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9th March 2021 – Editorials/Opinions Analyses

Content

  1. Ensuring trust in the electoral process

Editorial: Ensuring trust in the electoral process

Context:

  • The Election Commission of India has announced dates for elections to five Legislative Assemblies. It is a matter of grave concern that the petition challenging the electoral bonds scheme, which deals with the vexed issue of election funding, continues to languish in the Supreme Court.

Relevance:

  • GS Paper 2: Salient features of the Representation of People’s Act.

Mains Questions:

  1.  It is critical that the Supreme Court immediately adjudicates on the electoral bonds scheme. In this context discuss the issues associated with electoral bonds scheme. 15 marks

Dimensions of the Article:

  • About Electoral Bond Scheme
  • Issues with electoral funding
  • Rationale behind introduction of Electoral Bonds
  • Issues with Electoral Bond Scheme
  • Way Forward

About Electoral Bond Scheme:

  • Electoral bond scheme was announced in Union Budget 2017- 18 in an attempt to “cleanse the system of political funding in the country.”
  • Electoral bonds with denomination of Rs 1 crore accounted for more than 91 per cent of the money raised till now.

Issues with electoral funding

  • Opacity in donations: Political parties receive majority of their funds through anonymous donations (approximately 70%) through cash. Also, parties are exempted from income tax, which provides a channel for black money hoarders.
  • Lack of action against bribes: The EC sought insertion of a new section, 58B, to RPA, 1951 to enable it to take action if parties bribe voters of a constituency, which has not come to light.
  • Allowing foreign funding: Amendment of the Foreign Contribution (Regulation) Act (FCRA) has opened the floodgates of foreign funding to political parties, which can lead to eventual interference in governance.
  • Lack of transparency: Despite provisions under section 29 of RPA, 1951, parties do not submit their annual audit reports to the Election Commission. Parties have also defied that they come under the ambit of RTI act.

Rationale behind introduction of Electoral Bonds

  • To limit the use of cash in political funding: To reduce using illicit means of funding and the ‘system’ was wholly opaque and ensured complete anonymity.
  • To curb black money– due to the following features included in the electoral bonds.
    • Payments made for the issuance of the electoral bonds are accepted only by means of a demand draft, cheque or through the Electronic Clearing System or direct debit to the buyers’ account”.
    • Limiting the time for which the bond is valid ensures that the bonds do not become a parallel currency.
  • Eliminate fraudulent political parties- that were formed on pretext of tax evasion, as there is a stringent clause of eligibility for the political parties in the scheme.
  • Protects donor from political victimization– as non-disclosure of the identity of the donor is the core objective of the scheme.

Issues with Electoral Bond Scheme

  • Still maintains opacity in political funding- due to the following reasons
    • Prior to electoral bonds, political parties had to maintain records of donations above Rs 20,000. However, the electoral bonds were kept out of the purview of this requirement.
    • Further, political parties are legally bound to submit their income tax returns annually under Section 13A of the Income Tax Act, 1961. However, the electoral bonds have also been exempted from IT Act.
    • The electoral bonds were also opened for foreign funding, which has been highlighted in the recent dissent note of the RBI.
  • Allowed possibility of corporate misuse- as revealed from the nature of transactions discussed above.
    • Earlier, no company could donate more than 7.5% of its profits to a political party. But this limit was completely removed under this scheme.
  • Lack of level playing field in terms of political funding- Government amended Section 29B of the Representation of the People Act, restricting the benefits of electoral bonds only to a few political parties.
    • Data revealed through the audit report of ruling party also showed that the ruling party has received 94.6% of all the electoral bonds sold in 2017-18.
  • Merely an urban phenomenon– the data also highlights the fact, that electoral bonds have been used by the rich players in cities, rather it being percolating to the majority population, especially in rural areas.

Way Forward

  • Switching to complete digital transactions.
  • Donations above a certain limit be made public to break the corporate-politico nexus.
  • Political parties should be brought under the ambit of RTI as followed in countries like Bhutan and Germany.
  • Establish a national electoral fund where donors contribute and funds are distributed among different parties according to their respective performances in the last elections. This will also weed out black money as well as ensure anonymity to donors.
  • State funding of elections has been suggested in the past in response to the high cost of elections. Law Commission of India, 2nd ARC, National Commission to Review the Working of the Constitution, have favored state funding.
  • Cap maximum expenditure of political parties to a multiple of half of maximum prescribed limit for individual candidates with the number of candidates fielded.
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