A skewed setup
AFTER a long delay, the Supreme Court has taken up the electoral bonds case. Even as the court reserved its verdict on the validity of the controversial scheme, the Finance Ministry rolled out another round of electoral bonds. The decision came amid the Assembly elections in five states. Electoral bonds are interest-free financial instruments that individuals or groups may use to make donations to political parties. The sale of the first batch of electoral bonds took place in March 2018. The State Bank of India (SBI) is the only bank authorised to issue electoral bonds after payment via cheque or digital means. These contributions are tax-deductible, allowing individuals and corporates to channel unlimited funds to political parties without having to declare their identity.
The government proposed the scheme in 2017, saying that it would bring much-needed transparency to election finding in India. But it has done the exact opposite by ensuring the anonymity of donors and reducing whatever little transparency that existed until their introduction. It has opened the floodgates for anonymous donations, even as the public (or even shareholders of a donor company) are in the dark about them. Information on donors would certainly be available to the government from the banking system, which it runs. Political parties would know who has donated to them. The only people deprived of this vital information are the voters. However, Attorney General R Venkataramani submitted to the Supreme Court that citizens had no fundamental right to know the sources of electoral bond funds. He said the right to know must be subject to reasonable restrictions and can be exercised for specific ends or purposes. Solicitor General Tushar Mehta said anonymity was necessary to protect the privacy and political affiliation of citizens who made such donations to parties.
The focal point of the controversy are two conflicting rights: the right to privacy and confidentiality, and the right to know (to prevent tradeoffs and kickbacks). For the government, the secrecy of the donor is of prime importance, even as the Reserve Bank of India (RBI) and the Election Commission of India (ECI) had expressed concerns that electoral bonds could be misused by shell companies. For voters, the right to know is paramount as it affects the transparency of the electoral process. But the government has ruled out providing any information to the public regarding corporate or individual donations to parties.
Free and fair elections require full disclosure of information regarding election funding. However, with electoral bonds, the government has actually promulgated opacity. The startling lack of transparency has broader implications for the democratic process. From the standpoint of democracy, it is important for the public to know about donations so as to play the role of a watchdog. Absence of such information makes it difficult to track money spent by parties in elections; this violates the very principle of an ‘informed electorate’. Besides, donations by big businesses can hide tradeoffs by parties cornering funds anonymously, thus enabling unaccountable quid pro quo policies. The Supreme Court raised concerns about ‘legitimisation of quid pro quo’ policies during hearings in the case. The Chief Justice of India observed that bonds could be used for trading political favours.
Electoral bonds have increased the power of the corporate sector to influence politics and policies. Indian elections are an expensive affair. They have become more expensive over time as competition between parties has intensified, and major parties rely on corporate donors to fund their campaigns. This has strengthened the politics-business nexus, which is not a new phenomenon, but now it has been given an institutional structure and scaled up to unprecedented levels. It is the most significant innovation to date to cement this nexus and ‘help business help politics’.
The government pitched electoral bonds as an alternative to cash donations. The sole concern is that election funding should be cash-driven through formal banking channels with no consideration given to the quantum of corporate donations or imposing restrictions on the amount that corporate entities may contribute to parties. However, direct and untraceable cash which dominated political donations has not vanished. The share of income of national parties through unknown sources has seen an increase since 2018 despite electoral bonds. According to analytical reports, the BJP’s share of income via unknown sources rose from 58 per cent to 68 per cent between FY15-17 and FY19-22 (excluding FY18). Additionally, money received by the BJP through electoral bonds exceeds the earnings of other parties by a wide margin. The bulk of the donations go to the ruling party, presumably for favours done or expected.
Electoral bonds skew the electoral field. The ruling party has access to huge amounts of money through electoral bonds, while there is a paucity of funds available to other parties; this precludes a level playing field. This pattern was apparent from the onset of this scheme. Several petitions were filed immediately after its introduction on the grounds that it distorted elections.
In April 2019, the apex court had declined to stay the scheme, stating that it would require an in-depth hearing on the pleas as the Centre and the ECI had raised ‘weighty issues’ that had ‘tremendous bearing on the sanctity of the electoral process in the country’. Still, the hearings were not expedited.
The concentration of money power gives a big advantage to the ruling party. It has given the regime an additional and powerful means of centralising power in its hands and crushing any opposition to itself. Several suggestions have come up from time to time to reform political funding; these range from strictly enforcing statutory limits on election expenses to putting a ceiling on corporate donations to political parties to state funding of elections. These proposals need serious consideration to stop the subversion of the electoral process as free and fair elections are impossible without transparency in campaign financing.
