Electoral Reforms In India

Electoral Bonds chief source of donations for parties: Report


From UPSC perspective, the following things are important :

Prelims level: Electoral bonds

Mains level: Not Much


Central Idea

  • Electoral bonds have emerged as the primary source of donations for political parties in India, with the BJP securing the majority share.
  • A report by the Association of Democratic Reforms reveals that between 2016-17 and 2021-22, national and regional parties received a total donation of ₹9,188.35 crore through electoral bonds.
  • The BJP received ₹5,271.97 crore, while other national parties collectively received ₹1,783.93 crore.

Political Donations under Electoral bonds scheme

  • Breakdown of donations: Over the six-year period, the 31 analyzed political parties received a total of ₹16,437.63 crore in donations. Of this, 55.9% came from electoral bonds, 28.07% from the corporate sector, and 16.03% from other sources.
  • BJP leads the pack: The BJP declared donations worth ₹5,271.97 crore through electoral bonds, surpassing the total donations of all other national parties combined.
  • Congress and regional parties: The Congress received the second-highest amount through electoral bonds, with ₹952.29 crore (61.54% of total donations). The Trinamool Congress received ₹767.88 crore (93.27% of total donations).
  • Regional parties’ reliance on bonds: Regional parties such as the BJD, DMK, and TRS received a significant portion of their total donations from electoral bonds.
  • Surge in bond donations: National parties witnessed a 743% increase in donations through electoral bonds between 2017-18 and 2021-22, while corporate donations only rose by 48%.

Key features of Electoral Bonds Scheme

  • Introduction of Electoral Bond Scheme: The Electoral Bond Scheme 2018 was introduced for electoral funding during the crucial time period analyzed in the report.
  • Removal of donation limit: The Finance Act, 2017 eliminated the previous cap of 7.5% of a company’s average three-year net profit for political donations.
  • Purchase and Donation: Any Indian citizen or company incorporated in India can purchase Electoral Bonds from select branches of the State Bank of India. The bonds can be bought in denominations of ₹1,000, ₹10,000, ₹10 lakh, and ₹1 crore. The purchaser can then donate the bonds to an eligible political party of their choice.
  • Eligibility and KYC: To purchase Electoral Bonds, the buyer must fulfill the Know Your Customer (KYC) norms and make the payment from a bank account. Only individuals and companies with Indian citizenship or incorporation can participate in the scheme.
  • Bond Validity: Electoral Bonds have a life of 15 days, ensuring that they do not function as a parallel currency.
  • Anonymity and Disclosure: Donors who contribute less than ₹20,000 to political parties through Electoral Bonds are not required to provide their identity details, such as the Permanent Account Number (PAN). However, the identity of the donor is known to the bank.
  • Redemption and Eligible Parties: Only political parties registered under Section 29A of the Representation of the People Act, 1951, and securing at least one percent of the votes in the last general election are eligible to receive Electoral Bonds. The bonds can be encashed only through a bank account with the authorized bank.

Issues with the Scheme

  • Lack of Transparency: The scheme has faced criticism for enabling opaque political funding. While the identity of the donor is captured, it is not revealed to the party or the public, limiting transparency.
  • Limited Tax Benefits: Donations made through Electoral Bonds may not qualify for income tax breaks, potentially discouraging donors from participating in the scheme.
  • Privacy Concerns: The privacy of donors may be compromised as the bank will have knowledge of their identity.
  • Differential Benefits: The scheme can potentially favor parties in power, as the government can access information about the donors and the funds received.
  • Unlimited Donations: Amendments in the Finance Act of 2017 allow for unlimited donations from individuals and foreign companies to political parties without disclosing the sources of funding, raising concerns about the influence of money in politics.

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