NEWS

• The Election Commission of India has announced dates for elections to five Legislative Assemblies.
• But it is a matter of grave concern that the petition challenging the electoral bonds scheme, which deals with the vexed issue of election funding, continues to languish in the Supreme Court.
• The delay in adjudicating on the case filed in September 2017, gives rise to “weighty issues which have a tremendous bearing on the sanctity of the electoral process in the country.”

CONTEXT  The political system in India has traditionally been hostile to the idea of transparency in electoral financing. Political parties have zealously opposed any examination of the linkages between their governments’ policies and decisions, and the interests of their major donors. 

ELECTORAL BOND SCHEME

• The government introduced amendments to laws, including the Income Tax Act of 1961, the Companies Act of 2013, and the Representation of the People Act of 1951 to give effect to the electoral bond scheme.
• Under this scheme, an electoral bond, issued in the nature of a promissory note, can be bought by any Indian citizen or company incorporated in India. The scheme allows parties to receive these bonds.
• This new instrument of political party funding is aimed to ensure greater transparency by addressing the issue of anonymous financing. It sought to eliminate black money from the system.

RELATED CONCERNS

1) LACK OF TRANSPARENCY

• The government used the money bill route to bypass the Rajya Sabha, to introduce electoral bonds which allow donors to anonymously donate unlimited amounts of funds to political parties.
• It allows parties to receive these bonds without the public, the Election Commission or even the Income Tax Department knowing the identity of the donors.
• It has legitimised opacity and opened the floodgates for anonymous donations to parties, dealing a severe blow to voters’ right to know.
• It undermines the People’s ability to track donations by big businesses and expose quid pro quo.

2) VIEWS OF ELECTION COMMISSION

• Expressing its opposition to electoral bonds in the Supreme Court, the Election Commission has contended that they will have an adverse impact on transparency in political party financing and would make it impossible for the constitutional body to ascertain whether donations received were in compliance with the statutory framework governing political parties.

 3) IN CONJUNCTION WITH AMENDMENTS TO FCRA ACT  

• In 2016 and 2017, amendments were made to the Foreign Contribution (Regulation) Act (FCRA), 2010, with retrospective effect. Thus, enabling the Indian subsidiaries of foreign companies to make donations to political parties through electoral bonds.
• This allows anonymous financing by foreign entities opening Indian elections to the influence of foreign interests.

4) MONEY LAUNDERING

• One of the stated objectives of introducing electoral bonds was to address the problem of black money and large cash donation.
• Proponents of electoral bonds have argued that since bonds can only be purchased via cheques, demand drafts, direct debit or electronic clearing, they will stem the flow of black money.
• But, the problem lies with the provision of the Income Tax Act under which political parties are exempted from disclosing sources of donations of less than Rs. 20,000.
• Most parties claimed that a majority of their income was received in denominations smaller than Rs. 20,000 thus doing away with the requirement to disclose the source of donation.
• Even the amendments to the Income Tax Act in 2017 only lowered the stipulated ceiling of anonymous contributions from Rs. 20,000 to Rs. 2,000.
• In fact, electoral bonds are likely to abet money laundering since the amendments to the Companies Act in 2017 removed the cap of 7.5% on political contributions by a company as a percentage of its average net profits of the preceding three years.
• This allows for black money to be easily routed through shell companies to purchase electoral bonds.

5) BIG MONEY IN ELECTORAL POLITICS

• The rationale given by the government for providing anonymity to donors of electoral bonds is to allow donors to use legitimate funds to support political parties by protecting them against the wrath of rival parties, especially the party in power.
• But as bonds are issued only through the State Bank of India, it is not difficult for the party in power to access information about the identity of purchasers and details of bonds sold to them, and match those to deposits in political party accounts.
• Bonds worth nearly ₹6,500 crore have been sold so far. Thus, the scheme has helped in consolidating the role of big money in electoral politics.
• As per the information obtained under the Right to Information (RTI) Act shows that bonds with the highest denomination value of Rs. 1 crore are the most preferred by donors and constitute 92% of the total value of bonds sold till October 2020.

Thus, Electoral bonds goes against every known principle of transparency and lend themselves to use by special interest groups, corporate lobbyists and foreign entities to acquire a stranglehold on the electoral process and governance at the expense of citizens

WAYFORWARD

• To ensure public trust in the electoral process, it is critical that the Supreme Court immediately adjudicates on the matter.
• If bonds are to be retained as an instrument for contributing to political parties, donations must be made transparent and parties should be obligated to file reports with the Election Commission and other oversight bodies disclosing the names of donors and amounts received.
• This information must also be placed in the public domain. These steps are necessary to safeguard democracy and ensure that elections do not become a mere formality.

Reference:

1. https://www.thehindu.com/opinion/op-ed/ensuring-trust-in-the-electoral-process/article34022063.ece