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Electoral Bonds controversy

Electoral Bonds controversy

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  • GS 2 || Polity || Political Dynamics || Elections

Why in news?

  • The Supreme Court in its interim order asked political parties to disclose, to the Election Commission in sealed covers, details of the donations they have received through anonymous electoral bonds.

Case

  • Details released by ADR: During 2017-18, the BJP earned Rs 200 crore from electoral bonds and the Congress Rs 15 crore, the Association for Democratic Reforms (ADR) had said recently based on an analysis of the parties’ tax returns and contribution statements submitted with the Election Commission.
    • No other national party declared any contributions through electoral bonds, according to the details released by ADR.
  • Citing lack of transparency, the ADR later challenged the electoral bond scheme in the Supreme Court, which asked parties to submit to the EC details of contributions through electoral bonds.
  • However, when the matter was taken up, it was considered that the time available was too limited for an in-depth hearing.
    • The only concession given to those concerned about the dangers of anonymous political funding is that the names would be available with the EC, albeit in sealed envelopes, until the court decides if they can be made public.

Concerns

  • The petitioners, the Association for Democratic Reforms, questioned the anonymity-based funding scheme on the grounds that –
    • it promotes opacity,
    • opens up the possibility of black money being donated to parties through shell companies and
    • empowers the ruling party, which alone is in a position to identify the donors and, therefore, well placed to discourage donations to other parties.
  • The petitioners raised four major objections:
    • Ordinary citizens will not be able to know who is donating how much money to which political party, and the bonds “increase the anonymity of political donations”.
    • The requirement to disclose in the profit and loss account the name of the political party to which a donation has been made, has also been removed.
    • With the removal of the 7.5% cap on the net profits of the last three years of a company, corporate funding has increased manifold, as there is now no limit to how much a company, including loss-making ones, can donate.
      • This opens up the possibility of companies being brought into existence by unscrupulous elements primarily for routing funds to political parties through anonymous and opaque instruments like electoral bonds.
    • The contribution received by any eligible political party in the form of electoral bonds will be exempt from income-tax as per Section 13A of the Income Tax Act.

Supreme court’s order

  • The Supreme Court’s interim order is an inadequate and belated response to the serious concerns raised about the opaque scheme.
    • The scheme, under which one can purchase bonds of various denominations from a designated bank and deposit them in the accounts of any political party, had been challenged in the apex court a year ago.
    • Given this premise, it could be asked whether the judicial intervention could not have come earlier.
  • The order, unfortunately, preserves the status quo, and any effect that the possible asymmetry in political funding would have on the election process will stay as it is.
    • However, all it has done now is to ensure that its interim arrangement does not ‘tilt the balance’ in favour of either side.

Conclusion

  • There is some concern that a disproportionately large segment of the bonds purchased by corporate donors has gone to the Bharatiya Janata Party (BJP).
    • The Rs 200 crore that the BJP received through electoral bonds was out of Rs 1,027 crore declared by the party.
      • This included Rs 553 crore received from undeclared sources; the amount through electoral bonds was part of that.
    • The Rs 15 crore collected by the Congress through electoral bonds, meanwhile, was out of Rs 120 crore received from unknown sources, and Rs 199 crore declared overall.
    • All national parties (barring CPM) considered, the Rs 215 crore received via electoral bonds accounted for nearly one-third of all contributions (Rs 689 crore) received from unknown sources.
  • This donor anonymity may end if the court decides that the EC should disclose the names at the end of the litigation, but the influence such donations would have had on the electoral outcome would remain undisturbed.
  • The court notes in its order that the case gives rise to weighty issues which have a tremendous bearing on the sanctity of the electoral process in the country.

Additional info

Electoral Bonds

  • An electoral bond is designed to be a bearer instrument like a Promissory Note — in effect, it will be similar to a bank note that is payable to the bearer on demand and free of interest.
  • It can be purchased by any citizen of India or a body incorporated in India.
  • The bonds will be issued in multiples of 1,000, Rs. 10,000, Rs. 1 lakh, Rs. 10 lakh and Rs. 1 crore and will be available at specified branches of State Bank of India.
  • Donors can donate the bonds to their party of choice which can then be cashed in via the party’s verified account within 15 days.
  • Every party that is registered under section 29A of the Representation of the Peoples Act, 1951 (43 of 1951) and has secured at least one per cent of the votes polled in the most recent Lok Sabha or State election will be allotted a verified account by the Election Commission of India. Electoral bond transactions can be made only via this account.
  • The bonds will be available for purchase for a period of 10 days each in the beginning of every quarter, i.e. in January, April, July and October as specified by the Central Government.
  • An additional period of 30 days shall be specified by the Central Government in the year of Lok Sabha elections.

Mains question

  • Have anonymous cash donations reduced with the electoral bonds scheme introduced by the government? Are there pitfalls in the system? Critically examine.