Why bonds do not address key issues in electoral funding

The National Democratic Alliance’s framework for electoral bonds is a well-meaning but flawed exercise that does little to clean up political funding in a meaningful way. For one, it is unclear how retaining the feature of anonymity for the purchaser of these bonds will enhance transparency, which Finance Minister Arun Jaitley claims is the primary aim of this move. It is true that businesses do not want the donors named but the logic given by the state for accepting such demands is not clear. Ironically, potential donors are unlikely to be drawn by the assurance of anonymity either, given the absence of robust privacy laws. More importantly, the mechanism of the electoral bonds does not address the fundamental problem associated with the funding of political parties: Its opacity to the electorate.

Transparent disclosure is vital in an emerging democracy where crony capitalism has haunted policy-making for decades. Passing a law that makes it compulsory to declare the names of all donors in the public domain would have been a better way of ensuring this. Instead, in an extraordinary demonstration of multi-party solidarity, all national and regional parties have steadfastly refused to obey the Central Information Commissioner’s orders, in 2013 and then in 2015, requiring them to disclose their assets under the Right to Information Act. Indeed, the ruling Bharatiya Janata Party (BJP) led the charge by arguing before the Supreme Court in 2015 that doing so would “adversely affect their internal working and political functioning”. Considering that party funds are exempt from income tax, this is a strange position to take.

Similarly, political parties were required to report any donation over Rs 20,000 to the income tax department. When innate Indian ingenuity found a way around this provision by donating greater volumes of cash in amounts below this limit, the government lowered the disclosure limit to Rs 2,000 and made it mandatory for donations above this amount to be made through cheque or digital mode. But the new limit, which anyway does nothing to guarantee that monetary muscle will dissipate from electoral processes, can be gamed in just the same way. In any case, transparency is not synonymous with anonymous transactions and the persistence of cash.

Political parties’ claim that they are transparent because they submit their tax returns and their contribution reports to the income tax department and the Election Commission. This is not quite the same thing as public disclosure and, as research by the Association for Democratic Reforms (ADR) shows, something of eyewash. According to ADR, almost 70 per cent of the Rs 113 billion of party funding received over an 11-year period came from unknown sources. Making matters worse, the government in 2016 retrospectively amended the Foreign Contributions Regulation Act (FCRA) to redefine the status of London-headquartered multinational Vedanta, which had contributed to the BJP and the Congress Party, after the Delhi High Court held both parties guilty of violating FCRA rules. Neither party has suffered any consequences for this violation. In Indian democracy, as in Animal Farm, politicians are clearly more equal than other people.