[op-ed snap] A vote for state funding

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Mains Paper 2: Polity | Salient features of the Representation of People’s Act

From UPSC perspective, the following things are important:

Prelims level: Right to Information (RTI) Act, Central Information Commission, Electoral bonds, Indrajit Gupta Committee

Mains level: State funding of elections


Context

Election expenditures in India

  1. Indian elections are the world’s biggest exercise in democracy but also among the most expensive
  2. Corporate donations constitute the main source of election funding in India which is awash with black money
  3. 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

International best practices

  1. Many countries have partial or full public funding or transparent regulation and financial accountability of political finance
  2. The USA is one such example

Electoral bonds do not ensure transparency

  1. A transparent method of funding political parties is vital to the system of free and fair elections
  2. The concern for transparency in political funding is at complete odds with the electoral bonds scheme notified by the government
  3. 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
  4. All donations given to a party will be accounted for in the balance sheets but without exposing the donor details to the public
  5. The Election Commission (EC), the Income Tax department and the voter would remain in the dark about this donation

Why is this a cause for concern?

  1. Bonds will allow corporate houses to make anonymous donations through banking channels to the party of their choice
  2. This would lead to further opacity in the funding process and further limit oversight and accountability
  3. Opacity of election funding is an area of existential concern for democracies
  4. Anonymity is the very wellspring of institutionalised corruption
  5. Also, the bonds scheme imposes no restrictions on the quantum of corporate donations
  6. Electoral bonds will result in unlimited and undeclared funds going to certain political parties

Provisions that will lead to further misuse of electoral bonds

  1. The maximum limit of 7.5% on the proportion of the profits a company can donate to a political party has been lifted
  2. This opens up the possibility of shell companies being set up specifically to fund parties
  3. Foreign Contribution (Regulation) Act (FCRA) has been amended to allow foreign funding to political parties
  4. Political parties have refused to come under the RTI Act in order to conceal their sources of funding
  5. All of these together will end up strengthening the business-politics nexus

Not as per recommendations for electoral reforms

  1. 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
  2. The bond scheme could provide a backdoor to corporates and other lobbies for shaping public policy to benefit their interests
  3. Policy decisions of political parties and politicians after being elected may be biased in favour of groups that fund them

Reform proposals to reduce high cost of elections

  1. Strong disclosure norms
  2. Strict statutory limits on election expenses and
  3. Ceiling on corporate donations to political parties

Way forward

  1. State funding of elections (in various forms) is a potential solution to this problem
  2. 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
Electoral Reforms In India
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