Political party funding: Why transparency is the key

Electoral bonds and after: What eminent personalities say about state funding too


Geetanjali Minhas | March 25, 2024 | Mumbai

#Jagdeep Chhokar   #Electoral bonds   #ADR   #Election Commission   #Elections  
(Photo: Governance Now)
(Photo: Governance Now)

On February 15, the five-judge constitution bench of the Supreme Court declared the government's electoral bond scheme as unconstitutional. It also struck down amendments the government had made to facilitate passage of EBs wherein the Finance Act 2017 made amendments to the Representation of the People’s Act, 1951, the Income Tax Act, 1961 and the Companies Act, 2013.

The Supreme Court based its judgment on two issues: It described the level playing field amongst political parties, the logic being that free and fair elections are the bedrock of a democracy and for elections to be free, the level playing field should be same for all contestants. In the present case the level playing field was disturbed by secrecy of bonds or secrecy of donor.

The other issue, the SC observed, was that the scheme violated the voter’s fundamental right to information about the sources of funding for political parties. A voter, in order to make an informed choice on which party should he or she vote for, needs information as also information about from where the party get this money. The judgment stands on these two pillars.

The electoral bonds scheme introduced in January 2018 promised transparency by way of donations and allowed anonymous donations by individuals and organisations to all political parties through banking channels. The scheme allowed unlimited donation to political parties and removed the requirements to declare and maintain a record of donations through electoral bonds. The government was criticised for breeding corruption on the premise of anonymity.

With the top court restoring the status quo that existed before the Finance Act, 2017 was passed in statutes, we go back to the question of the funding of political parties. The issue of the funding of political parties has been long discussed, requiring urgent reforms. Several committees through the years since 1998 have suggested state funding for elections.

Political parties need money to run their offices throughout the country, establishment costs, staff salaries, travel, election campaigns, tours, publicity etc. How should political parties raise funds? How transparent should be funding to political parties or how much transparency is ideal?

Governance Now spoke with three eminent personalities on these issues:    

Transparency had to be forced
Professor Jagdep Chhokar, founder member, trustee ADR, the main petitioner in the EB case 

I have no problem with corporations giving donations to political parties, but it should be done transparently.

That most money goes to BJP was already known as those figures were available from the statement of income and expenditures that political parties give to the Election Commission. However, now the data shows who gave how much money to the BJP or who has donated to which political party.

But it is the belief of people that when money is given in exchange of favour, it is quid pro quo and it is important for people to know of it because they have to decide whether a particular decision or action of the political party is taken to benefit any company or any individual or to benefit the people and the country.

The government reasoned that the donor wants anonymity to avoid vindictive action from the ruling party if donation has been given to an opposition party. But who takes vindictive action? It is the political party. In state A, party X is taking vindictive action. In state B, party Y is taking vindictive action and in state C, party Z is taking vindictive action. So, vindictive action is taken by political parties against the donors of other parties. The only way to solve the problem of vindictive action is that political parties have to accept that people will donate to all parties and they should stop taking vindictive action. But they will not stop. So the stand of the parties is that we will keep taking vindictive action. People or the society should find a solution.

Political parties have to behave responsibly. Therefore, transparency has to be forced. The problem is not created by the corporates. The problem is created by political parties. Of course, corporates may also be partners in this crime – they want to get undue benefit, so they give money. And since they don't want to make it public that the benefit is a return for money, both parties are guilty. So transparency is the only answer, which is what the court has ordered.

The Central Information Commission has said that six national political parties are public authorities under the RTI law but the parties don't follow that direction. For that reason we are in the Supreme Court. Parties have to learn to follow the law of the land.
With the electoral bonds scheme now closed, Indian democracy will be where it was in 2016. Till that time, democracy in India was functioning quite well.
To say that before electoral bonds came Indian democracy was absolutely useless is not correct. At that time too, we were we were trying to make Indian democracy better. There were problems in funding arrangements and we were fighting against them; we were correcting them or trying to correct them which will continue. The only difference was if somebody was caught giving money to political parties it was considered a crime. Electoral bonds made that legal. Now it will be a crime again.

