An invitation to corruption

An invitation to corruption


Suhrith Parthasarathy is an advocate talks about danger of electoral bonds which was purportedly with a view to cleanse unaccounted political funding.

Important Analysis:

About Electoral Bond Scheme:

  • The Electoral Bond Scheme has been touted to promote transparency by ensuring the money trail in electoral system.
  • Under this, bonds for contributions to political parties can be issued by the State Bank of India, and can be bought by any donor with a KYC compliant account.
  • Donors can donate their bonds to any party of their choice, which can deposit it in their designated account. Donations will be tax deductible, and the benefitting political party will get a tax exemption for the amount received.
  • The government claims that since these bonds are purchased through banking channels the scheme will eliminate the infusion of black money into electoral funding.
  • However Electoral Bond Scheme with a view to cleansing the prevailing culture of political sponsorship cannot really deliver whatever it was intended to.

Issues with the Electoral Bond

  • In its present form, the scheme permits not only individuals and body corporates, but also “every artificial juridical person or non-human legal identity
  • Electoral bonds will not bear the name of the donor, nor can the beneficiary party be revealed. The whole process is anonymous, moreover, the value of donations can be unlimited.
  • Series of amendments made to legislation, in the form of a money bill.
    • Prior to 2017, Section 182 of the Companies Act, 2013, stipulated that a company can donate only up to 7.5% of its average profit of the last three years, and must disclose this amount and the beneficiary political party.
    • Amendment to Finance Bill 2017, removed the limit to the amount companies can donate, and the requirement for such firms to have existed for the last three years on a profit-making basis has also been deleted. The implication is that even loss-making companies or shell companies can be used to purchase electoral bonds
    • Moreover, under Section 13A of the IT Act, companies contributing through electoral bonds will not even be required to keep records of such donations, and if no records are mandatorily maintainable, no questions can presumably be asked by IT authorities.
    • The RPA Act has been amended to exempt parties to inform EC of any amount received above Rs 2,000, if made through electoral bonds. The result is complete financial opacity.
    • Foreign Contribution Regulation Act, 2010, has been amended to exempt from scrutiny foreign funds received by political parties with retrospective effect from 1976 Furthermore, the amended Companies Act now allows any foreign company registered in India to make contributions through bonds to political parties
  • The scheme flouts a number of Constitutional rights and mandate:
    • Indian Constitution does not contain an explicitly enforceable right to vote. But implicit in its guarantees of equality and free speech is a right to knowledge and information.
    • In the absence of complete knowledge about the identities of those funding the various different parties, it’s difficult to conceive how a citizen can meaningfully participate in political and public sphere.
    • When the power of that vote is diluted through opacity in political funding, democracy as a whole loses its intrinsic value.

International Practice:

  • In the US, there is a requirement to provide the name, occupation, employers and addresses of all individuals who contribute more than $200 to political entities.
  • In the UK, any contribution above £7,500 must reveal the name of the donor. By contrast, in India, the world’s largest democracy, electoral ‘reform’ has legitimised financial opacity.

Way Forward:

  • Government has lost a major opportunity to clean up India’s most opaque political finance regime that creates incentives for political corruption, subversion of governance, and citizen’s loss of faith in the democratic process.
  • The ideal solution would be to set up a National Electoral Fund to which all donors can openly contribute without expressing any preference for any political party.
  • The funds could then be allocated to all registered political parties in proportion to the votes obtained. This will also address the donors’ concern for secrecy.
  • Once public funding of political parties is ensured, private donations must be totally banned.
  • There must be an annual audit of Public Funding by the Comptroller and auditor General of India.
  • Granting more autonomy to election commission to scrutinize the funding pattern to political parties will bring more transparency in electoral system.
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