From UPSC perspective, the following things are important :
Prelims level : Electoral Bonds
Mains level : Limitations of electoral bonds and electoral funding laws
Election Commission and the Reserve Bank of India had expressed reservations about the Electoral Bonds scheme.
- In 2017, then RBI Governor wrote to the Finance Minister that “allowing any entity other than the central bank to issue bearer bonds is fraught with considerable risk.”
- The EC warned that this would allow illegal foreign funds to be routed to political parties.
- There is no other country in the world where such a scheme exists.
- The scheme was passed in the Lok Sabha as part of the Finance Bill so that it could bypass Rajya Sabha.
Importance of Electoral Bonds – Money
- Money plays a larger role in elections. India spends more on elections than the U.S. with a per capita GDP of 3% of the U.S.
- Sustaining victory over several elections requires funds.
- To reach voters, candidates and parties use hoardings and advertisements on printed, electronic and social media. They hold election rallies. They travel and have to pay party workers.
- There is the added expenditure of buying votes through the distribution of gifts, money, liquor and so on.
- Some countries have public funding of elections.
- Campaign funding laws and reforms are a constantly evolving subject internationally. They focus on public funding, limits on expenditure, limits on donations, transparency in funding and penalties for non-compliance.
- The gaps between the stated purpose of the electoral bonds scheme and the law are glaring.
- The voter does not know who is funding whom through electoral bonds.
- This is supposed to protect the donors from harassment from the authorities.
- Harassment by the party in power through law enforcement agencies is well known. The bank knows the purchaser of the bonds as well as the party that cashed it.
- The law agencies can obtain this information whenever they want.
- Ruling party use this to demand donations for itself, prevent donations to others, and use the law enforcement agencies to harass those who donate to rival parties.
- A large corporate could buy the government using electoral bonds.
- The ruling party gets nearly all the funds.
- If big money entirely funds elections in an opaque way, democracy will not exist.
Other electoral funding challenges
- India continues to have spending limits. Hardly any winning candidate sticks to it.
- Black money cannot be used to buy electoral bonds. However, black money can be used outside the scheme during elections.
- The reduction in cash donations from ₹20,000 to ₹2,000 is not good enough. There are parties with hundreds of crores of declared income who claim that all the funds were received from small cash donations of ₹100 or less.
- ₹2,000 notes printed after demonetisation are being hoarded.
- Electoral bonds cannot eliminate black money.
- Any political party can voluntarily choose to disclose its funds and sources.
- There is no law that prevents them from doing so.
- They can also state publicly that they will henceforth not use black money.
- We need to benchmark ourselves against the best international practices and laws on campaign funding.
- Complete transparency in all funding.
- Political parties need to be under the Right to Information Act.
- There must be spending limits as well as donation limits and strict penalties for flouting rules and the law.
- Public funding needs to be examined and introduced with proper checks and balances.
- Voters need to demand changes and we need voter awareness campaigns.
- The electoral bonds scheme needs to be scrapped.