Electoral Reforms In India

Need to remove the secrecy around the electoral bonds


From UPSC perspective, the following things are important :

Prelims level : Various aspects related to the electoral bond scheme

Mains level : Paper 2- Issues with the electoral bond scheme and alternatives to it

The article highlights the issues with the electoral bond scheme and suggests an alternatives.

Secrecy in donations

  • Before the electoral bond scheme, every transaction of more than Rs 20,000 was reported to the Election Commission.
  • Now even Rs 20 crore or Rs 200 crore could be donated anonymously. 
  • Why should donors want secrecy? To hide return favours, like contracts, licences and bank loans.
  • Both the RBI and ECI, standing up to their mandates, had registered their strong protest.

How electoral bond scheme led to changes in provisions of other Acts

  • To make way for electoral bonds amendments were introduced in the Reserve Bank of India Act, Companies Act, Income Tax Act, Representation of the People Act and Foreign Contribution Regulations Act.
  • There were three serious changes which did not receive the deserved attention.

1) Limit of 7.5 per cent removed

  • First, the limit of 7.5 per cent of its profits which a company could donate was not just increased but completely done away with by amending section 182 of the Companies Act, 2013.
  • Thus a company could donate 100 per cent of its profits to a political party.
  • Even a loss-making company could make political donations.
  • This is a sure step to legitimise and legalise crony capitalism.

2) Requirement of resolution removed

  • The requirements for a resolution by the board of directors for a company to make donations to political parties and to declare the political donations in the profit and loss accounts were also removed.
  • This would allow keeping the donations secret not only from the public but the owners of the company, the shareholders — ironically, all in the name of transparency.

3) Secrecy in contribution from foreign source

  • Section 29B of the Representation of the People Act, 1951 prohibits all political parties from accepting any contribution from a “foreign source.”
  • Section 3 of the 2010 Foreign Contribution (Regulation) Act bars candidates, legislative members, political parties and party officeholders from accepting foreign contributions.
  • When the High Court of Delhi in 2014 found Congress and BJP having accepted foreign funds in violation of the FCRA 1976, the government passed a retroactive amendment through a 2016 Finance Bill which repealed the 1976 Act and replaced it with the modified 2010 statute.
  • If any foreign country is financing our elections, it will now be a protected secret.

Way forward

  • The Supreme Court’s concern about the possibility of misuse of funds is very pertinent.
  • The EC has been demanding that a law be passed to make political parties liable to get their accounts audited by an auditor from a panel suggested by the CAG or EC.
  • If the government don’t want to abolish the electoral bond scheme it should just make changes to it to disclose the donor and the recipient.
  • Another alternative is to do away with private fund collection altogether and replace it with public funding of political parties.
  • This is not likely to be more than Rs 10,000 crore every five years, if we were to go by the entire collection all the parties make together.
  • Another feasible option is to establish a National Election Fund to which all donations could be directed.
  • This would take care of the imaginary fear of political reprisal of the donors. 

Consider the question “What were the changes introduced in various Acts for the introduction of the electoral bond scheme? What are the issues with these changes?”


We must not forget the finance minister’s opening statement in the 2017 Budget speech that “without transparency of political funding, free and fair elections are not possible”.

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