Not Just Note Bans, State Funding of Parties Needed to Fight Graft

Note bans will not usher in transparency in polls. What we need is state funding of parties, writes S Y Quraishi.

6 min read
Hindi Female

Demonetisation of Rs 1,000 and 500 denomination notes has triggered an unprecedented debate on black money and corruption in the political arena. It is good that, at last, a long avoided subject is becoming a focus of serious attention. It is important to understand why the matter is of great essence and consequence.


Systemic Corruption

Rampant abuse of money power in elections is the mother of all corruption in the country. When candidates and political parties spend crore of rupees in election campaigns, they have to generate enough funds by hook or by crook when they come to power. The ‘collection drive’ that follows inevitably leads to a politician-bureaucracy nexus.

When the two most important instruments of governance join hands in this unholy alliance, corruption spreads in all directions, horizontally & vertically, and seeps into every sphere of life. The lowest functionaries like a constable or patwari when accosted, have a stock answer, “Ooper tak dena hai” (we have to pay up to the top). Who is the highest “Ooper wala” is not spelt out but refers to the minister or higher.

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Note bans will not usher in   transparency in polls. What we need is state funding of parties, writes S Y Quraishi.
(Photo: PTI/ Altered by The Quint)

State Funding of Polls

Not that political leaders have not expressed concern about it. However, in the absence of a serious discussion, it seems their concern is mere lip service. The problem has been discussed in parliamentary debates, committees have been constituted and the only refrain we hear is that there should be state funding of elections.

The most famous committee on this was the Indrajit Gupta Committee set up in 1999 which consisted of many political stalwarts like Dr Manmohan Singh. The committee recommended only partial state funding of elections and even that was tampered with a condition that there must be genuine inner party democracy – which no party likes.

The 255th Report of the Law Commission of India (March 2015) also brought into focus the urgent need for the overdue electoral reforms.

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Transparency in Donations

It is a fact that democracy cannot function without money to contest elections. However, money cannot be allowed to dominate the process so much that only the rich can contest and hijack the political system.

The law, therefore, prescribes a ceiling on expenditure of the candidates – though strangely not on the expenditure of the political parties. The absence of a ceiling on political parties' expenditure negates the whole logic of a ceiling and creates conditions of financial indiscipline. To outdo their rivals, all parties spend thousands of crore of rupees. In the 2014 general elections, the amount spent on campaigns was estimated at a staggering Rs 30,000 crore.

Where does this money come from? The sources could be: Corporate funds, small donations, sale of coupons and membership fee, besides interest on deposits, rental and revenue income. There is no transparency in the source of most donations. As much as 75-80 percent of all funds are shown as cash donations without disclosing the source. This is a serious matter. It may be foreign money or from crime, drug or real estate mafia.

Also Read: Black Money Aftershock: Modiji, You Knew How Govt Machinery Works

Note bans will not usher in   transparency in polls. What we need is state funding of parties, writes S Y Quraishi.
(Photo: iStock/ Altered by The Quint)

Parties Ignore EC’s Demands

The Election Commission (EC) has been demanding for over twenty years that there should be complete transparency. It wants a law prescribing an annual audit of political parties by an independent auditor from a panel given by the EC – instead of an in-house auditor who only does a whitewash job. The audited accounts must be put up on the website of every party for all to see.

In 2013, the Aam Aadmi Party by suo motu deciding to put all its fund receipts on its website had created a healthy precedent worth emulating. It will be worthwhile to look at this model closely and understand its working.

Political parties, unfortunately, have not bothered to look at the EC’s demands seriously. Governments have come and gone pushing the proposal under the carpet. And it is not political parties alone who refuse to disclose their sources of income; corporate houses also prefer anonymity. A CII report in 2012 had demanded that political donations be kept secret. They reasoned that if the competing parties get to know what they have given to their rivals, they will either be flooded with similar requests or face vindictiveness. The real reason, however, is that neither the political parties nor the corporates would like the quid pro quo to be exposed.

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Note bans will not usher in   transparency in polls. What we need is state funding of parties, writes S Y Quraishi.
(Photo: iStock/ Altered by The Quint)

Election Trust Fund

Unfortunately, the image of the political class in India is abysmal, which is very unfortunate for democracy. Not all politicians are corrupt. India has become a major power in the world, thanks to many great statesmen and political leaders.

In both public and political discourse, state funding of elections has often been mentioned as the panacea for fighting corruption. State funding would obviously be limited to the expenditure's legal ceiling. Thus even if entire legal expenditure ( Rs 70 lakhs for Lok Sabha and Rs 28 lakhs for Vidhan Sabha) is state-funded, how will it stop the illegal expenditure which is 50 to 100 times? It's not the white money but black that we want to root out.

The best way out is the state funding of political parties -- though not funding of elections. This is based on a study of the experience worldwide.

In the general election to the Lok Sabha in 2014, nearly 55 crore votes were cast. If the state was to pay Rs 50 for every vote obtained, this will add up to Rs 2,750 crore. An equal amount can be paid based on performance in Vidhan Sabha elections. This will make for a total liability of Rs 5,500 crore for 5 years. This roughly corresponds to the fund collection of all political parties put together. Private and corporate donations, which are at the root of the problem, will then be totally banned.

State funding will free the political parties from dependence on the corporate houses who like to run the government by proxy.

The amount of state funding proposed is so small that it can easily be accommodated in the national budget. But, if necessary, an Election Trust Fund could be created to which corporates may be asked to make transparent donations. The fund could be administered by an independent trust or the Election Commission. The allocation of funds will be based on the actual performance of the political parties. The operational details can easily be worked out if the proposal is approved in principle.

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Independent Auditor

The accounts of the political parties will then have to be audited by an independent auditor on the EC-approved panel or by the CAG itself. A study of ‘Political Finance Regulations Around the World’ by the International Institute of Democracy and Electoral Assistance (IDEA), Stockholm (2012), showed that this system is working well in over 70 countries of the world, including most countries of Europe. There is no reason why it will not work in India.

The NDA government has adequate mandate and a powerful leadership that can make it happen. The current situation may be a godsend. We should not let it slip.


(The writer is a former Chief Election Commissioner and the author of ‘An Undocumented Wonder – the Making of the Great Indian Election’. He can be reached @DrSYQuraishi. This is an opinion piece and the views expressed above are the author’s own. The Quint neither endorses nor is responsible for the same.)

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Topics:  Demonetisation   Rs 1000 note   Rs 500 note 

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