A beginning can be made for state funding of parties
Prithviraj Chavan, former chief minister of Maharashtra, former member of Lok Sabha and Rajya Sabha   

With as many as 5,000 registered political parties, the state funding will not work. First of all, political parties have to be registered, adhering to and running their party as per their own constitution, filing of regular returns to income tax and to election commission authorities. All these things have to be made compulsory.

Registering a new political party has to become a lot more difficult. The national status to a political party could be given as per the formula that is currently in vogue which makes about five-six parties ‘national parties’. Funding should only be provided to national parties and not to the smaller parties, to take part in national elections. If that works, it can be carried further to state-registered parties for assembly elections in the next step.

The first step to try to make sure that national elections are funded through the state exchequer to the percentage of voted polled last time and in that ratio a common minimum should be given to every party. And then top it up with the percentage of votes obtained in the last civil elections. This should be tried for Lok Sabha elections also.

Simultaneously, an attempt should be made to make sure the number of registered parties is in tens, that is, 40-50 or even 100. It will be unwieldy and impractical if everybody wants funding. That will be ridiculous.

So funding should be provided only to the national parties and votes polled in last elections should be the criterion to receive state funds. Some money could be given as per votes polled by national parties.

That could be a beginning. It is not a perfect system like EVMs, it is an evolutionary process (people still don't believe that EVMs are completely transparent). But somewhere a beginning has to be made of actually giving of cash to nationally registered parties on the condition that their accounts will be examined by income tax authorities as any other corporate account.

While parties do not have to pay taxes as per tax provisions, their accounts have to be audited. The source  of funds are to be identified, sources of funds from the corporate sector are to be identified with a limit on cash donations audited by income tax thoroughly just as corporate accounts are audited. Both expenditure and income should be checked and only on that condition should state funds be distributed to national parties. The money should be spent only for recognised political purpose and any money received by the party should be identified.

Party-internal elections are to be held transparently and even if the election commission can be given some role to supervise the party elections, I would not be averse to that, as that too is a process that has to evolve over a period of time.
As long as parties are run as per their own constitutions and office-bearers are elected democratically as per their own constitutions they should be eligible for receiving state funds.

Lot more needs to be done. Free coupons for petrol, diesel, advertisements, etc. could be provided and cash should be given to the political parties subject to the condition that accounts are thoroughly examined like corporate accounts. If their accounts are properly audited and there is no violation, only then income tax exemption should continue.
Not state funding but crowd funding could be the answer
Pavan Varma, author, former diplomat and former Rajya Sabha member

In a country where parties have different majorities, I am against state funding for political parties. If that were to happen, funds will be disproportionately distributed and it will still not obviate the additional role that cash has to play which means there will be cash influence. The only way out that I see in the future is that all political parties must compulsively select funds or donations through digital transfers which has to be put up on websites of the respective  party.

Because parties need money to fight elections, crowd funding is the only way to ensure some level of transparency. Today because of the digital revolution almost anybody can donate to a party digitally. It leaves a financial trail and that amount must be displayed on the website, so the public knows how much money a party has collected.

Later when we observe by any objective assessment, a political party’s vast amounts of spending over and above what has been revealed through legitimate digitally transferred donations which are the only avenue to transfer money , people can question where the money is coming from?

This was done successfully by Bernie Sanders, the former US president hopeful. He said he will not take any donations from corporate houses but he will do crowd funding through which any individual can send any amount to his cause and fund through digital transactions. And through this process he received as much as $250 million, details of which were transparently available on his website with the name of the sender and the amount.

Now ultimately these are the reforms which have been recommended by the election commission. Accounts of candidates are audited, but accounts of public political parties are not even audited. All they have to do is to submit a statement of accounts. The EC has said that there should be a panel of chartered accountants recommended by the Comptroller and Auditor General (CAG) who must compulsorily audit the accounts of political parties.

These measures along with compulsory funding only through digital transactions are the only way to provide transparency.

Electoral bonds were a total fraud in the name of reforms. The Supreme Court has rightly nullified them. But, that is still not an answer, because now, instead of bonds, the same donors will have to generate black money to pay money in cash.
The answer lies only by way of digital transactions where citizens have the right to know who has given what and parties have to do to display these details compulsory on a public website.



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