Why electoral bonds won't clean up political funding
Through the Finance Act, 2017, Union finance minister Arun Jaitley introduced the scheme of "electoral bonds", asserting that it was the Narendra Modi government's solution to cleanse political finance of all the muck that goes into funding Indian elections. While Jaitley faced significant criticism then, not just for the electoral bonds but the Finance Bill/Act 2017 as a whole, its 40 amendments packed into a mega law that tweaked a number of then existing laws, all in the name of transparency, what exactly is the real picture?
On January 2, 2018, once again FM Jaitley spoke of electoral bonds, "explaining" its nuts and bolts, as it were, which were published as a PIB press release, while defending it again on Sunday, January 7, in a social media post. As expected, FM Jaitley kept insisting that electoral bonds were in the interest of the nation and anti-corruption, but voices of reason finding many a problem with the scheme have been sounded since.
What are 'electoral bonds'?
According to the government of India notification, the "electoral bond would be a bearer instrument in the nature of a promissory note and an interest-free banking instrument". The notification added: "Bond(s) would be issued/purchased for any value, in multiples of Rs 1,000, Rs 10,000, Rs 1,00,000, Rs 10,00,000 and Rs 1,00,00,000 from specified branches of the State Bank of India (SBI)."
The PIB notification further stated:
"A citizen of India or a body incorporated in India will be eligible to purchase the bond… The purchaser would be allowed to buy electoral bond(s) only on due fulfilment of all the extant KYC norms and by making payment from a bank account. It will not carry the name of payee. Electoral bonds would have a life of only 15 days during which it can be used for making donation only to the political parties registered under section 29A of the Representation of the Peoples Act, 1951 (43 of 1951) and which secured not less than one per cent of the votes polled in the last general election to the House of the People or a Legislative Assembly."
The notification added: "The electoral bonds under the scheme shall be available for purchase for a period of 10 days each in the months of January, April, July and October, as may be specified by the central government. An additional period of 30 days shall be specified by the central government in the year of the general election to the House of People (Lok Sabha). The electoral bond(s) shall be encashed by an eligible political party only through a designated bank account with the authorised bank."
Opacity via transparency
While the Modi government's anti-cash mode continued with the Centre capping anonymous or pseudonymous cash donations to political parties at Rs 2,000, from the previous cash cap of Rs 20,000, it nevertheless left the disclosure cap unaltered. Instead, through the introduction of electoral bonds, the government tried scoring the transparency points, saying electoral bonds would encourage white money, as transactions would occur via PSU banks, mostly SBI.
However, given the donor doesn't have to disclose which party or candidate s/he's giving its electoral bond money to, while the doner needs to only disclose the amount received via bonds, but nothing more, exactly how is transparency encouraged? While the government's position is that the KYC (know your customer) details collected during the purchase of the electoral bonds and during its encashment would leave the money trail highly visible to these government banks and other bodies, that it would still be wholly unavailable to the tax-paying general public means that this is a skewed transparency we are talking about.
Effectively, electoral bonds leave the money trail and details of who is funding whom wide open to the eyes of the government, and by extension, the ruling party, while depriving the other political parties and the Indian voter of the precious information.
How will the voter, denied the crucial information of corporate-political alliances via funding, make an informed decision about which party or candidate to choose? Won't the ruling party have wildly unfair advantage over the rest in the fray, as well as over the citizen left without significant details of the funding sources of the political parties?
Unlimited anonymous corporate donations
FM Jaitley via the Finance Act, 2017 also sneaked in a crucial amendment that removed the cap of 7.5 per cent of three-year average net profit that corporations and private businesses can donate to political parties. In addition, the amendment also removed the need for companies to declare the name of the political party they made donations to, effectively paving the way for unlimited, anonymous corporate funding of political parties during elections and otherwise.
Now when combined with electoral bonds, the legalising of unlimited anonymous corporate donations does two things. First, while it makes the donations supposedly anonymous, nevertheless, the government of the day gets to know who is funding whom. Second, only the ruling party knows the funds flow, and therefore can exert undue pressure on companies to not fund rivals in the political fray, Opposition parties and rising stars in the political theatre.
Effectively, electoral bonds tilt the political finance balance heavily in favour of the ruling party in the Centre. This, consequently, only bolsters the political-corporate nexus and not challenge it in anyway.
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