Transparency via secrecy

Electoral Bonds

By Dr.S.Saraswathi
(Former Director, ICSSR, New Delhi)

The Supreme Court has passed a very important interim order concerning funding of political parties for election. It has directed all political parties to provide complete information to the Election Commission in sealed covers on every single donor and contribution received through electoral bonds till date. It was hearing a PIL brought by an NGO challenging the issue of bonds on grounds of lack of transparency.
The bench headed by the CJI admitted that these were “weighty issues with tremendous bearing on the sanctity of the electoral process in the country”. The Court refused to stay the Electoral Bonds scheme, but has introduced some restrictions.
This scheme, a new channel for private funding of political parties, was promulgated by the Government of India under the Reserve Bank of India Act by a notification issued in January 2018. India is the first country to issue such a bond in the nature of a promissory note which is a bearer banking instrument without carrying the name of the buyer or the payee. The buyer need not declare the name of the beneficiary. Bonds are available in the denominations of one and ten thousand, one lakh, one million, and ten million.
The buyer can donate them to political parties which can encash them. Only parties registered under the Representation of People Act 1951 and have secured at least one per cent of votes polled in the latest Parliament or State election are eligible to receive donations under the scheme. Bonds are valid for 15 days from the date of purchase and are sold at specified time of the year.
The Attorney General argued that there is no reason to disclose the names of donors and the source of political funds to the citizens. Parties also cannot produce the details demanded by the Court as they themselves receive the donations without any official information about the donors. Except the CPM, all political parties are in favour of maintaining secrecy in the matter of political funding. Transparency in funding is indeed hard to achieve.
The bond scheme was introduced as an experiment with the object of eradicating black money and the government does not want the court to intervene now and put an end to it. But, the Supreme Court is of the view that if the identity of the donors buying electoral bonds is not known, government efforts to check black money would be futile. It looks like an effort of the government to achieve transparent dealings in party funding in the interest of eradicating corruption by maintaining secrecy. How this can be achieved through this indigenous Indian experiment is anxiously watched by the citizens.
The EC is taking a different stand holding that voters should know the source of funding of the parties also. It rejects the argument that the scheme will help poll reform. To stop financing of election campaigns using black money, the EC urged the government to amend laws to ban anonymous contributions of Rs.2,000 and above made to political parties. When the bond scheme was mooted in 2017, The EC observed that by removing the cap on donations of 7.5 per cent of the average net profit of the preceding three years, bonds could open the “possibility of shell companies being set up for the sole purpose of making donations to political parties”. Anonymity could help channeling money through troubled, dying, and bogus companies and thus instead of cleansing party funds, would add to sources of black money trail.
The “cost of democracy”, which includes the cost of electoral campaigning and conducting elections, has been increasing like all other goods and services all over the world. According to an expert estimation, 2019 general election in India may cost up to $10 billion which is said to be nearly $ 4 billion more than American presidential election expenditure in 2016. Figures vary in different estimates, but uniform in suggesting much higher election expenditure in India compared to the US.
Representative system of government formed by popular voting is unable to regulate the flow of money in politics. We believe that there is no democracy without an electoral system. We also have to believe and admit that a general election cannot be held without huge expenditure. The inevitable consequence is enormous and almost unstoppable money power dominating elections which is clearly visible in the assets declared by candidates and their rapid rise. The ceiling put on election expenditure of candidates as Rs.28 lakh for Assembly and Rs.70 lakh for Parliament constituencies in bigger States and much less for smaller States is itself so unrealistic and becomes the starting point for making money matter opaque in party system and electioneering.
Issue of coupons printed by the parties themselves, said to be a way of collecting donations without limit does not seem to be in practice. In 2016, the EC asked the Law Ministry to ensure that political parties register details of donors for coupons of all amounts on the basis of a Supreme Court order issued in 1996. The situation raises a serious question of transparency in electoral funding.
In Britain, the Corrupt and Illegal Practices Prevention Act 1883 is an effort to regulate financial aspect of political competition. The Honours (Prevention of Abuses) Act 1925 aimed at ending the practice of selling titles in exchange for donations to political parties. In 1976, the Committee on Financial Aid to Political Parties recommended two kinds of aid — lump sum grant to the central party organisation or reimbursement of election expenditure to candidates. Excessive spending by candidates is being controlled by legislations. Checking expenditure seems to be more effective than limiting donations.
Despite these regulations, Britain faced “Cash for honours” scandal in 2006 which led to enquiries. Putting a ceiling on individual donations and on funding political campaigns, and increasing State funding were then recommended.
The UN Convention Against Corruption encouraged member-countries to “enhance transparency in the funding of candidatures for elected public office and when applicable, the funding of political parties”.
French presidential candidates are prohibited by law from receiving more than the prescribed limit of donations to their election campaigns. Limits are prescribed for individual donations to parties and to presidential candidates. Corporate firms and other legal entities with the exception of political parties and movements are prohibited from financing candidates. Contestants have to submit their accounts to the National Commission for Campaign Accounts and Political Financing. The system seems to be fairly effective. It put former French President Nicolas Sarkozy in deep trouble over allegations of illegal funding of his election campaigns by the late Libyan leader Colonel Gaddafi.
The Australian Election Commission monitors donations to political parties and publishes annual list of political donors. Parties are not required to identify the corporates which attended fund raising events. Donations above $14,000 have to be disclosed publicly.
No nation has found an ideal democratic devise of electoral funding of parties and contestants. Inflation is hitting election costs also including the price for votes. Bonds or no bonds – Unless voters reject money power and understand the significance of election and democracy, there can be no escape route from money power.— INFA