scrutiny of poll expenses incurred by political parties and candidates.

The EC move followed a sharp increase in election spending by parties and candidates. The CMS estimated that such spending amounted to Rs10,000 crore in the 2009 general election—more than double what was spent in 2004.

Sanjiv Shankaran contributed to this story.