[Answered] Argue whether electoral bonds are an effective mechanism to conduct fair and transparent elections? Suggest some measures to improve transparency in electoral funding to political parties.

Electoral bonds are interest-free bearer instruments (like Promissory Notes) that allow donations to political parties using banks as an intermediary. The general public can also issue these bonds to fund eligible political parties.

An effective mechanism:

• All electoral bonds issued are to be redeemed by a bank account that the Election Commission of India has disclosed; hence the malpractice is strengthened.
• The widespread use of electoral bonds can help to hold back political parties who operate with the goal of simply collecting funds from the public. It is because only registered parties attaining at least 1% of the votes in the general election can receive electoral funding.
• Electoral bonds work with the government goal to make election funding entirely safe and digitized. Therefore, any donation going above RS 2000 is not legally required to be in the form of electoral bonds and cheques.
• All transactions of electoral bonds are carried out via cheques or digitally.

Issues:

• Crony capitalism:  The higher value of the bonds being purchased indicates that the electoral bonds are being purchased by corporates rather than individuals that reflects corporate influence.
• Delayed audit reports: The delay & non-compliance by political parties defeat the purpose of any such reporting.
• Foreign funding: The Election Commission has observed that with the removal of the cap on foreign funding, electoral bonds invite foreign corporate powers to impact Indian politics.
• Tax evasion: Electoral bonds provide secrecy and will encourage round tripping i.e. rerouting illegal money that originates in India, back into the country through a tax haven.

Measures to improve transparency in electoral funding:

• An alternative to electoral bonds is a National Electoral Fundto which all donors can contribute. There is need to educate the Voters through awareness campaigns especially about the ill-effects of money power during elections.
• Venkatachaliah Committee Report (2002) recommended strict regulatory frameworks for auditing and disclosure of party income and expenditure along with state funding. In the absence of such frameworks, state funding in India cannot be effective.
• Strengthening the role of Election Commission by enabling suitable laws and creating healthy political environment. The EC should increase its own capacity in terms of empowering staff and developing infrastructural and logistical strength.

Bringing about effective electoral finance reform in India requires political will. Measures like electoral bonds will have limited effectiveness, unless they are not accompanied by other necessary reforms.