Electoral Bonds: The Safeguards of Indian Democracy Are Crumbling
Recently, the Supreme Court has dismissed a plea seeking stay on the sale of these bonds in the wake of Assembly elections in five states and union territory of Puducherry.
What are Electoral Bonds?
- It is similar to promissory note (PN) because it can be bought by any Indian citizen or company incorporated in India from select branches of State Bank of India.
- The citizen or corporate can then donate the same to any eligible political party of his/her choice.
- The bonds are similar to bank notes that are payable to the bearer on demand and are free of interest.
- An individual or party will be allowed to purchase these bonds digitally or through cheques.
- The electoral bonds were introduced with the Finance Bill (2017).
- The bonds will be issued in multiples of Rs 1,000, Rs 10,000, Rs 100,000 and Rs 1 crore.
Need for Electoral Bonds in India
- India being the largest democracy in the world: Elections and political parties are a fundamental feature of Parliamentary democracy but India has not been able to evolve a transparent political funding system.
- Prevalence of opaque political funding: The businesses, which need approvals for projects, tend to appease political patrons through political donations, which in turn become a cause for fudging books to generate funds for such contributions.
- Nexus between parties and corporates: The political parties, which have various expenses to meet in conducting elections, accept funding from businesses, which makes it possible for an inappropriate nexus between the two to emerge.
- Plagued India’s Institutional edifice: The political interference, executive overreach, the failure to propagate standards of accountability both within institutions and outside them has severely impacted the election mechanism in India.
- Conventional system of political funding is to rely on donations: The donations, big or small, come from a range of sources from political workers, sympathisers, small business people and even large industrialists.
- The conventional practice of funding the political system was to take donations in cash and undertake these expenditures in cash.
Arguments in favour of Electoral Bonds
- Interest-free instruments: It is an interest free banking instrument issued on a non-refundable basis and is not available for trading i.e. no loan would be provided against these bonds.
- Cap on political parties to receive funding through electoral bonds: Only those parties, which have got 1% of all votes polled in the last Lok Sabha or state assembly polls, are eligible for funding through these bonds.
- It makes it possible to give political contributions through a legitimate channel with tax-paid funds, while who gave how much to which party, remains anonymous.
- Element of transparency: It is a fact that a donor has purchased bonds worth a specified amount and that parties have received specified amounts in aggregate, will become a record.
- Limitation on use of cash during political funding: The government has been defending the scheme on the ground that it limits the use of cash in political funding, thus bringing more transparency, and provides a shield to donors by granting them anonymity.
- Elimination of black money in purchasing Electoral Bonds: The government has argued that all payments made for the issuance of the electoral bonds are accepted only by means of a demand draft, cheque or Electronic Clearing System or direct debit to the buyers’ account.
Argument against Electoral Bonds
- Growing trend away from transparency and accountability: The experts point out that electoral bonds are most likely the first-of-its-kind instrument in the world used for funding political parties.
- Influx of black money: The identity of the donor of electoral bonds has been kept anonymous which could easily lead to an influx of black money and increased instances of money laundering.
- Supporting big companies through money laundering: The opponents have alleged that the scheme was designed to help big corporate houses donate money without their identity being revealed.
- Legalization of political corruption: The opposition parties have raised serious concerns regarding electoral bonds and accused the union government of promoting a scheme which ‘legalizes political corruption’.
- Anonymity of donor’s identity: The electoral bond scheme pertains to the anonymity accorded to the buyer of the bonds.
- The critics have argued that the scheme, by not disclosing the identity of the donor to the public, violates their right to know.
- Government of the day knows the donor’s details: The information furnished by the buyer shall be treated confidential by the authorised bank and shall not be disclosed to any authority for any purposes, except when demanded by a competent court or upon registration of criminal case by any law enforcement agency.
Measures to be adopted for transparent Electoral Bonds
- Setting up National Election Fund: The government should attempt to set up National Election Fund where corporate houses and individual donors can contribute with 100% tax-free fund.
- The Election Commission could be given the task of overseeing it and the money can then be divided among political parties mostly in kind and a part in cash.
- Addressing funding of political parties: It is necessary to focus on funding of political parties, which need to engage in political activity all through the year, whether there is an election or not.
- State funding of electoral candidates: The direct funding of candidates, who will be reimbursed according to their final share of the votes cast, will result in three beneficial fallouts:
- The direct funding of candidates, who will be reimbursed according to their final share of the votes cast, will result in three beneficial fallouts:
- It will become possible for new and cleaner candidates from outside the mainstream parties to join politics;
- It will ease the pressure on parties themselves to give tickets to criminals and other rogues primarily because they can manage their own funding; and
- Parties themselves will become more internally democratic, as candidates will not be over-dependent on party bosses for cash.
Way Forward
- The government has told the Supreme Court that the electoral bonds attempt at bringing greater transparency, ensuring KYC compliance and keeping an audit trail in comparison to the earlier opaque system of cash donations.
- The Law Commission has proposed wide ranging reforms on the issue of expenses incurred by candidate such as limits; disclosure obligations of individual candidates and political parties; and penalties imposable on political parties; as well as examining the issue of state funding of elections.
- The government has recognized that electoral reforms is a continuous process and it shall be the endeavour of all the stakeholders including Government, Election Commission of India, Law commission, etc. to implement proposals on electoral reforms.
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