Ensuring Trust In The Electoral Process

Context: It is important for the Supreme Court to immediately adjudicate on electoral bonds as the grave issues in the electoral funding model undermines electioneering and democracy in India.

Electoral bond scheme: Key Features

• Objective: Introduces a new instrument of political party funding to ensure greater transparency and eliminate black money from the system.
• Issued in nature of the promissory note, it can be bought by any Indian citizen or company incorporated in India.
• Ensures Anonymity of donors: Allows parties to receive bonds without public, Election Commission or Income Tax Department knowing the identity of donors.
• Addresses problem of black money: Bonds can only be purchased via cheques, demand drafts, direct debit or electronic clearing; thus, they will stem the flow of black money.
• Regulates large anonymous cash donations: Amendments to the Income Tax Act in 2017 lowered the stipulated ceiling of anonymous contributions from Rs.20,000 to Rs.2,000.
• Removes the cap on political contributions: Amendments to Companies Act in 2017 removed cap of 7.5% of net profits on political contributions by a company.
• Enabled subsidiaries of foreign companies to make donations to political parties: through amendments to Foreign Contribution (Regulation) Act (FCRA) in 2016-17.

Issues with the Electoral Bond Scheme:

• Legitimised opacity: Opened floodgates for anonymous donations to parties.
• Undermined people’s right to know: People’s ability to track donations by big businesses and expose quid pro quo been undermined.
• Exploiting money bill route: To bypass Rajya Sabha for introduction of regressive amendments.
• Risk of foreign contributions: Electoral bonds allow anonymous financing by foreign entities opening Indian elections to the influence of foreign interests.
• Continuing dominance of cash donations: Creative accountants easily neutralise the impact of lowered ceiling by multiplying number of unattributed cash donations by a factor of 10.
• Expanding the role of shell companies: Removing the cap on political contributions allows for black money to be easily routed through shell companies to purchase electoral bonds.
• Biased information access: As bonds are issued only through State Bank of India, it provides for party in power to access information about the identity of political donors.
• One-party dominance: 95% of bonds issued in the first tranche in March 2018 in name of ruling party.
• Election Commission’s views: - An adverse impact on transparency in political party financing.
  • As it would be impossible for a constitutional body to ascertain whether donations received were in compliance with the statutory framework governing political parties.
• Threat to democracy: as elections are reduced to mere formality.

Way forward

• Ensure public trust in the electoral process: Supreme Court must immediately adjudicate on the matter.
• Bring in transparency: Parties should be obligated to file reports with Election Commission and other oversight bodies disclosing names of donors and amounts received.
• Ensure public oversight: Information must be placed in the public domain.