How our political parties should hit reform path

The need of the hour is pushing for financial transparency and accountability within parties

Neeti Biyani | June 19, 2014




The life of the democratic state is built upon the party system,” Harold J Laski said in his classic text, A Grammar of Politics. Political parties, despite being non-governmental entities, are the means through which a modern, democratic nation-state is operationalised. Political parties, by way of representing the populace in parliament and state assemblies, reflect various shades of opinion, thereby giving shape to people’s political aspirations and beliefs. Political parties are thus the building blocks of a constitutional democracy. The central information commission of India (CIC), in one of its judgments held that political parties are “responsible for the growth and development of the society and the nation. Political parties affect the lives of citizens, directly or indirectly, in every conceivable way and are continuously engaged in performing public duty. It is, therefore, important that they became accountable to the public.”

In this context, the election commission of India (ECI), on August 30 2013, sought consultation with all 53 recognised political parties, having issued ten guidelines to them regarding the need to increase financial transparency and accountability. The ECI voiced its concerns in its letter to political parties, saying that it felt that the undue power of money could be curbed in elections if guidelines were established which would ensure financial transparency and accountability on the part of political parties. These guidelines are as follows:
1. The responsibility of maintaining the books of accounts of the party at all levels should be vested in the treasurer of the party, or a person authorised by the party.

2. The treasurer of the political party should maintain consolidated accounts at the central party headquarters (including state and local units) as required by audit purposes, conforming to standards issued by the Institute of Chartered Accountants of India (ICAI).

3. Appropriate acknowledgement/ receipt should be issued for every amount of contribution or donation received by political parties, and details should be maintained according to accounting standards.

4. All donations received should be deposited in the political parties’ bank accounts within a reasonable amount of time.

5. The treasurer should ensure that all funds raised for the party are used only for party activities, as enshrined in the party rules and constitution.

6. All lump-sum amounts given to candidates for their election campaign expenses should be given through account payee cheques, draft, RTGS, NEFT or internet transfer. It should be ensured that the amount does not exceed the ceiling prescribed for candidates. The party should also obtain a utilisation certificate from the candidates for funds disbursed to them.

7. The treasurer should ensure that any payment or aggregate of payments made from the party account to any person, company or agency exceeding Rs. 20,000 in a day is done only by account payee cheque, draft, RTGS, NEFT or internet transfer.

8. The party should ensure that any donation or contribution from a person or company exceeding '20,000 in a financial year is received through account payee cheque, draft, RTGS, NEFT or internet transfer.

9. During the election process, the political parties may ensure that any party candidate or worker does not carry party funds in cash, exceeding a specified amount.

10. Political parties should get their accounts audited for every financial year and submit a copy of the audited accounts to the ECI before September 30, or before the due date for furnishing return of income of that financial year along with their contribution report.

A total of 17 political parties responded to the ECI guidelines. Five out of six national parties responded to the ECI guidelines, the only exception being the BJP, which did not even acknowledge the receipt of the ECI’s letter. BSP cited the lack of time due to the ongoing state assembly elections; thereby acknowledging the receipt of the guidelines but without stating its position on them. Three national parties, NCP, CPI and CPM, and five recognised parties – IUML, JVM-P, SAD, SDF and Shiv Sena – agreed with the guidelines. While the All India NR Congress (AINRC) was the only party to give additional suggestions to the ECI, DMK, DMDK and ZNP only partially agreed with the guidelines. JD(U) and SP maintained that it would create undue hardship to maintain the details of persons contributing to their respective parties in excess of Rs. 1,000 and that this limit should be increased to Rs. 20,000 and Rs. 50,000 respectively.

The parties which gave detailed responses and arguments include the Congress, AIADMK and AITC (that is, Trinamool Congress). Their responses to all the guidelines are summarised in the table.

A few common threads of responses were also observed in the replies furnished by the political parties to the ECI. Several political parties suggested that the ceiling of Rs. 20,000 for payments that can be made in cash by political parties should be increased, taking into account the declining purchasing power of the rupee, inflation and urgent requirements on part of the parties. A few political parties also cited the lack of banking facilities, especially in rural areas, as the reason behind the candidates carrying cash for election campaign purposes. The CPI and CPM stated that acknowledging donations and collections during hundi meetings, mass assemblies, functions or camps would be difficult, as many such collections were very small and done at large gatherings. Political parties also maintained that obtaining a utilisation certificate from candidates would increase and even duplicate their paperwork, since candidates are anyway expected to submit an account of their expenses to the ECI. A majority of political parties, which responded, agreed to have their accounts audited and submit a copy of the same to the ECI.

According to the IT returns submitted by them, the total income of the six national political parties between FY 2004-05 and 2011-12 is Rs. 4,895.96 crore. Of this, a whopping Rs. 3,674.50 crores or 75.05% comes from unknown sources. The BJP, the only national party not to have responded to the ECI, has not declared the sources for 73.04% of its income between FY 2004-05 and 2011-12, which stands at a sum of Rs. 952.58 crore. BSP, which requested the ECI for more time, has declared that it has not received even one donation above Rs. 20,000/- between FY 2004-05 and 2011-12, and therefore has not revealed the names of any donors. Moreover, of BSP’s total income of Rs. 497.44 crore between FY 2004-05 and 2011-12, Rs. 307.31 crore (or 61.78%) are from unknown sources.

There are already specific formats provided to the political parties in which they are expected to submit their donations report (Form 24A). Similarly, at the time of registration, political parties commit to submit a copy of their annual audited reports, details of any internal elections, change of address etc. Through various RTIs to the ECI, ADR has observed that even these mandatory procedures have not been followed by the parties. Hence, apart from introducing new guidelines on financial transparency, the need of the hour is to have concrete regulations governing the functioning of political parties, including their sources of income, a ceiling on their election expenditure and details of all donors. It is disheartening to see that out of 53 parties, only 17 parties have responded to the circulated guidelines by the ECI.

Similar to the recent supreme court judgment dated March 10, 2013 which gave the ECI powers under Section 10A of Representation of People’s Act to disqualify candidates for filing incorrect election expenditure statements, the commission should be given the authority to penalise defaulting parties. ADR believes that promoting financial transparency and accountability on part of political parties will only help strengthen our democracy. 

Biyani is a researcher with the Association for Democratic Reforms (ADR)

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