24 April 2023 – The Indian Express

Electoral Bonds Scheme 

Present circumstances:

Recent SBI information provided in response to an RTI request was as follows:

• The New Delhi branch of the State Bank of India redeemed 83% of the Rs 232.10 crore in electoral bonds that were sold during the window of sales in December 2022, with the Mumbai branch selling nearly half of them.
• To cover the commission and printing costs of the Electoral Bonds (EBs) issued to finance political parties, the government has spent Rs 9.53 crore from taxpayer funds. An amount of Rs 1.90 crore, inclusive of GST, has been levied to the government thus far for printing of Electoral Bonds, as was previously disclosed in Reply to RTI by SBI.
• Even two NGOs, Common Cause and the Association for Democratic Reforms (ADR), previously filed a PIL in the SC contesting the scheme and accusing it of “distorting democracy.”

Basic understanding:

• Elections that are free, fair, and transparent are essential to a healthy democracy. Numerous problems, such as the criminalization of politics, caste- and religion-based politics, and the secretive funding of political parties, interfere with the electoral process.
• Accordance to Article 327 of the Indian Constitution.
• Subject to the provisions of this Constitution, Parliament may from time to time by law make provisions regarding all matters relating to, or in connection with, elections to either House of Parliament, to the House or to either House of the Legislature of a State, including the creation of electoral rolls, the delineation of constituencies, and all other matters necessary to ensure the proper constitution of such House or Houses.
• Therefore, in 1951, Parliament created the Representation of People Act (RPA) to promote electoral transparency.

How do election bonds function?

The following statements were made by then-finance minister Arun Jaitley during his address on the 2017 Union Budget:

• The country has not been able to create an open system for financing political parties, which is necessary for the system of free and fair elections, even 70 years after its creation.
• Political parties still receive the majority of their funding in the form of cash from anonymous donations. Therefore, a campaign to purify the Indian political finance system must be launched.
• An electoral bond scheme to “clean the country’s system of political fundraising” was included in the Union Budget for 2017–18.
• In order to contain provisions introducing electoral bonds, the Finance Act of 2017 revised the Reserve Bank of India Act of 1934, the Representation of Peoples Act of 1951, the Income Tax Act of 1961, and the Companies Act.
• Anyone can donate money to recognised political parties via an election bond, a bearer banking instrument. In multiples of 1,000, 10,000, one lakh, ten lakh, and one crore rupees, these bonds are being sold.
• It can be obtained through authorised State Bank of India branches.
• Therefore, a donor must pay the authorised SBI branch with a cheque or another type of electronic payment (cash is not permitted).
• The donor may then donate this bond to one or more political parties of their choosing (if the bond is worth Rs. 1 lakh or more, only one party; otherwise, up to ten).
• In order to cover their election-related expenses, political parties have the option to redeem such bonds within 15 days after receiving them (the bond’s maturity date).
• Throughout the electoral bond process used to finance political parties, it is made sure that the donor’s name is kept a secret.

Which Political Parties Are Eligible to Receive Donations Through Electoral Bonds?

• A political party that received at least 1% of the votes cast in the most recent general election for the House of the People (LS) or the Legislative Assembly and that has been registered in accordance with Section 29A of the Representation of the People Act, 1951 (43 of 1951) is regarded as eligible.
• The amount of money that a political party may accept from unidentified sources was reduced from Rs 20,000 to Rs 2,000 as another measure to promote open political fundraising.

Among those who oppose the electoral bond programme are:

• The electoral bonds programme is primarily criticised for having the exact opposite effect from what it was designed to have, namely promote election financial transparency.
• The fact that these bonds are being sold by a bank that is owned by the government (SBI) enables the government to pinpoint the precise sources of funding for its enemies. Consequently, the government is then given the chance to either target big businesses as punishment for not backing the government or to exert influence over them.

Advantages for the governing party:

• The one (ruling) party that receives the lion’s share of political funding is: The National Campaign for People’s Right to Information claims that more than 75% of all electoral bonds went to the BJP, which is in charge at the federal level.
• Increases Political Funding’s Opacity: Since the bonds increase the anonymity of political donations, the general public is unable to ascertain who is contributing how much money to which political party.
• Furthermore, even though more than 90% of the bonds have been of the highest denomination, one of the reasons for the creation of electoral bonds was to make it simple for the general population to support the political parties of their choice (Rs 1 crore).
• It raises the possibility of misappropriation of corporate funds: Prior to the establishment of the electoral bonds system, a company could donate up to 7.5% of its average net profits over the previous three years to a political party. The government altered the Companies Act to eliminate this restriction, enabling corporate India to accept an unlimited amount of capital.
• After the Foreign Contribution Regulation Act (FCRA) was modified to allow political parties to take donations from foreign companies that own the majority of Indian companies, unrestricted foreign fundraising is now permissible. It could lead to foreign corporations influencing Indian policy.
• Two non-governmental organisations (NGOs), Common Cause and the Association for Democratic Reforms (ADR), have filed legal challenges to the assertion that the introduction of electoral bonds in India is “distorting democracy”:

What advantages come from funding elections?

• Previously, the great majority of political donations were made in secret, and this law limits the amount of money political parties may raise through campaign donations. It opens the door to crony capitalism or the establishment of an unholy alliance between political parties and those who finance illicit activity.
• because the major objective of the plan is to conceal the donor’s identity, it shields the donor from political prosecution. As a result, investigations are conducted to determine whether the provider of political party funds has been a victim, and the individual’s identity is kept a secret at all times.
• As it necessitates payment by check or digital methods while correctly abiding by KYC laws, it is also a potent tactic for eliminating shady political fundraising. It also ensures that the beneficiary political party must disclose its receipt of the funding and provide an explanation of it within a predetermined time frame.

A way to proceed:

• The government’s commitment to promote political funding openness is a positive step forward because it guards against donors facing retaliation for supporting a certain political party.
• However, political parties must act with greater accountability and transparency by making public disclosures of the financial information they have received while maintaining the anonymity of the donors and submitting ITRs on time.
• The commission and printing costs should also be covered in proportion to the quantity of Electoral Bonds (EBs) that the political parties receiving them received.