May 22, 2016

Foreign Funds for Political Parties: Dangerous Step

THE BJP government has taken the dangerous step to allow foreign companies to fund political parties in India.  Till now, as per the Foreign Contribution (Regulation) Act (FCRA), political parties were prohibited from receiving foreign money and this included foreign companies and their subsidiaries in India.

So far, a company operating in India was considered foreign, if 51 percent or more of its share capital was from a foreign source. It is this clause in the FCRA which has been amended in the Finance Bill to state that even if the foreign investment is more than 50 percent, as long as the foreign capital is within the limits specified for foreign investments under the Foreign Exchange Management Act or the rules and regulations, then that company will not be deemed to be foreign.  What this means is that if foreign capital investment of 74 percent is allowed in a sector, like the telecom sector, then a company with majority foreign shareholding will not be treated as a foreign company.  Thus, Vodafone, a telecom company, will be treated as an Indian company!

Now all the multinational corporations operating in India like IBM, Samsung, General Motors and so on can finance parties.  This will be in addition to the donations by Indian corporates which are legal.

By making such a blanket change, all foreign enterprises and multinational companies will be considered to be Indian and free to donate funds to recognised political parties.  This will have grave repercussions for the democratic system and impact on the political party system itself.  It will lead to direct intervention by MNCs in the political system and subvert the integrity of parliamentary democracy.

By such a change, donations to NGOs by foreign companies will also become legal. It will thus knock the bottom of the FCRA which was meant to regulate the flow of foreign funds to various public activities with the aim of protecting the integrity and sovereignty of the country. 

That this amendment has been done to facilitate the exoneration of the BJP from the  charge of violating the law by receiving funds from a foreign company, makes it all the more condemnable.  The Delhi High Court had in a verdict in 2014, on a case involving receipt of foreign contributions, held that the Congress and BJP had violated provisions banning donations under the FCRA. These parties had received donations from the subsidiary of a foreign company, Vedanta.  This verdict was challenged by both parties in the Supreme Court, where the case is pending.  Further, the amendment to the FCRA, through the Finance Bill, has been made with retrospective effect from 2010, to help both these parties.

Using the Finance Bill to smuggle in an amendment to the FCRA and also change the definition of foreign company in other laws is another instance of the dubious legislative practice the Modi government is resorting to.  Earlier, it got the Aadhar Bill through, by getting it declared as a “Money Bill” by the speaker.

The legalising of foreign company donations is an anti-national, anti-democratic step. The Modi government has unleashed a pernicious foreign influence to pollute the political parties and subvert democracy.

All democratic forces must work unitedly to see that this harmful amendment is annulled.