The Worst Fears About Electoral Bonds Have Been Confirmed

An investigation by The Quint has revealed that the much-hailed electoral bonds, which were meant to usher in an era of taint-free financing for political parties, carry a secret number “visible on the top-right corner of the original document showing fluorescence, when examined under Ultra Violet (UV) Light.”The saga of electoral bonds started with the Budget Speech of the Finance Minister in the Lok Sabha on 1 February 2017. The speech had a section titled “Transparency in Electoral Funding”, and this is what Arun Jaitley said:“164. India is the world's largest democracy. Political parties are an essential ingredient of a multi-party Parliamentary democracy. Even 70 years after Independence, the country has not been able to evolve a transparent method of funding political parties which is vital to the system of free and fair elections. An attempt was made in the past by amending the provisions of the Representation of Peoples Act, the Companies Act and the Income Tax Act to incentivise donations by individuals, partnership firms, HUFs and companies to political parties. Both the donor and the donee were granted exemption from payment of tax if the accounts were transparently maintained and returns were filed with the competent authorities. Additionally, a list of donors who contributed more than Rs 20,000/- to any party in cash or cheque is required to be maintained. The situation has only marginally improved since these provisions were brought into force. Political parties continue to receive most of their funds through anonymous donations which are shown in cash.165. An effort, therefore, requires to be made to cleanse the system of political funding in India. Donors have also expressed reluctance in donating by cheque or other transparent methods as it would disclose their identity and entail adverse consequences. I, therefore, propose the following scheme as an effort to cleanse the system of funding of political parties:In accordance with the suggestion made by the Election Commission, the maximum amount of cash donation that a political party can receive will be Rs 2000/- from one person.Political parties will be entitled to receive donations by cheque or digital mode from their donors.As an additional step, an amendment is being proposed to the Reserve Bank of India Act to enable the issuance of electoral bonds in accordance with a scheme that the Government of India would frame in this regard. Under this scheme, a donor could purchase bonds from authorised banks against cheque and digital payments only. They shall be redeemable only in the designated account of a registered political party. These bonds will be redeemable within the prescribed time limit from issuance of the bond.Every political party would have to file its return within the time prescribed in accordance with the provision of the Income-tax Act. Needless to say that the existing exemption to the political parties from payment of income-tax would be available only subject to the fulfillment of these conditions. This reform will bring about greater transparency and accountability in political funding, while preventing future generation of black money.”The Quint’s Exposé on Electoral Bonds: Read the Forensic ReportsCan Transparency & Anonymity Coexist?The same day, when asked about electoral bonds in the customary post-Budget media interaction, Jaitley said the following:[T]here is a provision of electoral bonds which requires an amendment to the RBI Act. A notified bank will be issuing those bonds. Any donor can buy those bonds using a cheque or digital money. These bonds can be given to the political party.Union Finance Minister Arun Jaitley“Every recognised political party will have to notify one bank account in advance to the Election Commission and these can be redeemed in only that account, in a very short span of time. These bonds will be ‘bearer’ ones, to keep the donor anonymous (marked bold to add emphasis).”The contradiction between transparency and anonymity was highlighted soon after Budget 2017 was announced.It was pointed out that it would present not the slightest difficulty to the ruling party (whichever it may be) to get information from the State Bank of India as soon as someone purchased an electoral bond. And as soon as this information reached the political party in power, it would not be at all difficult for that party to get in touch with the buyer and “persuade” him/her to donate the bonds to the ruling party.The apprehension was that this might choke the flow of funds to all Opposition parties. Now that the bonds are numbered, albeit surreptitiously, it will become impossible for all parties in the Opposition to attract legitimate funds.Even without electoral bonds being in place, it is worth noting the increase in the reported income of the seven national parties between financial years 2015-16 and 2016-17.The income of Bharatiya Janata Party (BJP) increased by 81.18 percent, while the income of the Indian National Congress (INC) decreased by 14 percent.BJP Richest Party With Income of Over Rs 1,034 Crore in 2016-17The share of individual national political parties in the total amount received by all the seven national political parties was as follows:66.34 percent BJP’s share of total funding received by 7 national parties14.45 percentCongress’ share of total funding received by 7 national parties11.13 percentBahujan Samaj Party share of total funding received by 7 national parties6.43 percentCPI(M)‘s share of total funding received by 7 national parties1.11 percent Nationalist Congress Party’s share of total funding received by 7 national parties 0.41 percentTrinamool Congress’ share of total funding received by 7 national parties0.13 percent CPI’s share of total funding received by 7 national partiesHow these figures will be once the trails of electoral bonds can be followed based on ‘invisible’ numbers printed on them, is anyone’s guess.Big Brother is Watching... Out for Funds!Even without the ‘invisible’ serial numbers, the potential for damage that the scheme of electoral reforms could do to the political health of the country is immense. The reason being, while introducing electoral bonds, the government also got the Parliament to approve two key amendments to the Companies Act.The first of these amendments removed the limit of the percentage of profits that a company could donate to political parties. This limit, which was originally 5 percent but had been raised to 7.5 percent, was completely removed by one of the amendments to the Finance Bill. This has been done by removing proviso to sub-section (1) of Section 182 of the Companies Act 2013.The second is even more startling concerning transparency and opacity. Sub-section (3) of Section 182 of the Companies Act 2013 requires that a company making donations to political parties shall disclose “particulars of the total amount contributed and the name of the party to which such amount has been contributed” in its profit and loss account.The second amendment removes this requirement of disclosing the name of the political party. Now a company making a donation to a political party will not need to disclose the name of the party.Adding even more intriguing features to an already dangerous instrument is obviously not a healthy sign at all. It is possibly a signal that the government wants to ensure, at any cost, that the ruling party has all the information on who donates to whom, and the funding for Opposition parties is reduced as much as possible.So much for “Transparency in Electoral Funding”, promised by the finance minister on 1 February 2017, in the ‘temple of democracy’ – the Lok Sabha!Jagdeep S Chhokar is a former Professor, Dean, and Director-in-charge of IIM, Ahmedabad. The views expressed above are the author’s own. The Quint neither endorses nor is responsible for the same.)

BECOME A MEMBER

The Worst Fears About Electoral Bonds Have Been Confirmed

Now that the bonds are numbered, it will be impossible for the Opposition parties to attract legitimate funds.

Read Latest News and Breaking News at The Quint, browse for more from opinion

Topics: Arun Jaitley Finance Minister Arun Jaitley Electoral Bonds