Electoral Reforms In India

Electoral bonds

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Electoral bond and issues related to it

Mains level : Paper 2- Issues with electoral bond

The article highlights the issues with the political funding through electoral bonds.

Changes made for the electoral bond and issues with them

  • Earlier, only profit-making domestic companies could contribute to political parties; now loss-making companies can too.
  • Earlier, foreign companies or companies where the controlling stake was held by a foreign company couldn’t contribute; now they can. 
  • India’s political parties could theoretically be fully funded by a foreign company operating in India or by a foreign entity through a shell company.
  • Only the ruling party via the State Bank of India (SBI) has a full account of all donations being made via electoral bonds, to itself and to Opposition parties.

Issues in the Supreme Court verdict

  • In March 2021, the Supreme Court refused to stay the sale of electoral bonds before the West Bengal elections.
  • Instead, the judgment listed several documents which supposedly establish a paper trail on donations and do some ‘match the following’.
  • This is impractical and plainly incorrect.
  • The Right to Information (RTI) Act of 2005 enables easier access to information held by public authorities.
  • Suggesting a “match the following” is incorrect for three reasons.

1) Full scale of registered entities in unknown

  • If we set aside individual donors and focus just on registered entities, we will find that the full scale of registered entities is unknown. 
  • According to back-of-the-envelope calculations, there are close to 25 lakh potential donors comprising just companies and firms.
  • This includes about 12.6 lakh active private limited companies as of January 31, 2021.
  • Firms, unlike companies, have no regulatory mandate to submit their annual reports except for filing their annual tax returns, since their functioning is regulated by Acts other than the Companies Act of 2013.

2) No disclosure by companies about donation to political parties

  • Even if registered companies filed annual financial statements, many do not disclose political donations.
  • Conveniently, the Finance Bill of 2017 amended Section 182 of the Companies Act of 2013 to remove the requirement for declaring disaggregated donations to political parties.
  • Even if registered companies filed annual financial statements, many do not disclose political donations.

3) Political parties do not need to disclose their donor

  • Crucially, political parties do not need to disclose their electoral bond donors either.
  • Strictly speaking, political parties are not even supposed to know their electoral bond donors.
  • The only requirement is the annual audit reports with a total of all donations received via electoral bonds.
  • These reports are submitted with great delays.
  • Even if these reports are submitted on time, there is no way to match a donation of a company to that received by a political party as only aggregate amounts are available.

Implications

  • Electoral bonds give political power to companies, wealthy individual donors, and foreign entities, thus diluting the universal franchise of one voter-one vote.
  •  Every vote is not equally valuable if companies can influence policies through hidden donations.
  •  The winner of this arrangement is the ruling party, whether at the Centre or in a State, and the loser is the average voter.

Way forward

  • Companies and political parties could exercise moral leadership and voluntarily disclose the identity of recipients and donors, as the Jharkhand Mukti Morcha recently did.

Conclusion

Opacity in political funding goes against the basic tenets of democracy. What we need is a system of political funding which is transparent and fair.

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