Date: 18/10/2022
Relevance: GS-2: Transparency and Accountability, Electoral Reforms, Funding to the political parties.
Key Phrases: Electoral Bonds, Transparency in Electoral Funding, Section 29A of the Representation of People Act 1951, Article 324 of Indian Constitution, Right to Information Act, Foreign Contribution Regulation Act.
Why in News?
- Recently, the Supreme Court of India questioned the government of India about the mechanism of funding to political parties through Electoral bonds and issues in revealing the source of funding.
What is the issue all about?
- Funding through Electoral bonds has always been a point of contention among various stakeholders since it was launched.
- There are many burning issues with the Electoral Bond system such as -
- Validity of electoral bonds as it impacts the conscience of Article 324 of the Constitution which mandates free and fair elections.
- Applicability of the Right to Information Act 2005 on the political parties as political parties do not fall under the ambit of the RTI act.
- Challenge to the retrospective amendments made in the FCRA
2010.
- According to amendments made in the Act, subsidiaries of foreign companies would not be treated as foreign sources.
Electoral Bonds
- About
- An electoral bond is a bearer instrument in the nature of a promissory note through which anyone can donate money to political parties.
- The electoral bond scheme was introduced in 2018.
- Objective
- The stated objective of the introduction of the Electoral Bonds system was to make funding to the political parties more transparent.
- The electoral bond process ensures that the name of the donor remains anonymous.
- Eligibility to Purchase the Electoral Bonds
- A citizen of India or a body incorporated in India can purchase the bond from authorized branches of the State bank of India during a specific window.
- A person being an individual can buy Electoral Bonds, either singly or jointly with other individuals.
- Features of Electoral Bonds
- These bonds can be sold in multiples of Rs 1000 without any upper limit.
- The political parties can choose to encash such bonds within 15 days of receiving them and fund their electoral expenses.
- Only the authorized branches of SBI can sell the electoral bond during a specific window of time.
- The anonymity that electoral bonds provide to donors means that voters will not know which individual, company, or organization has funded which party, and to what extent.
- Criteria for Receiving funding through Electoral Bonds
- Only the political parties registered under Section 29A of the Representation of the People Act, 1951.
- Political parties secured not less than 1% of the votes polled in the last general election to the House of the People or the Legislative Assembly, and are eligible to receive electoral bonds.
Arguments in Favour of Electoral Bonds:
- Electoral Bonds limit the use of cash in political funding because the threshold limit for cash donations made to political parties is Rs.20000.
- It curbs black money because electoral bonds can be purchased DD, Cheque, and A/c with KYC norms.
- It protects donors from political victimization because of non-disclosure of donor identity.
- It eliminates fraud in political party funding since there are certain eligibility conditions for receiving funding.
Arguments Against Electoral Bonds:
- Bring the opacity in political funding (Electoral bonds are kept out of the Representation of the People Act and RTI).
- It makes the political class even more unaccountable because
prior to electoral bonds political parties had to disclose details of those
who donated more than Rs 20,000 which is not the case at present.
- As the transparency activists argue these changes infringe on the citizens ‘Right to Know.
- While electoral bonds provide no details to the citizens, the said anonymity does not apply to the government of the day, which can always access the donor details by demanding the data from the SBI.
- It favours the ruling party.
- Ex- According to data released by the ECI, the ruling party cornered three-fourths of electoral bonds sold in 2019-20, even as the main Opposition party got just 9 percent of the total bonds.
- It does not allow the Election Commission to keep a check on violations.
- It allows unchecked foreign funding because of amendments made in FCRA because after the amendments subsidiaries of foreign companies would not be treated as foreign sources.
Foreign Contribution Regulation Act, 2010
- Foreign funding of persons in India is regulated under FCRA Act and is implemented by the Ministry of Home Affairs.
- Individuals are permitted to accept foreign contributions without the permission of MHA. However, the monetary limit for acceptance of such foreign contributions shall be less than Rs. 25,000.
- The Act ensures that the recipients of foreign contributions adhere to the stated purpose for which such contribution has been obtained.
- Organizations are required to register themselves every five years.
Foreign Contribution (Regulation) Amendment Act, 2020-
- Prohibition to accept foreign contributions: The Act bars public servants from receiving foreign contributions.
- Transfer of foreign contribution: The Act prohibits the transfer of foreign contributions to any other person not registered to accept foreign contributions.
- Aadhaar for registration: The Act makes the Aadhaar number mandatory for all office bearers, directors, or key functionaries of a person receiving the foreign contribution, as an identification document.
- FCRA account: The Act states that foreign contributions must be received only in an account designated by the bank as an FCRA account in such branches of the State Bank of India, New Delhi.
- Surrender of certificate: The Act allows the central government to permit a person to surrender their registration certificate.
View Points of Various Stakeholders with respect to Electoral Bonds:
- Although there are arguments in favour and against the system in Indian political discourse, the Apex institutions such as the RBI and ECI have been critical of the system.
- View of Election Commission
- The Election Commission in 2019 told the Supreme Court of India that it was not against the Electoral Bonds Scheme but it did not approve of anonymous donations made to political parties.
- View of RBI
- The central bank had warned the government that the bonds would "undermine the faith in Indian banknotes and encourage money laundering."
Way Forward:
- There is a need to put a cap on the funding by big corporate houses and such donations should be made public as is done in the USA.
- Political parties should be brought under the ambit of the Right to Information Act with certain safeguards similar to countries like Germany, Bhutan, etc.
- Partial state funding of elections should be considered as recommended by the Indrajit Gupta Committee.
- The funds of political parties should be audited by an independent auditor and the audit details should be placed in the public domain.
Conclusion:
- A transparent, rule-based financing of political parties is a facilitating factor for transitions to democracy and democratic consolidation.
Source: The Hindu
Mains Question:
Q. “Electoral bonds have legalized crony capitalism” in light of the statement, write arguments in favour and against Electoral bonds. (150 Words).
