Arun Jaitley’s #UnionBudget2017 does little to clean up political funding

It’s being hailed as a “milestone” in cleaning up political corruption and whitening of political funding, but is Union finance minister Arun Jaitley’s move – to cap undeclared cash donations to political parties at Rs 2,000, a steep fall from Rs 20,000 hitherto – such a big deal?

Jaitley, in the wake of Narendra Modi-driven demonetisation and its attendant “surgical strike on black money”, had been under pressure to grandstand and show that the ruling BJP in the Centre is serious about cleaning up its own stables, even as it tries to wipe out dirty money from the system. Hence, during the Union Budget today, when the FM declared that the maximum amount of cash donations a party can receive from any “one source” would be Rs 2,000, it appeared that the BJP government is indeed taking its anti-corruption narrative very seriously.

However, that’s not quite the case. Simply because it is irrelevant where the “cap” of undeclared cash donations is set. The moot point is that it is undeclared and unaccountable. If the donor remains anonymous, whether the cap in undeclared and unaccountable cash to parties is Rs 20,000 or Rs 2,000 is simply immaterial.

Black money and political funding

Political financing has been the elephant in the room as far as corruption in India, as well as worldwide, is concerned. Whether though under-the-table corporate funding, siphoning off money from bloated state schemes and funds, or ponzi schemes and chit funds , ill-gotten wealth was disguised by political parties of all hues as cash donations from supporters and volunteers who would like to remain anonymous.

Hitherto, under Section 29C of the Representation of the People Act, 1951, the cash donation of up to Rs 20,000 didn’t need any declaration of source. This meant that the political parties were bound by law to submit details and declare income to the Election Commission before an election, whether parliamentary, Assembly, or municipal and civic polls, of only that amount which was above board. That is above the Rs 20,000 limit, whether paid in cheque or cash, or by other means, directly into the party account.

For example, the BSP showed that all its cash donations, between 2014 to 2015, were under the limit of Rs 20,000, and therefore did not need to declare the sources. On the other hand, AAP was the only political party to declare details of its donations received below Rs 20,000, as shown in a report released by the Association for Democratic Reforms and National Election Watch.   

This makes it quite clear that it’s not the cap that would determine whether the government actually wants to clean up political funding: it’s the declaration of the source to make every rupee accountable, traceable and cut off the inflow of dirty money into politics.    

Why Rs 2,000 limit wouldn’t matter

Given that political parties are already adept at creating hundreds of thousands of fictitious accounts to show cash donations in backdated receipt, actual and impactful auditing of party funds remains just a fancy idea with little on-the-ground effect. Parties with wide cadre base, such as the Bharatiya Janata Party, Indian National Congress, the Bahujan Samaj Party, the Samajwadi Party, the Trinamool Congress, as well as regional strongholds such as the Rashtriya Lok Dal, the AIADMK and DMK, among others, have maintained a veritable system of cadre base that churn out reams and reams of fake receipts, cash memos and various other non-accountable items of cash donations, by keeping them strictly below the cash cap.

That this limit has been brought down drastically – from Rs 20,000 to Rs 2,000 – will have little impact on the ground, because all the parties would now have to do is show that the undeclared income is obtained in Rs 2,000 or under. This may mean about ten times more in backdated/ fake receipts, but that’s little price to pay for the high-voltage message of anti-corruption that this move will send out, consolidating and bolstering Narendra Modi’s demonetisation narrative further.

FCRA and corporate funding

The recent coup d’état legalising retrospectively the foreign funding of political parties by tweaking the FCRA (Foreign Contribution Regulation Act, 2011) via the Finance Bill that was passed in the Winter session of Parliament in 2016 is something that has got universal support from across the political spectrum – chiefly the BJP and the Congress – and universal condemnation from transparency activists.

A murky intersection of unethical corporate money, which incidentally was also of foreign origin, that is from the UK-based mining behemoth Vedanta group, had flown into the coffers of both the BJP and the Congress over a period of over half a decade, and the two biggest parties were pulled up by the Delhi H​igh ​C​ourt​ in March 2014.

The tweaking of the FCRA, brought in as a money bill – itself a highly dodgy issue – meant that what constituted as “foreign” under the older FCRA (of 1976 and 2010) was amended to exclude those with under 50 per cent of foreign share capital, even if they had subsidiaries all over the world, or were registered in a foreign country. Hence, contributions from Vedanta, by this new definition, wouldn’t be deemed foreign and illegal, that too retrospectively.

This mutual bailing out and deafening silence over the FCRA tweak last Winter session of Parliament is one such instance of enshrined corruption in political funding.  

Cash isn’t the kingpin

Because politics is such a costly affair, but also because it’s conducted like a thriving business and a front to make money, corruption is both the super villain and the norm in Indian politics. While there’s a cap on election expenditure – Rs 16 lakh for a biggish Assembly constituency and Rs 70 lakh for a parliamentary constituency – no such limit exists on party funding and keeping its enormous machinery greased and working.

The ostentatious display of wealth that became normalised in Lok Sabha polls of 2014, with the BJP allegedly spending over Rs 5,000 crores in advertisement, while delaring an expenditure of Rs 714 crore on the Modi wave, using 3D holographic projections, social media campaigns, television commercials, radio jingles, huge billboards and print media ads, etc, was diametrically at odds with the anti-corruption narrative of Narendra Modi. Ever since, the element of spectacle has become the staple of not just the BJP, but in fact every political party campaign.

This isn’t possible if parties rely only on voluntary contributions, whether declared or undeclared, from supporters. Illicit corporate patronage and highly-padded state/central projects are the chief mechanism to keep the money flowing into party coffers, while showing that most of the money, about 80 per cent of the funds declared on an average, has come from miniscule voluntary contributions.

So, it’s obvious that at the heart of political corruption isn’t the cash that’s circulating in the economy and in fact sustaining much of the informal and agricultural sector, it’s money obtained from corporate, particularly the biggest barons of business, in lieu of legislative favours, or ignoring their many legal breaches, such as tax avoidance and parking profits in offshore tax havens, flouting environmental and land acquisition laws, labour exploitation, among many others. Blaming it all on cash is convenient eyewash, meant to distract from the real sources of corruption.

Until, the focus is on complete and legally enforceable transparency and not on lowering the threshold of undeclared income, political funding will remain a murky issue. 

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