Electoral Funding Lacks Transparency

Synopsis: Electoral funding of political parties lacks transparency. Over the years, many steps are taken by the government to make it a more secret affair.

Introduction:

In 2014, the Delhi High Court held that both main national parties (Congress and BJP) were guilty of accepting donations illegally. They both accepted donations from companies registered in India but whose controlling shareholders was a foreign company. The court held that this is a violation of the Foreign Contribution (Regulation) Act (FCRA), 1976.

• In 2016 and 2018, the government amended the FCRA through the annual Finance Bills. These bills exempt political parties from the scrutiny of funds they have received from abroad since 1976. This enabled new and regressive pathways that afford full anonymity to corporate and foreign political donors.
• In 2017, the amount of anonymous cash donations to political parties was reduced from ₹20,000 to ₹2,000 to ensure greater transparency in political funding. However, the introduction of electoral bonds introduced a new form of anonymity. It led to the funding of thousands of crores of anonymous donations.

Challenges in electoral funding:

• The electoral funding drastically reduced public and legislative oversight. Only the ruling party (via the State Bank of India (SBI)) has a full account of all donations received by electoral bonds. The ruling party can monitor donations to itself and to Opposition parties.
  • Even the Parliament, the Election Commission, and the Opposition parties do not have this information, nor do the public.
• Earlier, only profit-making domestic companies were allowed to contribute to political parties; now loss-making companies can also contribute.
• Earlier, foreign companies or companies where the controlling stake was held by a foreign company, couldn’t contribute. Now they can contribute by a foreign company operating in India or by a foreign entity through a shell company.

Public Interest Litigation (PIL) on Electoral funding:

• For the above-mentioned reasons, the Association of Democratic Reforms filed a case in SC to declare electoral bonds unconstitutional.
• However, SC refused to stay the sale of electoral bonds prior to the Assembly elections in West Bengal and Tamil Nadu.
• Instead, the court listed several documents to establish a paper trail on donations. But this is not practically feasible.

Challenges with cross-checking Electoral funding:

1. The full scale of registered companies is unknown. Even if registered companies filed annual financial statements, many do not disclose political donations.
2. Amount of political donors in the country: According to back-of-the-envelope calculations, there are close to 25 lakh potential donors, comprising just companies and firms. Annual reports of all these companies are not readily accessible on the website of the Ministry of Corporate Affairs.
   • Even if these documents are indeed available in the public domain, they will not specify donations to parties. It is notable that the Finance Bill of 2017 amended Section 182 of the companies act. It removed the requirement for declaring political donations. 
   • Furthermore, even if a firm mentions the total political contributions through electoral bonds, it is not required to specifically name a political party.
3. Political parties also not need to disclose their electoral bond donors. So the cross-checking of donations is not feasible. The only requirement is the submission of annual audit reports with only aggregate amounts by political parties. However, this report too does not provide details of the total amount.

Thus, the SC’s “match the following” suggestion is not practical.

Suggestions for transparent electoral funding:

1. Companies and political parties should exercise moral leadership and voluntarily disclose the identity of recipients and donors. For example, recently, Jharkhand Mukti Morcha disclosed their donors voluntarily.

Conclusion:

The electoral funding gives political power to companies, wealthy individual donors, and foreign entities. They can influence government policies through hidden donations. This dilutes the universal franchise of one voter-one vote. So, electoral funding needs abrupt corrections to ensure universal franchise.

Source: The Hindu