The BJP's near-monopoly on political funding

Parties have obtained anonymous donations of more than Rs 10,000 crore through EBs of which BJP received over two-thirds

In August this year, the US media exposed the biggest-ever secret political donation to come to light in that country — a reclusive billionaire had given $1.6 billion to a Republican Party operative who had helped build up the current Conservative-dominated US Supreme Court to pursue the party’s agenda — end abortion, overturn climate change regulations, etc. The New York Times exposed how Joe Biden and the Democrats had, in fact, beaten the Trump camp and the Republicans at their own game in garnering and using ‘dark money’ — political funding from anonymous sources — to win the 2020 presidential election. Biden’s campaign reportedly obtained $1.5 billion in such anonymous donations, compared to about $900 million raised by the Trump campaign.

‘Dark money’ is a problem in other democracies, too. In fact, it has become an even bigger and dangerous factor in Indian elections and politics than in the US, thanks to Electoral Bonds (EBs), introduced by the Narendra Modi government, ironically in the name of ‘transparency’ in political funding. It is perhaps the world’s cleverest scheme to obtain unlimited secret money for a political party.

Also read | SC must take up electoral bonds case

The late Finance Minister Arun Jaitley, who in 2017 introduced amendments to multiple laws to allow EBs, told Parliament and the nation that under previous regimes, illegal cash donations from corporates and rich individuals had corrupted elections and policymaking. The BJP, he said, would cleanse the system by introducing ‘transparency’ in political donations through EBs.

In truth, EBs are bearer bonds, and thus as good as cash. If as a voter, we do not know who is giving this EB, we citizens are no wiser as to who is funding our political parties and what they are getting in return or whether these donors are able to influence government decisions. The Supreme Court, while refusing to stay the operation of EBs, suggested that people could piece together whatever information they could obtain and do ‘match the following’ to get a sense of who is making these secret donations. Let’s try that and see what comes out.

Fact 1: Political parties have obtained anonymous donations of more than Rs 10,000 crore since 2018 through EBs.

Fact 2: Of this, the BJP has obtained more than two-thirds — that is, around Rs 7,000 crore.

Fact 3: More than 95% of these donations have been made in the Rs 1-crore denomination. Obviously, it is not individuals like you and me donating such money, it is corporates and rich individuals pumping in the moolah.

Fact 4: The donor enjoys tax exemption for their donation and the political party enjoys tax exemption on its receipt, but the donor does not have to reveal who he gave the money to and how much, and the party does not have to say who gave it the money.

Fact 5: In 2019, about a year after the EBs started to work swimmingly for the ruling party, the Modi government cut corporate tax rates (which resulted in the loss of Rs 1.84 lakh crore in revenue to the government in the first two years of its announcement, according to a parliamentary committee report).

Do “match the following” between these facts and EB donations to the BJP and come to your own conclusions.

Oh, don’t forget: non-BJP governments in Karnataka, Madhya Pradesh, Maharashtra, etc., have fallen post-2018, with large numbers of MLAs of non-BJP ruling parties breaking away from their parties and helping the BJP to come to power in states where it could not win elections.

Also read | The name is Bond... Electoral Bond

There is much to worry about the fact that all this big money is being channelled to political parties, especially the ruling party of the day, anonymously.

First, the fact that what was considered illegal earlier — anonymous or secret donations to a political party — has now been legalised and has become the preferred way to fund parties.

Second, consider the amendments that were made to the Companies Act to enable them to make these secret donations: Earlier, companies had to be profitable and could donate a maximum of 7.5% of their average profits for three years; they had to seek the approval of their Board for such donations; and they had to list their donations in their annual accounts or reports. Under the EB regime, a company formed yesterday can start donating today, including its entire shareholding; there is no limit to how much a company can donate to a party; they do not even have to inform their Board or shareholders about such donations; and they do not have to list their donations in their annual accounts. Oh, by the way, even foreign companies can fund our political parties through their Indian subsidiaries. Money is welcome, wherever it comes from!

Third, that EBs have resulted in more or less a ruling party monopoly over political funding, thus tilting the balance against the Opposition decisively and endangering our multi-party democracy.

Indeed, the story of how this was achieved is itself worrisome and shows how the bogey of ‘anti-corruption’ drives and ‘cleansing up the political system’ can be used to undermine multi-party democracy. This story started with demonetisation.

On November 8, 2016, we were told that PM Modi had decided to demonetise Rs 500 and Rs 1,000 notes to act decisively against ‘black money’ and bring it all out in the open. But what actually happened?

The logic of demonetisation

Well, the RBI ended up spending Rs 13,000 crore to print new notes, but no black money was recovered. But there was great benefit to the BJP. It had not only put itself on a moral pedestal, it had also deprived the Opposition of all its stock of cash and shorn it of the ability to compete with the BJP electorally. The results were visible in the Uttar Pradesh elections in March 2017. This, not recovering black money, was the logic of demonetisation. Or, at least, it was the effect.

Demonetisation was thus the first step toward the BJP obtaining a near-monopoly on all political funding. That first step was to deprive the Opposition of its stock of money. Electoral Bond was the next step – to ensure that the BJP’s treasury was full, while the Opposition also got some crumbs to keep up the appearance of an even playing field. Is there a deeper, more nefarious connection between the data obtained from demonetisation and the donations secured by the BJP through EBs? Well, that’s a tantalising question that needs investigation.

Add to this the fact that with the introduction of GST, all indirect revenues go to the Centre first and is then devolved to the states at its convenience. Further, by choosing to mop up revenues through cess and surcharge on fuel — rather than taxes — which it does not need to share with the states, the Modi government has ensured that even revenues are concentrated in its hands, and that it alone is in a position to run “revadi” schemes, complete with a picture of Narendra Modi on every bag of grain given to the poor.

It is only when one sees this whole picture — starting from demonetisation and GST through EBs to the Centre’s behaviour on devolution to the states – that one understands the near-monopoly control of the BJP over all politically-useful money. Needless to say, this is dangerous for our multi-party democracy.

The US system will repair itself. There is already movement, led from the White House, through the Disclose Act and other legislations that will require companies to disclose their political spending. The institutions of democracy in the US are still functional and so it can repair the wounds to its democracy. It is Indian democracy that we need to worry about. The Election Commission should have been at the forefront in fighting against opaque election funding. Instead, it is worried about ‘freebies’ announced for the poor by political parties. The case against Electoral Bonds has been pending in the Supreme Court since 2017. Meanwhile, another round of elections is due, and another round of hundreds, if not thousands, of crores of ‘dark money’ is waiting to be handed over secretly to political parties.

Shall we just resignedly say, in Mark Twain's words, that "We have got the best government that money can buy"?