The Hindu: National: Monday, January 29, 2018.
Electoral
bonds cannot clean up campaign finance
Indian
elections are the world’s biggest exercise in democracy but also among the most
expensive. India’s campaign spend is only rivalled by the American presidential
race, the world’s most expensive election. Parties and candidates need large
sums of money for voter mobilisation, advertising, consulting, transport,
propaganda and printing of campaign materials to reach voters in
constituencies. Corporate donations constitute the main source of election
funding in India which is awash with black money, with business and corporate
donations to political parties commonly taking this form. The public disclosure
system that exists is limited. Only in 2008, using the provisions of the Right
to Information (RTI) Act, the Central Information Commission allowed disclosure
of income tax returns of political parties, though it is an open secret that
actual expenditure is much, much higher than what is disclosed.
Best
practices elsewhere
India’s
privately funded election campaign stands in contrast to the trend in most
countries, which have partial or full public funding or transparent regulation
and financial accountability of political finance as in the U.S. Corruption in
election finance and the flawed party funding system drive political parties to
misuse government’s discretionary powers to raise funds for election campaigns.
The combined effect is the absence of a level playing field which has reduced
the effectiveness of our democracy.
In his 2017
Budget speech, while emphasising the absence of transparency in funding,
Finance Minister Arun Jaitley noted that even 70 years after Independence the
country had not been able to evolve a transparent method of funding political
parties which is vital to the system of free and fair elections. But the
concern for transparency in political funding is at complete odds with the
electoral bonds scheme notified by the government this month to clean election
finance. Simply put, anybody can buy electoral bonds in the form of bearer
bonds from specified branches of the State Bank of India and donate it
anonymously to a political party of their choice; the party must cash the bonds
within 14 days. All donations given to a party will be accounted for in the
balance sheets but without exposing the donor details to the public. Donors
continue to prize anonymity as they fear disclosure could invite adverse
consequences from political opponents. As a result, the Election Commission
(EC), the Income Tax department and the voter would remain in the dark about
it. However, the ruling dispensation at the Centre, if it wants, can ferret out
information on who’s funding whom from banking authorities on some pretext or
the other.
The most
significant aspect of the electoral bonds scheme is that it will not carry the
name of the payee as there is reluctance to donate to parties through bank
instruments citing loss of anonymity. Bonds will allow corporate houses to make
anonymous donations through banking channels to the party of their choice. This
would lead to further opacity in the funding process and further limit
oversight and accountability. Transparency is a global norm while opacity of
election funding is an area of existential concern for democracies. Subversion
that such anonymity affords is perhaps one of the biggest threats to our
democracy today; it is the very wellspring of institutionalised corruption.
Far from
reducing the large-scale corporate funding of elections, the introduction of
electoral bonds does not even address this issue. The government’s principal
aim is to reduce the role of unaccounted cash in the electoral process and not
the corporate control of politics. Sure enough, the bonds scheme imposes no
restrictions on the quantum of corporate donations. Consequently, electoral
bonds cannot address the problems that arise from the corporate control over
politics and corporate capture of government policies and decisions. Rather,
electoral bonds will result in unlimited and undeclared funds going to certain
political parties which will be shielded from public scrutiny as the balance
sheets will not show which party has been the beneficiary of this largesse.
Three
steps back
Electoral
bonds must be seen in conjunction with: (1) lifting of the maximum limit of
7.5% on the proportion of the profits a company can donate to a political
party, thus opening up the possibility of shell companies being set up
specifically to fund parties; (2) amendment of the Foreign Contribution
(Regulation) Act (FCRA) opening the floodgates of foreign funding to political
parties, especially those which have a foreign support base; and (3) the
refusal of political parties to come under the RTI Act in order to conceal
their sources of funding. These three things will end up strengthening the
business-politics nexus. It goes against the position taken by various
electoral reform committees that the existing pattern of political funding
encourages lobbying and capture of the government by big donors. Far from
making the funding process transparent, the bond scheme could provide a
backdoor to corporates and other lobbies for shaping public policy to benefit
their interests. There is thus a legitimate fear that policy decisions of
political parties and politicians after being elected may be biased in favour
of groups that fund them.
Moreover,
these bonds are likely to reverse the small steps towards transparency of
political finance that came as a result of RTI-driven public disclosure of
income tax returns of political parties arguing that these disclosures were a
matter of public interest and should be available to citizens. Furthermore, all
registered parties were required to disclose to the EC the identity of
individuals and private entities donating more than ₹20,000 every year.
Proposed amendments to the Income Tax Act and the Reserve Bank of India (RBI)
Act will exempt parties from keeping records of donations made through bonds.
However, the decision to reduce cash contributions from ₹20,000 to ₹2,000 is a
step in the right direction, but the net effect is debatable, since it could
prompt parties to take smaller cash donations, and therefore not declare their
source. This would not decrease the drift towards non-transparent funding
reported by the Association for Democratic Reforms which found that nearly 70%
of party funding over an 11-year period came from unknown sources; nearly ₹7,900
crore donations came from unknown sources in 2015-2016. Electoral bonds will
not change this. In fact, political parties don’t need to reveal the donor’s
name for a contributions above ₹20,000 provided these are in the form of
electoral bonds.
Elections
that work well are essential for democracy; conversely, money power can corrode
the entire process. A major concern associated with the high cost of elections
is that it prevents political parties and candidates with modest financial
resources from being competitive in elections. Whilst the bond scheme can be an
attempt to burnish the anti-corruption credentials of the Narendra Modi
government ahead of the 2019 general election, it is clearly a regressive and
flawed move. A number of government committees have outlined reform proposals
to contain the negative effects of the high cost of elections. These include
strong disclosure norms, strict statutory limits on election expenses and
ceiling on corporate donations to political parties. The rules to limit and
restrict the campaign expenditure of parties are largely inoperative because it
is easy to circumvent them.
Staring at
the solution
State funding
of elections (in various forms) is a potential solution to this problem. The
Indrajit Gupta Committee on State Funding of Elections had endorsed partial
state funding of recognised political parties and their candidates in elections
way back in 1998, but the lack of political will has prevented any serious
discussion on this. The mechanics of this process need to be carefully worked
out to establish the allocation of money to national parties, State parties and
independent candidates, and to check candidate’s own expenditure over and above
that which is provided by the state. Based on the experience of countries that
have total or partial state funding of elections, it will not be difficult to
work out a formula that is both efficient and equitable to ensure that
democracy works for everyone and not just for the wealthy few.
(Zoya Hasan
is Professor Emerita, Centre for Political Studies, Jawaharlal Nehru University)
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