The opacity of transparency: A deep dive into India's electoral bond system

ARCHIS MOHAN dives into India's electoral bond system, where political finance, corporate interests, and anonymity collide, sparking debates on transparency and the pulse of democracy

The 10-day window for the sale of the 28th tranche of electoral bonds, which opened on October 4 and closed on Saturday (October 14), coincided with the Election Commission of India (ECI) announcing the Assembly poll schedule for Mizoram, Chhattisgarh, Madhya Pradesh, Rajasthan, and Telangana on October 9.

According to data available for the 26 tranches sold between March 2018 and April 2023, 22,458 bonds worth Rs 12,955.26 crore were redeemed during these five years, with nearly a third, or 34.23 per cent, of the total value of these bonds redeemed by political parties in three months alone — March, April, and May 2019 — that is, tranches eight to 10, the period of the 2019 Lok Sabha (LS) elections.

On October 10, the Supreme Court (SC) said it would hear a slew of petitions challenging the electoral bond scheme, including one by the Association for Democratic Reforms (ADR), bringing the focus back to the controversial election funding instrument ostensibly introduced to reduce the role of unaccounted money in elections.

The petitioners have asked the SC to decide upon the scheme’s legality before the 2024 LS elections. The court will adjudicate on two issues: the legality of anonymous donations to political parties and the violation of citizens’ right to information about the funding of political parties.

According to an ADR analysis, 94.19 per cent, or Rs 12,226 crore, of the total value of bonds purchased until April 2023 were in the denomination of Rs 1 crore, which “indicates that corporates rather than individuals are purchasing these bonds”.

Electoral bonds, or bearer instruments like promissory notes, can be bought by citizens or entities to donate funds to political parties and issued in multiples of Rs 1,000, Rs 10,000, Rs 1 lakh, Rs 10 lakh, and Rs 1 crore at select State Bank of India branches.

The ADR found that 14,260 bonds worth Rs 8,362.83 crore, or 64.55 per cent of the total electoral bonds redeemed between March 2018 and April 2023, were encashed in New Delhi, where the headquarters of most of the national parties, including the two most prominent, the Bharatiya Janata Party (BJP) and Congress, are located.

Apart from Delhi, bonds worth Rs 1,602 crore were encashed in Hyderabad, Rs 1,297.44 crore in Kolkata, Rs 771.5 crore in Bhubaneswar, Rs 662.5 crore in Chennai, and Rs 258.74 crore in other cities.

The BJP and Congress are the top two beneficiaries of the electoral bonds, followed by the Trinamool Congress (TMC).

According to the ADR analysis, based on the annual audit reports political parties have filed with the ECI between 2017-18 and 2021-22, the BJP received Rs 5,271.97 crore in funds through electoral bonds of a total of Rs 9,190.86 crore, which is 57 per cent of all electoral bonds redeemed by political parties during the period.

Of the BJP’s share, Rs 2,555 crore, or almost half, came in 2019–20, the year of the LS polls; Rs 1,450.89 crore in 2018–19; and Rs 1,033.7 in 2021–22, which saw key Assembly elections, including in Uttar Pradesh in February–March 2022.

The Congress received Rs 952.29 crore, or 10.36 per cent of the total, and the TMC got Rs 767.88 crore (8.35 per cent).

Other leading beneficiaries included the Biju Janata Dal (BJD), which received Rs 622 crore (6.76 per cent). The Dravida Munnetra Kazhagam (DMK) got Rs 431.5 crore (4.69 per cent), and Bharat Rashtra Samithi (BRS) received Rs 383.65 crore (4.17 per cent). The Yuvajana Sramika Rythu Congress Party (YSRCP) received Rs 330.44 crore, and Shiv Sena got Rs 101.38 crore.

Of the TMC’s funds from electoral bonds, Rs 528.14, or 68.77 per cent of the Rs 767.88 crore it received in the period, came in 2021–22. The elections to the West Bengal Assembly took place in April 2021.

The pattern is similar for the rest of the parties mentioned above. These parties received the lion’s share of their funds through electoral bonds in the financial year when the states they are influential in went to polls.

Since the scheme’s introduction, most voluntary contributions to national parties —above Rs 20,000 — were via electoral bonds.

From 2017-18 to 2021-22, the BJP received 52 per cent of all its donations in electoral bonds, while the Congress received 61.54 per cent of all its donations in electoral bonds, the TMC 93.27 per cent, BJD 89.81 per cent, DMK 90.7 per cent, BRS 80.45 per cent, and YSRCP 72.43 per cent.

Common Cause and ADR, both non-governmental organisations, and the Communist Party of India (Marxist), have challenged the scheme’s validity. They have flagged that the Centre has removed the limit on the amount companies could donate to political parties — 7.5 per cent of their average net profits in the previous three years — through amendments to the Companies Act, 2013, paving the way for unlimited funding from firms.

The ADR has demanded either the scheme should be scrapped or the principle of anonymity of the bond donor must be done away with. It has asked the SC to order all political parties that receive donations through electoral bonds to declare in their contribution reports the total amount of such donations received along with the detailed particulars of the donors for each bond. It has also demanded that the scheme come under the purview of the Right To Information Act.