[Answered]Critically examine the effectiveness of electoral bonds to make Indian elections more transparent. What other reforms are needed to make Indian election process more fair?

Demand of the question

Introduction. Contextual Introduction.

Body. Discuss positive aspects and various issues related to electoral bonds. Suggest some reforms to make Indian election process more fair.

Conclusion. Way forward.

 Electoral bonds are instruments launched by the Indian government that allow donations to political parties using banks as an intermediary. These are meant to ensure transparency in political funding and thus fair elections in India. The conventional practice of funding elections via unaccounted cash is expected to be minimised with the electoral bonds.

Benefits of electoral bonds:

  1. Transparent political funding: ADR (Association for Democratic Reforms) study shows that 69% of political funding in India comes from unknown sources. Electoral bonds give an alternative and the transparent route for parties to collect funds and meet election expenditures as it only allowsbonds through certain banks and that too to KYC validated individuals.
  2. Reduce misuse: A limited window and a very short maturity period (life of bonds is only 15 days) make its misuse difficult. The scheme is important to build a transparent electoral system by making bonds purchase only with validated KYC and an audit trail.
  3. Protect anonymity: It also provides anonymity to donors. It is essential so asto prevent post-poll intimidation or harassment by political opponents. Electoral bonds reduce such chances of
  4. Political accountability: The political parties are required to submit the details about contributions received through electoral bonds to the Election Commission. Hence the bonds help in cleaning up the system of electoral finance in India.
  5. Reduce black money: Under the old system a massive amount of political donations were made in cash by individuals or corporates using illicit means of funding and unaccounted black money was pumped in for financing elections. Electoral bonds will ensure cleaner money coming from donors.

Various issues related to electoral bonds:

  1. Crony capitalism: According to RTI documents, electoral bonds with denomination of Rs 1 crore accounted for more than 91% of the Rs 5,896 crore raised between March 1, 2018 and July 24, 2019. The higher value of the bonds being purchased indicates that the electoral bonds are being purchased by corporates rather than individuals that reflects corporate influence.
  2. Political influence: Electoral bonds scheme only ensures that contributions come from legitimate, tax-compliant sources. Since we can’t know who gave which party how much, it is impossible to assert that no political influence was bought with these anonymous bond contributions.In 2017-18, according to data collected, some 95% of the ₹222 crore of electoral bonds issued landed up with the major political party as anonymous contributions.
  3. Delayed audit reports: Audit reports submitted by political parties are the only source for information on beneficiaries of electoral bonds. According to data, not more than half of the political parties have submitted their annual audit report for 2018-19. The delay & non-compliance by political parties defeat the purpose of any such reporting.
  4. Foreign funding: The Election Commission has observed that with the removal of the cap on foreign funding, electoral bonds invite foreign corporate powers to impact Indian politics.
  5. Non-disclosure to Election Commission: While RPA mandates that the funds received by political parties in sums greater than Rs 20,000 be disclosed to the tax authorities, the Finance Act 2017 explicitly provides an exemption to this clause to electoral bonds. This affects the very purpose of cleaning up electoral finance.
  6. Round-tripping/Tax evasion: These bonds may also facilitate round tripping i.e. rerouting illegal money that originates in India, back into the country through a tax haven. Electoral bonds provide secrecy and will encourage such tax evasion.
  7. Shell companies: The ECI has said that there are chances that shell companies might get created. As per new provisions a company does not necessarily be profitable for the past 3 years to make political donations.

Other measures to make Indian election process more fair:

  1. State funding: Major electoral reform needed is state funding of elections. State funding has proved its effectiveness in a number of countries like Germany, Japan, Canada, Sweden etc. The government can set up a national election fund where corporate houses and individual donors can contribute with 100% tax-free fund. The EC can oversee
  2. Political party auditing: Venkatachaliah Committee Report (2002) recommended strict regulatory frameworks for auditing and disclosure of party income and expenditure along with state funding. In the absence of such frameworks, state funding in India cannot be effective.
  3. Strengthening Election commission: The ruling parties should play key responsibilities in strengthening the role of Election Commission by enabling suitable laws and creating healthy political environment. The EC should increase its own capacity in terms of empowering staff and developing infrastructural and logistical strength.
  4. Legislative measures: Dinesh Goswami committee recommended a series of legislative measures that should be set up to eradicate booth-capturing rigging and intimidating. The committee also called for an amendment of the anti-defection law to restrict disqualification. These recommendations should be implemented.

Bringing about effective electoral finance reform in India requires political will. Measures like electoral bonds will have limited effectiveness, unless they are not accompanied by other necessary reforms. The Santhanam Committee on Prevention of Corruption had raised the issue of black money in politics in 1964. A number of committees and commissions have recommended addressing the electoral finance issue. Their recommendations need to be implemented.

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