ELECTORAL BONDS: BOON OR BANE FOR INDIA'S POLITICAL SYSTEM

Author: Umang Dudeja

IMS Unison Univ, Dehradun


INTRODUCTION

Indian Prime Minister Narendra Modi announced the implementation of an electoral bond scheme to enhance the transparency in political financing in elections. The country's recent effort to exclude illicit income or black money from the country's electoral system is to have a new electoral bond scheme in India. The bonds are a financial instrument introduced in January to shield the donor’s identity from the political party intended for recipients.

Arun Jaitley, Minister for Finance in India, welcomed the move as historic, defended the electoral bonds vigorously, adding an aspect of accountability to today's complex cash donation scheme.[1] In November 2016, the government claimed that the banning for high-currency bills by India was an attempt to flush off the black currency system.

KEYWORDS: Electoral bonds, elections, funding, opacity in the election, etc.

WHAT IS AN ELECTORAL BOND?

In January 2018, to make elections more transparent and minimize the use of cash and black money, the Indian government notified the Electoral Bond System.

An election bond is like a Bearer Bond and can be obtained by both corporations and individuals. You can buy it at the beginning of each quarter for 10 days, and during elections for a further 30 days. Any person or company wishing to donate to a political party may purchase the Bonds and hand it over to its chosen party. When a party has it, it must be encashed in 15 days.[2] Since the bonds do not carry the name of the Donor or the recipient, the party receiving it need not know who the donor is, and the donor need not disclose who they are giving to. The Bonds are also tax-deductible for the donor.

It is a well-known fact that huge amounts of money are spent in elections with estimates running to as high as Rs 50,000 Crore as per the Centre for Media Studies. And most of it is spent in cash as is evident in the huge amount of cash seizures that happen during every election.

Earlier, individuals/companies could only donate Rs 2000 to political parties anonymously and even by declaring, companies could only fund up to 7.5% of their Net Profits. These have been amended and the caps removed.

BANE OR BOON

Electoral Bonds is neither purely a bane nor purely a boon, it has some of its positive as well as some negative sides. Electoral Bonds is an interest-free banking instrument whereby a citizen or a business entity in India is eligible to purchase (either through cheque or digital payments) the bond from specific branches of the State Bank of India for 10 days each in January, April, July and October. [3]Electoral Bonds are the bonds that will be valid for 15 days only and shall not carry the donor’s name, although the payee will have to fulfil KYC (Know Your Customer) norms at the bank. What is important here is that no report is required to be submitted by receiving parties in case of donations received via electoral bonds. In other words, neither donors nor political parties are legally bound to reveal the details of donations. Thus, opacity is ingrained with this new instrument for political funding and also only political parties registered under Section 29A of the Representation of the People Act, 1951 that has secured not less than 1 percent of votes polled in the last general election to the House of the People or the Legislative Assembly of the State is eligible to receive such donations.

While there are some merits there are some demerits of in having electoral bonds to infuse the political system with “clean money” as the buyers of the bonds will have to furnish KYC in the authorised bank and do the transactions either through cheque or digital means, the anonymity clause for donor and political parties make it half attempt. As it can be used to make the balance between black money and white money and also to convert the money from black to white by transferring it through bonds to various political parties of their choice. More recently, in the ongoing winter session of the House, the opposition parties led by Congress accused the government of the Union of implementing a scheme for legalization of corruption. The ADR report shows that support for national and regional political parties remained largely in-transparent between 2004-05 and 2014-15. Of all the contributions they received, roughly 69% came from unknown sources, amounting to milliards of dollars. Another ADR study shows that almost 31% of national parties' revenue was derived from unaccounted sources in 2015-16.[4] These figures show that black money in exchange for political support is channelled to parties.

Achal Kumar Jyoti, former Chief Election Commissioner of India in an interview told that the electoral bonds would not solve all problems about transparency in political funding which is one step in the right direction[5].

The fact of the matter is anonymity clauses or lack of disclosure requirements for the individuals or corporate donors buying such bonds defeats the fundamental principle of transparency in political finance. In fact, as the global evidence of political finance says, opacity in donation would make it a convenient channel for black money flow. Yet, what makes the scheme even more controversial is the removal of the 7.5% cap on corporate donations (bringing changes in the Companies Act 2013). This would allow for unlimited corporate/businesses donations even from the loss-making companies.


CHANGES BY THE NEW ELECTORAL BONDS SCHEME

Following are some changes which are made by the new electoral bonds scheme:

  1. Previously no foreign firm was able to donate under the Companies Act to any political party.

  2. A company can make policy donations with a maximum net profit of 7.5% of its average three years according to Section 182 of the Companies Act

  3. Under the same section of the Act, businesses must disclose political donation details in the annual accounts.

In the Finance Bill, the Government amended to make sure that this clause did not extend to enterprises when voting bonds existed. Therefore Indian, international and even shell firms can now contribute without having to tell anyone about the donation to the political parties.


SUPREME COURT ON ELECTORAL BONDS

In determining if the Scheme proposal should be suspended in this case, the Court rejected the appeal for a temporary stay in the Supreme Court. The Apex Court ordered that the Indian Election Commission should keep a record of political party money through election bonds and that the particulars of the donation the political parties receive should be made available in sealed form. It also stated that in order to ensure the balance does not fall in favour of either factor; it will thoroughly review amendments to the law. Although experts are divided on whether the order provides an answer to the transparency issue raised by petitioners, they agree that the interim solution should ensure that transparency exists. When the final hearings on the issue begin, it is important to see what position the Election Commission will take.


CONCLUSION

“Electoral Bonds are a good idea, they need to be accompanied by limits on donations.”

Well, it’s good to have Electoral Bonds for political parties for the election as money is all they need while standing in an election. From printing pamphlets to the various advertisements of the political candidates, money is something which will keep their aspirations alive in this battle. In some respect, it will start a fair election system where the donations are received from a particular banking system in the form of bonds by the political parties and it may also lead to a rise in the level of black money in the market by the use of donations by bonds and all. It’s a good idea to use the scheme of electoral bonds, but only if there is any limit on the donations which one political party can receive or an individual/company can donate.




[1] https://economictimes.indiatimes.com/news/elections/lok-sabha/india/arun-jaitley-defends-electoral-bonds-ask-opponents-to-suggest-alternatives/articleshow/68725053.cms?from=mdr [2] https://pib.gov.in/Pressreleaseshare.aspx?PRID=1598964# [3] https://www.orfonline.org/expert-speak/decoding-indias-electoral-bonds-scheme-58260/ [4] https://adrindia.org/content/analysis-sources-funding-national-and-regional-parties-fy-2004-05-2014-15 [5] https://scroll.in/latest/865605/electoral-bonds-a-step-in-the-right-direction-says-chief-election-commissioner-ak-joti

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