NDA’s move to channelize political funding through banking channels is the latest bid to reform the system
Electoral bonds are interest-free banking instruments, which can be bought from specified branches of State Bank of India in multiples of ₹1,000, ₹1 lakh, ₹10 lakh or ₹1 crore
The 2017-18 Union budget speech of former finance minister Arun Jaitley had a rare separate section on ‘Transparency in Electoral Funding’. It announced the National Democratic Alliance (NDA) government’s efforts to promote transparency in political funding, including capping cash donations at ₹2,000. A key measure that drew the most attention, as well as criticism since then, has been ‘electoral bonds’, a new mode of poll financing.
Jaitley proposed the measures noting that even 70 years after Independence, India has not been able to evolve a transparent method of funding political parties, which is vital to the system of free and fair elections. But critics now argue that it failed to measure up and claim that it “legalises political corruption."
Need for reform
Political funding has been an opaque affair. Businesses, which need approvals for projects, tend to appease political patrons through political donations, which in turn becomes a cause for fudging books to generate funds for such contributions. Political parties, which have various expenses to meet in running their organizations and in conducting elections, accept funding from businesses, which makes it possible for an inappropriate nexus between the two to emerge. Successive governments have tried to reform this with various amendments in the law, including in the Companies Act and in the Income Tax Act. The NDA’s attempt to curtail cash donations and political funding through banking channels through the electoral bonds is the latest.
Pros and cons
Electoral bonds are interest-free banking instruments, which can be bought from specified branches of State Bank of India in multiples of ₹1,000, ₹1 lakh, ₹10 lakh or ₹1 crore. These can be purchased by individuals and companies who have to disclose their identity through know your customer (KYC) norms to SBI, while political parties can encash these bonds within 15 days only in their specified bank accounts. Only those parties, which have got 1% of all votes polled in the last Lok Sabha or state assembly polls, are eligible for funding through these bonds. This makes it possible to give political contributions through a legitimate channel with tax-paid funds, while who gave how much to which party remains anonymous. The fact that a donor has purchased bonds worth a specified amount and that parties have received specified amounts in aggregate, will become a record. Electoral bonds offer some element of transparency, though not full transparency. Critics, however, say that removal of a cap on corporate donations that existed earlier—7.5% of three-year average net profit—enables businesses to make unlimited political donations without having to disclose the recipient’s name.
“As far as utilising black money for electoral funding is concerned, that too will increase in this system," former chief election commissioner (CEC) T.S. Krishnamurthy told Mint.
“The solution to this is setting up a national election fund where corporate houses and individual donors can contribute with 100% tax-free fund. The EC could be given the task of overseeing it. The money can then be divided among political parties mostly in kind and a part in cash," he added.
What the critics say
Ever since the first issue of electoral bonds in March 2018, opposition against the move has gained momentum. More recently, the Congress-led Opposition parties raised the issue in the ongoing winter session of Parliament, accusing the Union government of promoting a scheme which ‘legalizes political corruption’. Senior Congress leaders quoted documents obtained under the Right to Information (RTI) Act by transparency activist Commodore Lokesh Batra (retired), which became the basis of a series of news reports published by Huffington Post India, showing how the Union government ignored warnings by the Reserve Bank of India (RBI) and the Election Commission (EC) to legalise electoral bonds.
“There are two key problems with it—one, lack of transparency as we do not know who is giving what to whom and what they are getting in return; two, that only the government, through ministries, has access to this information," Rajeev Gowda, senior Congress leader and Rajya Sabha member, who has been vocal on the issue, told Mint.
“We are demanding largely three things. One, is to abolish the system of electoral bonds. The other is to launch an enquiry into concerned officials, particularly in the finance ministry, into the context of decisions which were taken. The third demand is to publish the name of the donors at least, if not who they went to," he added.