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Business News/ News / Electoral bonds ban unlikely to impact funding to political parties, says analyst

Electoral bonds ban unlikely to impact funding to political parties, says analyst

In a landmark verdict, the Supreme Court scrapped the Centre's electoral bonds scheme of anonymous political funding, calling it “unconstitutional”. Who will and will not be affected by this ban on electoral bonds? Here's an explainer.

Electoral bonds were pitched as an alternative to cash donations made to political parties.Premium
Electoral bonds were pitched as an alternative to cash donations made to political parties.

The ban on the sale of electoral bonds is unlikely to have any major impact on the funding of political parties, said a political analyst on Thursday. In a landmark verdict, the Supreme Court scrapped the Centre's electoral bonds scheme of anonymous political funding, calling it "unconstitutional".

ALSO READ: Electoral Bonds Scheme verdict: SC strikes down EBS, calls it ‘unconstitutional’

Will this have any impact on political parties?

Political strategist and commentator Amitabh Tiwari said there will be no gainers or losers in this. He said there will be no major impact on political parties as most of their funding comes from cash and other sources. In many cases, this cash may be unaccounted. Here's a look at data and disparities:

According a report by the Association for Democratic Reforms (ADR), the total amount of electoral bonds collected by the Bharatiya Janata Party (BJP) since Financial year 2017-18 is 65,66 crore, while that by the Congress was 1,123.3 crore. ADR cites data collected from the website of the Election Commission of India.

According to another ADR report which cited data available with the ECI, political parties spent a total of 2994.16 crore during the Lok Sabha 2019 elections and assembly elections 2019. These expenses were incurred by cash and cheque/DD, and the amount remaining unpaid.

Of 2994.16 crore, the BJP's total expenditure was calculated to around 1371.82 crore, while that by the Congress was around 820.887 crore.

Now, after the 2019 Lok Sabha Elections, an analysis report by think tank CMS India, titled "Poll Expenditure, The 2019 Elections", estimated that 55,000-60,000 crore was spent in 2019. "On an average, nearly 100 crore per Lok Sabha constituency, has been spend," the report had added.

Of this total estimated expenditure of over 55,000, the BJP's share was said to be 45–55% (around 24,700 crore) and that of the Congress's was estimated to be around 15–20% (around 8,200 crore). This was way more than what the ADR had reported while citing official figures.

In his analysis, Tiwari said, "...electoral bonds is a very insignificant amount". The amount of donation through electoral bond till date in last six years is around 11,986 crore, as per the ADR data. This is very less compared to the total expenditure in one Lok Sabha Election (2019) estimated to be 55,000-60,000 crore. 

"In one election cycle of 5 years, one Lok Sabha and around 30 Vidhan Sabha polls, total of 85,000-90,000 crore (estimate) is spent…The rest of the money is pumped into the parties in cash format," the analysts said.

Other sources of funding

Donations could be given to political parties through cheques, sale of coupons, crowd-funding and corporate donations.

Meanwhile, the CMS India report had added, “As the number of candidates who are millionaire and with business interest has been on increase in the recent elections, a higher percent of expenditure is being borne by candidates themselves. There are many cases of candidates contributing to the party or/ and meeting some campaign costs of some other candidates as well."

Ban on electoral bonds: Who and what could be impacted?

In the absence of electoral bonds, there might be an issue for the corporates and companies "which do not generate cash, like IT services companies", Tiwari added. "In industries where there is no cash collection/generation, only services is provided, they might not replace electoral bonds with cash donations," he added. He said, "Political parties will continue to get cash donations and that it cannot be curbed."

The electoral bond had raised question of transparency and the voters' right to know as the scheme had encouraged anonymous political funding. However, if the funding is done through cash and not disclosed, the “transparency" issue persists.

Notably, donation to any political party, not just through the now-scrapped electoral bonds but also through other means, is exempt from income tax under Section 80GGC of Income Tax (I-T) Act. "One can donate through cheque or electronic transfer, but not through cash, in order to claim the exemption, Chirag Chauhan, a Mumbai-based Chartered Accountant from CA Chauhan & Company, said.

Besides this, the Supreme Court directed the State Bank of India (SBI) to stop issuing the electoral bonds. It ordered the SBI to disclose details of electoral bonds encashed by political parties, including date and denomination.

Political consultant Azaz Alam said this "development could have a notable impact on the BJP, given the significant amount of funds typically transferred to them". He said this is particularly relevant amid concerns over a political party giving favours to industries and businessmen.

His statement came amid the Supreme Court's verdict specifically targeting the "quid pro quo" element potentially associated with electoral bonds, where donations might be linked to future favours. However, Amitabh Tiwari said, “Quid pro quo will also continue whether with black or white money. This happens across the world."

"It is crucial to electoral democracy that the exercise of freedom to vote is not subject to undue influence," the Supreme Court said while striking down as unconstitutional the electoral bonds scheme for political funding on Thursday.

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Published: 16 Feb 2024, 11:00 AM IST
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