Electoral Bonds Introduced To “Protect” Donors Of Political Parties: A New Source Of Black Money

Pooja Chaudhuri

November 27th, 2017

Electoral Bonds

Courtesy: Counterview | Image Credit: Quora

In separate replies to a Right To Information (RTI) plea, the Union Finance Ministry, the Election Commission of India (ECI) and the Reserve Bank of India (RBI) have all claimed to have no information about the Electoral Bond (EB) scheme, or who influenced the Centre to launch such a controversial scheme, reports Counterview.  

The RTI was filed by Venkatesh Nayak, activist and programme coordinator at Commonwealth Human Rights Initiative.

What Are Electoral Bonds?

Introduced in the Finance Minister’s budget speech this year as part of a Money Bill, Electoral Bonds upped the ante on campaign finance by eliminating cap on political donations. Previously, companies were barred from donating more than 7.5% of their average net profit to a political party.

The change brought about by amending the Companies Act, 2013 also removes the requirement that made it mandatory for a company to disclose the name of the party to which the donation has been made.

EB was introduced by amending the Reserve Bank of India Act, allowing the RBI to sell the bonds through notified banks for specific denominations. Anyone who wishes to make a donation to their preferred party can buy these bonds by making payments digitally or through a cheque. Once bought, it can be gifted to a registered political party as bearer bonds.

Bearer bonds are different from the more common types of investment securities due to the absence of principal and interest and the veil of anonymity they carry within themselves. No records are kept of the owner or the transactions involving ownership. Anyone who physically holds the mere paper owns the instrument.

A political party can convert these bonds back into money via their bank accounts. The bank account must be the one notified to the EC and the bonds must be redeemed within a specified time period.

A donor needn’t reveal his identity and the political party wouldn’t be required by law to ask questions.

Under Section 13A of the Income Tax (IT) Act, political parties enjoy 100% tax exemption from all sources of income.

RTI Revelations

Nayak filed the RTI plea with the Department of Economic Affairs (DEA), Ministry of Finance. He sought to find answers to the following questions:

  1. Total number of representations or petitions or communications received by the Government of India from donors regarding the need for maintaining confidentiality of their identity while making donations to political parties;
  2. Photocopy of these representations or petitions or communication; and
  3. Photocopy of the Draft Electoral Bond Scheme prepared by the department for consultation with RBI and ECI.

After the DEA refused to provide answers to Nayak, it transferred the RTI application to the EC and the Department of Financial Services (DFS), Ministry of Finance, reasoning that the subject matter of EB does not pertain to it.

“Eventually, both ECI and RBI replied that they did not have any information sought in the RTI application”, Nayak said in an email alert to Counterview, adding, “It appears that the records relating to the draft EB scheme are themselves being held in great secrecy. Nobody wants to acknowledge that they did any work on it.”

Electoral Bonds Painted In The Govt’s Favourite Colour: Black

Since the current government came to power in 2014, it promised “acche din”, followed by ill-conceived economic policies, the greatest being demonetisation. The Modi-led government termed it as a fight against black money, but 99% of the demonetised notes returned to the banks.

The government’s cleverly designed EB scheme provides a safe haven to illegally accumulated money. The Finance Bill amended the Representation of People’s Act (which governs elections in India) to ensure that electoral bonds are anonymous. Since it was introduced as a money bill, the Lok Sabha passed it with ease, without accepting any recommendations from the Rajya Sabha (where the BJP is yet to have a majority).

Last month, 13.4 million leaked paradise papers disclosed that India ranks 19th among 180 nations, in terms of the countries with the maximum wealth hidden in offshore tax havens.

Such money which has evaded tax or has been obtained in an illegal manner can be round-tripped to the country through electoral bonds. The government amended the Foreign Contribution (Regulation) Rules, 2011 (which regulates the flow of foreign contribution to India) to allow political parties to accept donations from foreign companies.  

Calling EB “a sovereign guarantee of donor secrecy for political party funding”, Nayak says, the amendments “remove the obligation of political parties to record and report the identity of EB-style donors to both regulatory bodies, namely, ECI and Income Tax Department.”

Basically, both foreign and domestic companies can make unlimited donations to political parties without the EC or the IT department tracing the money’s origin – giving corporations the power to dictate and run India’s policies.

Why Should We Care?

Because unchecked political donations give a small group of super-rich individuals the right to endlessly donate to either their favourite political party or multiple political parties, thereby cementing their control over whoever wins.

An ADR report released in August revealed that between the financial year 2012-13 to 2015-16, national parties received Rs 355.08 crore from 1,546 donations which did not have addresses and PAN details in the contribution form. 99% of such donations belonged to the BJP.

EB acts as a catalyst for such anonymity and corruption.

Bank ‘X’ knows the identity of the donor, while Bank ‘Y’ knows the identity of the recipient when he encashes the bond. Both the banks report to the RBI.

The RBI is not a constitutionally independent body; the government has the power to direct it and supersede its decisions as and when it deems necessary. Therefore, only the ruling party and nobody else can establish the identity of the donor, including gaining information on which corporations made donations to Opposition parties.

In conclusion, India’s electoral democracy is a puppet in the hands of the BJP. The government justified EB as a scheme that would protect donors from harassment as their identities would be secure. However, not only can the BJP regulate donations to itself and all other parties, it can itself resort to harassment of donors or offer them protection. All the while, keeping voters in eternal darkness about how the political party they are voting for is utilising the anonymous funds.

Former Election Commissioner SY Quraishi suggested an alternative to electoral bonds – a National Electoral Fund where donors can contribute and the accumulated fund would be allocated to political parties depending on the proportion of votes secured. This too would achieve the BJP’s reason for EB – protection of donor identity – in addition to weeding out black money.  

It is evident what the BJP truly desires behind the facade of fighting corruption – to remain in power at the expense of democracy.

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