Political Parties Funding: Helping Big Money in Politics

Prakash Karat

THE finance minister in the union budget has admitted that there is no transparent method of funding political parties in the country. In order to rectify this he has proposed some measures “to cleanse the system of political funding in India”. For this, three steps are proposed:

(i)                               The maximum amount of cash donation that a political party can receive will be Rs 2000 from a person;

(ii)                             Donation above this amount will have to be made by cheques or digital mode; and

(iii)                            The issuance of electoral bonds whereby donors can purchase bonds from authorised banks against cheques or digital payments only. These bonds will be redeemable only in the designated account of a registered political party within the prescribed time limit from issuance of the bond.

Taken together these measures will not help curb the main problem of political funding which is the enormous amounts of illegal or black money which is contributed to the major political parties especially for use in elections.

In fact the measures proposed are regressive and will not in any way stem the use of black money in politics and elections.

At present the law requires that a political party which receives Rs 20,000 and above should provide details of the name of the donor, his or her address and PAN number. The proposed change is to limit cash donation from a person upto Rs 2000. This will have no utility in checking the receipt of unaccounted money. It will only lead to a proliferation of cash donations below the Rs 2000 limit.

Instead, it would have been better to have provided that any donation of Rs 2000 and above whether by cash, cheque or digital payment to be declared with the details as it is now in the case of Rs 20,000.

The concept of electoral bonds as stated in the budget speech contradicts the very aim of evolving a transparent method of funding. According to the finance minister “Donors have also expressed their reluctance in donating by cheques or other transparent methods as it would disclose their identity and entail adverse consequences.”

This is the rationale given by corporates and businessmen for making donations of unaccounted or black money. By the electoral bond scheme, the identity of the donor will not be revealed. It is proposed to amend the Income Tax Act whereby a political party need not declare the source of the donation through electoral bonds.

What this amounts to is that donations of Rs 20,000 and above if routed through electoral bonds, will not entail providing the details of the donation by the donor in the returns filed by the political party to the income tax department.

So instead of ensuring transparency in political funding, the Modi government is providing a route for large scale donations through electoral bonds which will be kept anonymous. There will be an exception – the government of the day can get to know from the banks who has purchased the election bonds.

Though the exact details of the type of bonds are unclear there is every possibility of misuse of this instrument if they are in the nature of bearer bonds. Ways and means will be found to funnel money through such bonds and evade taxes. There can be enterprising ways in which the bonds can be used for political party-cum-business operations.

The proposed changes are being incorporated as amendments to the respective laws through the finance bill. By doing so, the government is trying to get these changes made through a money bill. This would mean that the Rajya Sabha will not have a say on the question of political funding and electoral expenses of political parties.

The amendments proposed to the IT Act and the Representation of People Act do not deal with matters related to the Consolidated Fund of India or the imposition of taxes. Therefore they cannot be brought under the “money bill” criteria. This is a misuse of the concept of money bill to bypass the Rajya Sabha.

The government’s claim that it is making efforts to cleanse political funding is suspect and hypocritical. Last year in the union budget 2016-17, an amendment to the Foreign Contribution Regulation Act was introduced through the finance bill. The purpose of the amendment was to treat contributions by Indian subsidiaries of foreign companies as Indian source of funds.

This amendment with retrospective effect was meant to nullify a Delhi High Court judgment which had held both the BJP and the Congress guilty of receiving foreign funds in contravention of the law. The donations had come from a foreign company, Vedanta, which is headquartered in London.

By this amendment passed again by the money bill route it is now legal for political parties to receive funds from Indian subsidiaries of multinational corporations.

Now with the latest measure MNCs can contribute funds to political parties through electoral bonds with no questions asked. The Modi government is in fact allowing foreign direct investment (FDI) in political parties.

There is a class aspect to the whole question of political funding and election expenditure. Neither the government, nor the Election Commission are against big money flooding the political parties and the electoral system. Their only concern is that it should be done legitimately.

Both the BJP and the Congress are for corporate funding of political parties. They do not want any limits to be set on the expenditure incurred during elections. For instance, in the 2014 Lok Sabha elections, the BJP spent hundreds of crores of rupees on advertisements in the print and visual media. Similarly, huge amounts are spent in chartering private planes and helicopters.

The CPI(M), on the other hand is against corporates’ financing political parties. If needed, they can contribute money to a fund supervised by the Election Commission which can provide State funding for parties during elections.

In the prevailing neo-liberal ethics, all the bourgeois parties would like to resort to money power to fight elections. Unfortunately, the Election Commission does not discourage use of money power and wants to crack down on small donations in cash from the ordinary people. The Election Commission prohibits use of posters, banners for election propaganda which hamper the electioneering by parties with limited financial resources, but encourages parties to advertise on television and print media and put up expensive hoardings.

The same class attitude is displayed by NGOs like the Association of Democratic Reforms which characterise mass collections by hundis, boxes, or, buckets as money from “unknown” sources. Whereas nothing is being done to check huge amounts of money received by political parties “under the table” and outside the formal accounting procedures.

There is an urgent need for overall electoral reforms which should include reforms in the funding of political parties. To begin with the following steps need to be taken:

(1)                 Set a limit of overall expenditure by political parties on various heads during elections. For instance, in a general election, a political party can spend Rs 500 crore on advertisements which is considered legitimate and no question will be asked. Limits on election expenditure have to be set if the role of black money in elections is to be curbed.

(2)                 An amendment in the Representation of People Act should be made in the relevant clauses to include expenditure incurred by the party on behalf of its candidate in the expenditure of the candidate.

(3)                 All contributions of Rs 2000 and above to political parties should be declared with details of the name of the donor and other details.

(4)                 If electoral bonds are to be issued then the party receiving them has to declare it with full details.

(5)                 Provision of State funding for recognised political parties in the form of publicity material, manifestos, fuel for transport and so on.

(6)                 Strict action against those who donate black money to political parties and penalties on political parties for receiving such money.

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