Corporate-Political Party Bond

Hidden Hand: Electoral Bonds ensure that we will never know who’s funding our political parties

On February 1, 2017, then Finance Minister Arun Jaitley made what appeared to be a very important announcement as a part of his Budget speech in the Lok Sabha. The Budget had a separate section titled ‘Transparency in Electoral Funding’. The first of the two paragraphs in this section declared the government’s resolve “to cleanse the system of political funding in India,” while the second mentioned the specific steps the government intended to take to make that happen. The steps consisted of amending four laws -- the Representation of the People Act, the Income Tax Act, the Reserve Bank of India Act, and the Companies Act. He was putting in motion the Modi government’s ‘Electoral Bonds’ scheme.

The same day, in his post-Budget media interaction, the FM said, “These bonds will be bearer in character to keep the donor anonymous”. Accordingly, the press release of the PIB carries a seemingly innocuous sentence, “It will not carry the name of the payee.”

It seemed to defy logic that an instrument which would “keep the donor anonymous” and “will not carry the name of the payee” could lead to transparency.

The next step was the release of the complete Budget Papers which contained the specific amendments that were proposed to the four Acts. Reading the fine print of the amendments showed unambiguously that all the amendments moved political and electoral funding further in the direction of opacity, exactly the opposite of transparency, which was stated to be the purpose of the entire exercise.

Withholding the names of the buyers (donors) and the recipients of electoral bonds turned out to be merely the tip of the iceberg. For example, a more insidious move, hidden in the amendment of the Companies Act, was to remove the 7.5% ceiling on the proportion of the profits of a company that could be donated to a political party. Another proposed amendment was to just delete the provision which required companies to disclose the name of political parties to whom they had donated, and the amounts donated. These two seemingly innocuous amendments made it possible for a company to donate its entire profit to a political party without declaring the name of the party or the amount donated.

“The Scheme of Electoral Bonds to cleanse the system of political funding in the country” was notified on January 2, 2018. The only redeeming feature, if one may call it that, is that donations made through electoral bonds cannot be completely hidden. The transparency, however, is severely limited. Each political party is required to declare the total amount of money they have received through these bonds but WHO gave how much money is NOT KNOWN. Similarly, a corporate buying and giving electoral bonds to political parties has to only declare the total amount of money donated to political parties through electoral bonds but does NOT have to declare how much it gave to which political party. For example, BJP and Congress declared that they received Rs 215 crore and Rs 5 crore in electoral bonds in financial year 2017-18, but no one is any wiser, and certainly not “We, the People”, as to WHO gave that money to these parties! Some transparency, indeed!!

So, what is wrong with electoral bonds? One, there is no transparency whatsoever because both the giver and receiver of the money are NOT KNOWN, even though both get the advantage of tax exemption. Two, with the 7.5% limit and the disclosure requirement gone, it is perfectly possible for any dubious entity to set up a company, or a shell company, and route money to political parties completely UNKNOWN to anyone except the State Bank of India. There are two issues with this: (a) These “dubious” entities can well be foreign companies or even drug or arms mafias, (b) With only State Bank of India knowing who buys the bonds, how long will it take for this information to move to the Reserve Bank of India, and in turn, to the finance ministry, is not difficult to guess. And once it goes to the finance ministry, how long does it take to reach the political party in power is also not a mystery. What that would mean is that the political party in power can, and in all likelihood will, exert pressure on the buyer of electoral bonds to donate the bonds to itself and not to the opposition parties. This will happen irrespective of the party in power. This is perhaps the reason why no political party really opposed this provision in Parliament.

This choking of the flow of funding to opposition parties was only an apprehension when the bonds were introduced in 2017. Sadly, it has been proved correct by the information disclosed by political parties in the “Audited Accounts Contribution Statements” submitted by them to the Income Tax Department and the Election Commission of India for the financial year 2017-18. These submissions reveal that BJP received Rs 215 crore worth of electoral bonds while the Congress received Rs 5 crore. No other party has declared receiving any contribution by way of electoral bonds.

An added concern is the way electoral bonds were introduced, as part of the Union Budget, and therefore as part of a Money Bill. The Constitution provides that Money Bills do not need to be “passed” in the Rajya Sabha, it can only comment on them. The Constitution also defines the conditions that need to be satisfied for a bill to qualify as a Money Bill. The provisions of electoral bonds do not meet the criteria to qualify as a Money Bill. The rationale by the government is that since the Budget is a Money Bill, anything contained in it is automatically considered to meet the requirements of a Money Bill. A similar misuse of the Money Bill has been the retrospective amendments to the Foreign Currency Regulation Act (FCRA) which the government has done, not once but twice, in attempts to save the BJP and the Congress from being prosecuted for violations of FCRA as decided by the Delhi High Court.

The electoral bonds scheme has been challenged in a PIL in the Supreme Court on two counts: (a) that this has affected transparency in political funding, as a result of which the Election Commission and the citizens of the country will not get to know the vital information regarding political contributions; and two, passing this as a Money Bill and thereby bypassing the Rajya Sabha, is unconstitutional and violates the doctrine of separation of powers and the citizen’s fundamental right to information, which are parts of the basic structure of the Constitution. The PIL was filed in October 2017, the Ministry of Finance filed its response on January 2018 and the Law Ministry responded in March 2018. The matter is still to come up for hearing.

Electoral bonds are yet another link in the long saga of political parties thwarting attempts to bring any semblance of transparency in political funding.

The UPA government had introduced electoral trusts with similarly high-sounding objectives. It was later held by the Delhi High Court that both BJP and the Congress were guilty of having violated the FCRA under the guise of receiving donations from electoral trusts. The NDA government has brought in electoral bonds which have made it perfectly legal for political parties to receive completely anonymous contributions…and it is always done with the hallowed aim of increasing transparency.

(The writer is a former Professor, Dean, and Director In-charge of Indian Institute of Management, Ahmedabad)