< Daily Current Affairs & Important Editorials

Electoral Bond Scheme

GS- II >>Polity>> Elections

Context: In 2018, Association of Democratic Rights and Common Cause filed a case in Supreme Court of India with respect to the constitutionality of Electoral Bonds Scheme. After the hearing by Constitution bench, it has recently been reserved for judgement.

About Electoral bonds:

• Electoral bonds are interest free bearer instruments like promissory note. Electoral bonds allow Indian citizens, or a body incorporated in India to purchase these bonds and enables anonymous donations to political parties.
• These are sold in denominations of Rs. 1,000 to Rs. 1 Crore at SBI branches from time to time, political parties can choose to encash the bonds within 15 days of receiving them.
• Electoral bonds can only be used to donate to political parties registered under Section 29A of the Representation of the Peoples Act, 1951, securing at least 1% of the votes polled in the last election to the House of the People or a Legislative Assembly.
• Section 29A of the RPA deals with the registration of associations and bodies as political parties with the Election Commission.

Reasoning behind the scheme:

• To clean the electoral regime: To ‘cleanse the system of political funding in the country’ and bring about ‘transparency in electoral funding in India’.
• Bring transparency: It brings a transparent method of funding political parties is vital to the system of free and fair election. Earlier, political parties received most of their funds through anonymous donations shown in cash.
• Curbing black money: The scheme curbs the circulation of black money by following means payments made for the issuance of the electoral bonds are accepted only by means of a demand draft, cheque or through the Electronic Clearing System or direct debit to the buyers’ account.
• Limiting the time for which the bond is valid ensures that the bonds do not become a parallel currency.
• Prevent political victimization: By ensuring non-disclosure of the identity of donors, it prevents the victimization of donors by other parties.

Challenges in political funding:

• Identity of donor: The identity of donor remains unknown, which goes against transparency of electoral funding.
• No upper limit for donation: It increases corruption and red tapism.
• Exemption allowed under RTI Act: Exemption allowed in Section 8 of RTI Act results in frivolous donations from unaccounted sources. Further it strengthens the corporate-political nexus and results in quid pro quo scenario post elections.
• 3 years clause removed: Prohibition of donation to be provided only by companies older than 3 years is removed. This has led to formation of Shell Companies to route funds as part of electoral finance.
• Restrictions removed: Restrictions on corporations for donating more than 7.5% of their average net profit over the previous 3 years to the Political parties removed.
• FCRA Amendment (2018): It enables political parties to accept donations from foreign companies viz. Indian elections may have foreign influence.

Need for regulating the political funding:

• Need for disclosure is essential because political parties are the pillars of representative democracy.
• Transparent accounting is the key to preserving citizen’s trust in parties.
• To uphold rule of law and remove corruption in electoral and political process.
• Unchecked donations bring disrepute to the democratic process.
• Outcome of elections should not depend on which party has deeper pockets.
• Separation of wealth from power is basic condition for a democratic system.

International best practices:

• USA: The Publicity Act (1910) mandates the disclosure of funding of political parties and candidates. It also imposes limits on political contributions.
• United Kingdom: The political parties’ elections and referendum act 2000, provides certain restrictions on political parties from taking donations and loans and there are requirements for declaration of sources of donations.
• European Union: In 2014, EU enacted an act to set up limits on value of donations that parties can accept in a year and per donor.
• Large donations must be immediately reported to the authorities.
• Parties are also required to file annual financial statements of revenue and expenditure, list of donors and corresponding donations.
• France: Bans on donations from foreign entities, corporations, trade unions and anonymous donors.
• Public funding available for parties based on the share of votes in the previous election which is allocated proportionally.

Way forward:

• Separate legislation: Need of separate legislation to mandate public disclosure of identity of donors to political parties above a certain limit.
• Making accounts public: Political parties accounts should be made public and reported to the Election Commission to ensure public scrutiny.
• Independent audit: Auditing of accounts of political parties by an independent authority.
• State funding of elections: Wider reforms for state funding of elections can be arrived at through consensus.

Source: indianexpress.com