The litmus test that the attack on black money has now to face is to initiate measures to curb its further generation, not just not stop at destroying its stock. To severely cripple black money or undeclared income for good, it is critical to change the law and the rules governing the funding of political parties and elections. Only legislators who have come to power without the aid of black money can be expected to fight and contain it.
On November 8, hours before the prime minister announced his demonetisation move, the Bharatiya Janata Party (BJP) in Kolkata deposited Rs 1 crore in Rs 500 and Rs 1,000 notes into its bank account. When the West Bengal Communist Party of India (Marxist) mouthpiece Ganashakti publicised this, state BJP leaders said the money was accounted for and the transaction was completely legal. Precisely two months earlier, a car with two BJP workers, which was stopped for trying to break through a police barricade in Ghaziabad, Uttar Pradesh, was found to contain Rs 3 crore in cash. A state BJP leader came forward to say it was “white money” and they had all the papers to prove it. Income tax staff who were called to the scene did their verifications and released the money and the workers.
Ten days after the demonetisation, Rs 91.5 lakh in Rs 1,000 notes was seized in Osmanabad district form a car belonging to the Lok Mangal group controlled Maharashtra BJP leader and state cooperation minister, Subhash Deshmukh, during routine checks ahead of municipal council polls. The minister said the cash was meant for payment to sugar factory workers and he had all the records. The money was seized.
These reports indicate how cash continues to play a role in the functioning of political parties. This is underlined by an analysis, reported in this paper, by the Association for Democratic Reforms of the income tax returns for the 11-year period 2004-05 to 2014-15 of six leading political parties. The Congress topped the list with Rs 3,323 crore or 83 per cent of its total income coming from “unknown sources”. The BJP followed with Rs 2,125 crore or 65 per cent of its total income coming from unknown sources. But the trend has changed in the last two years (2013-14 and 2014-15) when the BJP has been in power at the Centre and has overtaken the Congress in total income. “Unknown sources” are made up of things like sale of coupons, voluntary contributions and relief funds. Political parties have to disclose the names and other details of only those contributing over Rs 20,000 in the contribution list that they have to submit to the Election Commission and along with their income tax returns. The Bahujan Samaj Party claims not to have received any contribution above Rs 20,000 in the Rs 449 crore that it earned in the period, whereas the Communist Party of India earned the least, Rs 23 lakh, from unknown sources.
What all this indicates it that even as the prime minister has been urging the nation to go cashless, his own party and others have been continuing to handle large amounts of cash whose source they do not have to disclose.
To change this dispensation, the limit of Rs 20,000 for anonymous donations must be drastically lowered. There should be a public debate on fixing this at, say, Rs 100. Along with this there should be a limiting ratio, that, for example, unaccounted income should not exceed 10 per cent of total income. Theoretically, this could land political parties, which collect small amounts from large numbers, with enormous amounts of paper work. But the reality is that very few believe political parties rely on the little man’s small donations to run themselves. All that the rule change will do is close an obvious loophole for receiving and using black money.
Next, it is critical to improve the levels of disclosure mandated for political parties through their tax returns and submissions to the Election Commission so that they paint a true picture and these returns and submissions should be rigorously scrutinised. Along with this it is vital for the Election Commission to keep a close watch on the activities of political parties, particularly during election campaigns, so that they are not seen to engage in lavishness that is not supported by the expenditure they have claimed in their submissions.
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Related to this is the need to fix a reasonable ceiling on election expenditure, both by candidates and parties. But as has been pointed out, most candidates claim not to exceed the current ceiling whereas they are widely believed to spend amounts which have no relationship to the official ceiling. So the overall need is to ensure that unaccounted money, or black money, plays a vastly smaller role in elections than is the case today. Perhaps the best protection against the role of black money in elections is a known public aversion to lavish campaigns.
This brings us to the issue of public funding of elections. It is meaningless to go in for public funding if candidates routinely take the state funding and then spend some more of unaccounted money. Public funding creates a level playing field of sorts between poor and well healed candidates but makes it uneven between an incumbent and a challenger. How many contestants do you fund and how do you choose who to fund?
One criterion can be track record, by beginning at the bottom. All those contesting positions in elections up to district panchayats and municipal corporations should fund their own campaigns as given the size of such constituencies a candidate can go around them on a bicycle for campaigning. A winning councilor can then get state funding to fight Assembly elections and the same principle can hold for parliamentary elections. Political parties can get state funding depending on the percentage of votes polled by them in the previous elections. These can be the first steps in separating black money from politics.
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