The Electoral Bond Scheme has been a topic of significant controversy in India, recently coming under scrutiny when the Supreme Court declared it unconstitutional for violating voters' right to information. This scheme, introduced in 2018, allows individuals and entities to anonymously donate money to political parties through electoral bonds. However, it has raised concerns regarding transparency, accountability, and its potential for fostering corruption.

Limitations of the Electoral Bond Scheme

1. Lack of Transparency

One of the primary concerns with the Electoral Bond Scheme is the anonymity it grants to donors. This lack of transparency undermines the democratic process, as voters are unable to know who is financing political parties. The scheme removes the obligation for political parties to report the identity of donors, which deprives voters of crucial information.

2. Encourages Money Laundering

The Electoral Bond Scheme allows individuals and corporations to donate large sums of money without revealing the source of funds. This absence of scrutiny from the Income Tax Department has led to fears that it facilitates money laundering, with black money entering the system and being converted into white money.

3. Crony Capitalism and Foreign Influence

By eliminating the cap on corporate donations, the Electoral Bond Scheme strengthens the link between politics and corporate houses. It also opens the door for foreign companies to influence Indian politics through their subsidiaries, further complicating the democratic process.

4. Weak Oversight and Data Access Issues

The Electoral Bond Scheme bypasses the Election Commission of India (ECI) and the Reserve Bank of India (RBI), both of which are meant to regulate elections and currency respectively. Additionally, banks have access to sensitive information about donors and beneficiaries, which could be leaked, especially to parties in power.

Supreme Court Rationale for the Verdict on Electoral Bonds

The Supreme Court’s decision to declare the Electoral Bond Scheme unconstitutional was based on several factors:

1. Violation of Right to Information

The Court found that the Electoral Bond Scheme infringed on the right to information of voters. According to Article 19(1)(a) of the Constitution, voters have the right to know the sources of political donations, as it directly impacts their right to make an informed decision during elections.

2. Favoritism Towards the Party in Power

The Electoral Bond Scheme has disproportionately benefited the ruling party. For example, in 2022-23, the ruling BJP received 54% of its total income through electoral bonds, a stark contrast to the Congress Party, which received much less. This disparity raises concerns about the potential for a money-politics nexus.

3. Unchecked Corporate Donations

The Court criticized the removal of limits on corporate donations, arguing that it violates the principles of free and fair elections. The Finance Act, 2017, allowed unlimited corporate donations, undermining the integrity of the electoral process.

4. Failure to Curb Black Money

The Court noted that the Electoral Bond Scheme did not effectively tackle black money. By allowing anonymous donations, it fails to address the issue of illicit funding in elections.

Way Forward for Electoral Bond Scheme Reform

1. Public Disclosure of Donations

To promote transparency, it is essential to disclose electoral donations above a certain threshold. For instance, in the UK, political parties are required to report donations above a set limit, with donors’ names and addresses published online by the Electoral Commission.

2. Re-imposing a Cap on Corporate Donations

To curb the undue influence of corporations, the government should reintroduce the cap on corporate donations, limiting them to 7.5% of a company’s average net profit over the past three years.

3. Incorporating Electoral Bonds into RTI

The Electoral Bond Scheme and political party funding should be brought under the Right to Information (RTI) Act, enabling greater public scrutiny and accountability.

4. Empowering the Election Commission

The Election Commission of India (ECI) should be given more powers to monitor electoral funding, including the authority to delay or cancel elections if evidence of money power is found.

5. Exploring Alternatives to Electoral Bonds

India could explore alternatives to the Electoral Bond Scheme, such as state funding of elections or a National Electoral Fund, where donors can contribute without indicating support for any particular party.

Conclusion

The Electoral Bond Scheme has raised critical questions about transparency and accountability in political funding. The Supreme Court’s decision to declare it unconstitutional highlights the need for reforms to ensure a fairer, more transparent electoral process. Moving forward, it is crucial to implement stricter regulations on political donations and funding, empowering institutions like the Election Commission of India to maintain the integrity of India’s democratic process.