THE DEATH OF ELECTORAL BONDS

 

 

Electoral bonds were interest-free bearer instruments that were essentially used to donate money anonymously to political parties. Introduced in 2018, they were issued by the State Bank of India (SBI) and are sold in multiples of Rs 1,000, Rs 10,000, Rs 1 lakh, Rs 10 lakh (1 million), and Rs 1 crore (10 million). Since the introduction of the scheme, around 674,250 electoral bonds worth Rs 28,531.5 crore have been printed by the India Security Press, Nashik, between 2019 and 2022.

 

The Supreme Court's unanimous judgment declaring electoral bonds unconstitutional is hardly surprising. The voter has a right to know from where the political parties are getting their money to fight elections and how are they spending it. Though a brain child of the very learned and honest past finance minister Sri Arun Jetley, with the sole intention of protecting the identity of the corporate donors so that they could not be harassed and victimized by parties they did not contribute towards, he and the BJP messed up big time on this one. In 2017 four separate legislations were amended to create electoral bonds and both the Election Commission of India (EC) and the Reserve Bank of India were distinctly uncomfortable with this because the lack of transparency and distinct possibility of money laundering. 

 

History of Election Financing

The issue of corporates donating to political parties was discussed in Parliament way back in 1959 and though the ills of this option on both sides - government coercing the corporates to pay and corporates bribing the government to act in their favour, were discussed, a bill to this effect was passed in 1960. But nine years later in 1969 the government banned these donations for the very same reasons, which they chose to overlook in 1960! Thereafter financing of elections became really murky with cash filled suitcases, black money, drug money and hawala money all finding way to finance elections.

 

While the intention behind the electoral bonds was to solve this earlier problem of massive amount of cash and black money used to finance elections which resulted in politicians becoming the public face of the underworld and the corrupt, what it achieved was far from ideal. By keeping the information on donors secret it did not allow voters to deduce any quid pro quo between donations and policies of parties in power. Electoral bonds thus could succeed in creating a clique of corporate king makers who could unduly influence policy making. Thus they had the potential of surrendering the power of decision making to corporate donors, who then could manipulate the economy.

 

Bonds protected the political affiliation of the corporate

While information about the donor Corporeity’s political affiliation was protected by right to privacy, the question that was bothering us was that can this lack of transparency be allowed to infringe upon the voter's right to information? The donor corporate knows that they have paid for a particular party, the government through its State Bank of India knows which Corporate is paying how much to which party but the voter knows nothing about these transactions! The right to information of the citizen to the identity of donor may tell them if the Corporate is being unduly preferred and that in turn may affect their choice of voting.

 

These Electoral Bonds were not squeaky clean

This seemingly innocuous amendment to the Representation of the People Act of 1951 took away the element of probity, rectitude, transparency and independence from our elections. There are many more problems with these bonds because of this lack of transparency. The person purchasing these bonds could be funded directly or indirectly by other entities - from home or from overseas. Once purchased, these bonds could be traded, again secretly in anonymity. So trails of source of political funding could get real murky particularly with no less than 2,597 Registered Unrecognized Political Parties (RUPP) in India which can act as conduits for untraceable donations.

 

Once the political party encashed these electoral bonds, they need not use the money only for election purposes. How fair is that? When we have legal provisions limiting election expenditure why should there be no cap on receiving funding through these bonds?  What will this money be used if not for fighting elections? Will it be used for pre election buying vote for cash? Will it be used for post election horse trading?

 

The Supreme Court described the scheme as “unconstitutional”. It also directed the state-run State Bank of India (SBI) to halt issuing the bonds, furnish identity details of those who bought them, and provide information about bonds redeemed by each political party. The information will be made public on the website of the Election Commission of India. The SBI is the only organization authorized to issue the bonds under the scheme.

 

It is already known that the Bharatiya Janata Party (BJP) has received ₹1,294.14 crore (12,941.4 million) through electoral bonds in 2022-23, which was nearly 54% of its total income during the year, and seven times higher than that of its main rival, the Congress party which received only ₹ 171.02 crores (1,710.2 million) . In the last general election the victory of the ruling NDA has been of such landslide nature that these bonds may not have changed the results, but why should even an iota of opacity remain in the election funding process?

 

While I would be the first to admit that transparency alone cannot ensure free and fair elections it can surely dismiss ant linkages between donations and policy favours. But I dare say that this same transparency will perhaps not be able to protect corporates who fund parties that are not in power. Political vendetta against such corporates is already amply evident in the U.S where Donald Trump is threatening donors who are helping Nikki Haley. It won't take long to reach our shores and government agencies could start hounding corporates financing opposition parties.

 

 

Are we taking a wrong step backwards?

The demise of the electoral bonds may turn out to be a 'bad' decision if now political parties move to the old system, which allowed cash donations and the source of money was not known. Hawala operators, smugglers, extortionists all were all poll financers once upon a time in not so distant past and this decision can send the elections back in their laps. How will this practice of ‘suitcases of illicit cash’ bring transparency, which the Supreme Court feels is necessary? Did voters know who gave money earlier? And how do we know that this illicit cash is not drug money or illicit arms money. So have we once again opened to doors to both black money and red money in our elections? Jag Suraiya rightly wonders if the flip side of ‘crony capitalism’ is ‘pally politicization’!

 

An alternate method of funding elections

In one election cycle of 5 years, one Lok Sabha and around 30 Vidhan Sabha polls, total of ₹ 85,000-90,000 crore or 850 to 900 billion(estimate) is spent. We need to find a safe and transparent way of arranging this money. Instead of paying by electoral bonds to a particular party corporate can fund a common election fund, which then can be distributed among political parties depending upon their vote percentage. Donations could be given to political parties through cheques or electronic transfers (Section 80GGC Income Tax exemption), sale of coupons, crowd-funding and corporate donations. Alternatively, the government can budget for this amount by assigning a percentage of taxes collected for this fund. Electoral spending should be closely scrutinized and defaulters disqualified from the electoral process for a five year term. Political parties should develop a living database of political donations which should be available on their website for inspection by the EC as well as the public. The U.S does it and we can too.

 

The running budget for the EC is only ₹. 300 crore (30 million), not enough to conduct elections and combat state interference and political pressures. More money will bring more autonomy. Like the Supreme Court, the CAG and the UPSC the E.C's expenditure should be changed to the consolidated fund of India. This will make the E.C more powerful and our elections more representative.

 

The battle ahead

Two issues that bother a very unfortunate minority of our country, the tax payers, needs urgent attention of the courts. Political parties should be designated as public authorities under RTI Act and politicians should be held accountable for squandering tax-payers' money. Freebies, free power, loan waivers and MSP for all crops irrespective of their quality and our need are all examples of government misuse of the most productive minority's resources and trust. When will the Supreme Court legislate on these maladies?

 

Exorbitant election expenditure prohibits qualified and meritorious candidates from fighting elections. Candidates in parliamentary elections can today spend up to ₹ 95 lacs (9.5 million) in large states and ₹ 75 lacs (7.5 million) in smaller states and Union Territories and the parties invariably end up spending many times more and lying to the Election Commission. These individuals and their political parties should have their election cancelled and they must be forced to go for a repeat and fairer election.