Date: 01/10/2022

Relevance: GS-2: Government policies and interventions for development.

Key phrases: Electoral bond, RBI, SBI, ECI, political parties, RPA act 1951, Finance Bill 2017, Transparency, Government-owned bank, Political party, Corporate India, Institutionalizing Corruption, Democracy, Republic

Why in News?

• Electoral bonds have been pitched as an alternative to cash donations made to political parties as part of efforts to bring transparency in political funding.

Context:

• Ahead of Assembly elections in Gujarat and Himachal Pradesh, the government on Thursday approved issuance of 22nd tranche of electoral bonds that will open for sale on October 1.
• State Bank of India (SBI), in the 22nd phase of sale, has been authorised to issue and encash electoral bonds through its 29 authorised branches from October 1-10.

Misuse of money during election:

• The use of money and social media in elections are the concerns of election management bodies globally.
• Elections abroad have been affected apparently most adversely on these counts, where as in our case money is typical in certain states and constituencies, which are known as expenditure-sensitive.
• Through corruption, money can be used to influence democracy actors and institutions to favour certain groups and their interests.
• Unbridled use of funds by candidates and political parties can make the playing field for elections uneven.
• Illicit funds by organized crime can lead to inefficient or disrupted public services in time of election.

What is Electoral Bond?

• Electoral bonds are an instrument through which anyone can donate money to political parties.
• The citizen or corporate can then donate the same to any eligible political party of his/her choice.
• The bonds are similar to bank notes that are payable to the bearer on demand and are free of interest.
• An individual or party will be allowed to purchase these bonds digitally or through cheque.
• The electoral bonds were introduced with the Finance Bill (2017). On January 29, 2018 the NDA government notified the Electoral Bond Scheme 2018.
• SBI is the only authorised bank to issue electoral bonds.
• An electoral bond will be valid for 15 days from the date of issuance. No payment would be made to any political party if the bond is deposited after expiry of the validity period, the statement said.
• Registered political parties that have secured not less than 1% of the votes polled in the last Lok Sabha or legislative assembly election are eligible to receive funding through electoral bonds.

Benefits of Electoral Bonds:

• It will bring substantial transparency in political donations against the previous system of contributions in the election funding mechanism.
• It will provide answer to many question. Like.
  • How much funding comes?
  • What kind of funding it is?
  • The source of funding.
  • Where it will be spent?
• Non-disclosure of recipients will ensure people are free to donate to any political party of their choice.
• Electoral bond will reinforce the idea of moving away from a cash system towards clean money which cheque system could not achieve.
• 15 days between buying and selling will ensure they don't turn into a parallel economy.

Why have electoral bonds attracted criticism?

• Opposite to Transparency
  • The central criticism of the electoral bonds scheme is that it does the exact opposite of what it was meant to do: bring transparency to election funding.
  • For example, critics argue that the anonymity of electoral bonds is only for the broader public and opposition parties. The fact that such bonds are sold via a government-owned bank (SBI) leaves the door open for the government to know exactly who is funding its opponents.
  • This, in turn, allows the possibility for the government of the day to either extort money, especially from the big companies, or victimise them for not funding the ruling party — either way providing an unfair advantage to the party in power.
  • Critics such as Anjali Bhardwaj, co-convenor of the National Campaign for People’s Right to Information, have noted that more than 75 per cent of all electoral bonds have gone to the BJP, which is in power at the Centre.
• No limit on funding by corporate
  • Moreover, before the electoral bonds scheme was announced, there was a cap on how much a company could donate to a political party i.e 7.5 per cent of the average net profits of a company in the preceding three years. However, the government amended the Companies Act to remove this limit, opening the doors to unlimited funding by corporate India.
• Institutionalizing Corruption
  • Removal of a limit on corporate donations that existed earlier Incentive the Institutionalizing Corruption.
• Against Democracy
  • Through an amendment to the Finance Act 2017, the Union government has exempted political parties from disclosing donations received through electoral bonds. This means the voters will not know which individual, company, or organization has funded which party, and to what extent.
• Further, one of the arguments for introducing electoral bonds was to allow common people to easily fund political parties of their choice but more than 90% of the bonds have been of the highest denomination (Rs 1 crore).

Way Forward:

• The Preamble of the Constitution declares India to be a Democratic and Republic. Democracy is sustained by free and fair elections. Only free and fair elections to the various legislative bodies in the country can guarantee the growth of a democratic polity.
• There is a need for effective regulation of political financing along with bold reforms to break the vicious cycle of corruption and erosion of quality of democratic polity.
• It is crucial to plug the loopholes in the current laws to make the entire governance machinery more accountable and transparent. Unless drastic and radical steps are taken to cleanse public offices by the government, political parties and people at large, corruption will continue to corrode the vitals of the country

Source: The Hindu

Mains Question:

Q. “India is the largest democracy in the world. However, despite strengthening various institutions for the last seven decades, India has not been able to evolve a transparent political funding system”. In this scenario discuss the scope of electoral bond to make a transparent political funding system in India.