Elections Are Coming – and There’s a Problem with Electoral Bonds
Let’s talk money! On this episode of The Big Story podcast, we’re looking at political funding and where our political parties get their money.
The central government launched the Electoral Bonds Scheme for political donations in 2018.
The scheme allows individuals or corporations to donate money anonymously to political parties through electoral bonds. The scheme was brought into effect in January 2018.
Donors can buy bonds from specific branches of the SBI, and each bond can have a value of either 1000, 10,000, 1 lakh, 10 lakh, or 1 crore rupees. Donors need to complete some basic KYC work before they can buy bonds, but these details are supposed to stay confidential, so the donor retains anonymity.
But, in an exclusive, The Quint discovered that there really isn’t any anonymity, because every electoral bond has a unique alphanumeric code which is only visible under UV light, which allows the government to track who bought which bond. We’ll tell you more on this later, so stick around.
To add to this, the political parties don’t have to pay any tax on “voluntary contributions”, as long the party maintains a record of some details of the donation.
All of this, and more, were a result of the 2017 Finance Act.
Before the 2017 Finance Act, the parties had to maintain ALL details including the name and address of the donor, for ALL donations above Rs 20,000.
But under the new act, parties don’t have to record details of anyone who makes a donation above Rs 20,000 as long as it’s done through an electoral bond,
The act also removed a limit on how much companies can donate to political parties. Earlier, any company’s donations to a political party couldn’t be more than 7.5 percent of its past three years profits. This limit was removed by the new act.
Also, earlier, the companies act said that a company should disclose all details of the amount of money they’ve donated and to which political party they’ve donated. This requirement was also removed by the 2017 Finance Act.
Additionally, the 2018 Finance Act also removed restrictions on Indian subsidiaries of foreign companies donating money to parties.
The new act said that as long as a company’s share capital isn’t beyond a certain limit, this restriction doesn’t apply to them.
And this protection was then extended to go all the way back to 1976. Meaning any Indian subsidiary of a foreign company that was incorporated after 1976, is now protected under this rule.
Multiple petitions have been filed against this act. They argue that the scheme hides the identities of donors from tax and election commission authorities, reducing the transparency of elections.
They also argue that these amendments increase corporate influence over governance, leading to much more crony capitalism and corruption – and we already have enough of that.
The petitions have also claimed that the act is unconstitutional for three major reasons:
- The people have a right to know about the activities of political parties including their funding, and this scheme affects that right by making the donations anonymous.
- The scheme is manifestly arbitrary. Which in simple terms means that it has no connection to what it’s supposed to do. In this case, while the electoral bonds scheme is supposed to reduce corruption and increase transparency, in reality it does the exact opposite.
- The scheme was brought under the 2017 Finance Act, which is a money bill. A money bill only needs the Lok Sabha’s approval to pass. But the thing is money bills usually only govern budget and taxation. Not the wide range of amendments that this scheme brought in. The petitioners say that this is unconstitutional.
Apart from these objections, there have been a number of arguments against the bill. When the 2017 Finance Bill was announced, the Election commission wrote to the Ministry of Law and Justice saying that it opens up the possibility of setting up shell companies and routing black money to political parties.
Former CEC OP Rawat also told The Quint, in an exclusive interview that electoral bonds make the system more opaque and vulnerable to manipulation.
On top of this, the government has argued that the anonymity of the bonds protects donors’ privacy. But even this point is well….untrue, because remember how I told you that The Quint revealed how each bond has an alphanumeric code that is only visible under UV light? Using these numbers, the government CAN use track who purchased the bond.
Apart from this point, the government’s other responses to the petitioners doesn’t answer any of their questions adequately.
But Finance Minister Arun Jaitley did say that the scheme is part of a “larger policy of fighting black money” and that “courts aren’t supposed to interfere in matters of policy”.
Couple this non-response to the questions, with the fact the BJP has received a disproportionate amount of electoral bonds, for example in March 2018 Rs 222 crore worth of electoral bonds were sold. Out of this, Rs 210 crore went to the BJP.
So when you take all this into account. And look at the scheme once again. Especially with the elections approaching….Do you see what the problem is with the Electoral Bonds Scheme?