The Wire: New Delhi: Saturday, November 25, 2017.
According to
Venkatesh Nayak, the new system is being implemented without talking to
stakeholders and will make political funding even more opaque.
Though the
scheme to issue electoral bonds was announced by finance minister Arun Jaitley
in his budget speech in February this year, the Ministry of Finance, the
Election Commission of India (EC) and the Reserve Bank of India (RBI) have all
claimed to be unaware of the plan in their replies to queries filed under the
Right to Information (RTI) Act.
RTI activist
and programme coordinator at Commonwealth Human Rights Initiative Venkatesh
Nayak, who had filed the plea, has stated that electoral bonds were the ‘big
idea’ floated in the Union Budget to change the way donations were made to
political parties.
“The
government amended three laws relating to elections, income tax and the RBI to
create this new method of making monetary donations to political parties.
Briefly explained, anybody will be able to buy electoral bonds in the form of
bearer bonds from a designated commercial bank for any sum of money and donate
it anonymously to a political party that he, she or it (private entity)
chooses,” he said.
Stating that
these amendments had removed the obligation of political parties to record and
report the identity of electoral bonds-style donors to both the regulatory
bodies, namely, the EC and the Income Tax (IT) Department, Nayak said that the
electoral bonds scheme came under the sub-heading of ‘Transparency of Electoral
Funding’ in the Budget document.
What
happened to the process of consultations?
Following the
announcement, he said, news reports indicated that the Centre would hold
consultations with stakeholders – political parties, the EC and the RBI –
before operationalising this scheme. It was later reported that the Centre was
now finalising the electoral bonds scheme for implementation.
Recent news
that the Centre was finalising the scheme, Nayak said, made it appear that it
completely forgot to consult the stakeholders – the voters, taxpayers and
citizens – before taking this decision.
In order to
get to the bottom of the issue, Nayak had filed RTI applications with the
finance ministry, the EC and the RBI. But he said that they all claimed to not
have any information about it or about who influenced the Centre to launch the
scheme.
He said that
six months after the Budget speech was made in the parliament, he filed the RTI
application with the Department of Economic Affairs (DEA) in the finance
ministry, seeking information about the electoral bonds.
The
questions no one wants to answer
In his
application, Nayak had asked for “the total number of representations or
petitions or communications, by whatever name called, received by the
government of India till date from donors regarding the need for maintaining
confidentiality of their identity while making donations to political parties;
a clear photocopy of all representations or petitions or communication by
whatever name called; and a photocopy of the draft electoral bond scheme
prepared” by the DEA in consultation with the RBI and the EC.
Giving
reasons for the questions he asked, Nayak said, “As the finance minister said
in his speech that donors to political parties had expressed their
unwillingness to make their identity known publicly, the first two questions
were drafted to ascertain the total number of representations received in
favour of secrecy and the justification they offered. The third question was
aimed at getting a copy of the draft electoral bonds scheme, so that citizens
would be able to discuss the detailed proposals, being the primary donors to
political parties”.
When the DEA
did not respond to the plea, Nayak filed the first appeal and the First
Appellate Authority directed the RTI application to be transferred to the EC,
the Department of Financial Services (DFS) which supervises banks through which
electoral bonds will be sold and the coordination section of the DEA. The DEA
transferred the application to the EC and the DFS within 24 hours, saying that
the subject matter of electoral bonds does not pertain to them. The DFS also
quickly transferred the RTI application to the RBI.
The EC and
the RBI replied that they did not have any information which was sought in the
RTI application, said Nayak, adding that it appears that the records relating
to the draft electoral bonds scheme are being held in secrecy. “Nobody wants to
acknowledge that they did any work on it. Secrecy seems to be the guiding
principle for the electoral bonds scheme even before it is operationalised to
keep donor identity secret.”
Nayak said he
will soon file a complaint with the Central Information Commission (CIC) to
find out who is holding the records.
No one
will know who donated to a party now
“Until 2017,
all registered political parties were required to disclose to the EC the
identity of individuals and private entities donating more than Rs 20,000 every
year. The EC publishes these contribution reports on its electoral bonds site
soon after receiving them. The Finance Act, 2017 (one of the Bills relating to
the annual budget) amended Section 29C of The Representation of the People Act,
1951 to remove the obligation of political parties to keep a record of the
identity of donors who give any sum of money through electoral bonds or report
the same to the EC annually. As electoral bonds protect the identity of donors,
they are likely to become the default option for making donations. Citizens
will know lesser and lesser about who is making donations to which political
party,” said Nayak. This aspect, he fears, will undo the transparency regime
established during the Atal Bihari Vajpayee era.
Similarly, he
noted that the amendment to the IT Act will help political parties escape the
scrutiny of the department. “Until 2017, under Section 13A of the IT Act, 1961,
all political parties registered with the EC were required to maintain details
of donations of Rs 20,000 and above, received from any source, and have them
audited. These were essential requirements for every political party to get
exemption from paying income tax every year. The Finance Act, 2017, absolves
all political parties from the duty of keeping records of donations received
through electoral bondss. So these donations will not be audited either.”
Donations
by companies to become more opaque
Finally, he
said, the amendment to the Companies Act would also make the process more
opaque. “As of now, private corporations can donate not more than 7.5% of their
average net profits made during the immediately preceding three financial
years. Such donations had to be approved by a resolution of the board of
directors. Every private company making such donations is required to publicly
disclose in its profit and loss account how much money is donated to which
political party in a given year. The Finance Act, 2017, removed all these
transparency requirements from Section 182 of the Companies Act, April 2018
onwards.”
Now a private
corporation will be able to make donations from the first day without starting
commercial operations, let alone earning profits. “There will be no obligation
to publicly disclose the amount so donated and the identity of the recipient
political party. Only the total sum of money so donated will be reflected in
the profit and loss account of the company every year. So electoral bonds are
likely to become the preferred route for such companies to make donations to
political parties of their choice and escape public scrutiny,” he said.
Amendments
pushed as parties remain defiant to public scrutiny
Nayak also
questioned the manner in which the amendments were pushed through. “The
amendments carried out through The Finance Act, 2017 were also done in a manner
that prevented a vote in the Rajya Sabha. They were all introduced in the Finance
Bill which was certified by the speaker of the Lok Sabha as Money Bill even
though they violated the definition of a ‘Money Bill’ provided in Article 110
of the constitution,” he said.
Though the
CIC in the past had declared six national-level political parties as ‘public
authorities’ under the RTI Act, they continue to remain non-compliant.
The activist
cautioned that if implemented in the present form, the electoral bond scheme
will bring the era of transparency in political party funding to an abrupt end,
rather than making the process more transparent.
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