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Electoral Bonds can prove to be perfect fig leaf for Political Corruption

Published: Jan 10, 2018

Electoral bonds (EBs) "substantially seek to cleanse" the system of political funding, exuded Finance Minister Arun Jaitley.

Presenting EB scheme to Lok Sabha on 2nd January 2018, Mr. Jaitley stated: "Now, the element of transparency is that the donors buy these bonds. Obviously, their balance sheets will reflect that they have bought a certain amount of bonds. Political parties will file their returns and collectively also say that this is the extent of electoral bonds that they have received. And, therefore, this will be the cleaner money coming from the donor, cleaner money coming into the hands of a political party who would have cleansed substantially the whole process".

He added: "There would be a significant amount of transparency. Today, there is nil transparency. When the cash is given, the source of the money, the donor and where it is spent is not known. Therefore, at least now it will be known. The donor will be having an account of how many bonds he has purchased. The political party will be filing returns to the Election Commission, thereby indicating the total bonds it has received and which donor gave to which political party".

This transparency logic is flawed as is evident from the gazette notification on EBs issued on 2nd January 2018. It says: "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".

When the name of EBs buyer is not known to political party, how would it disclose the name of the donor in its annual report on donations filed with the Election Commission of India (ECI)?

The second flaw in the dubious logic is the assumption that EBs would be used largely by those who make donations in cash. We all know that cash donations are often black money and serve as secret advance for seeking favours.

Political parties could account big cash donations as each contribution below Rs. 20,000 to avoid disclosure of names of donors. This cash limit has been reduced to Rs. 2000 under EBs scheme. Political parties would now have to split large cash donations into lakhs of small receipts of upto Rs. 2000 each.

Why has digital payments-obsessed Government not banned Cash donations to political parties? Why has corruption-averse Government not declared giving cash donations as a non-bailable offence? Why can't it amend law to provide for rigorous punishment for 10 years in such cases?

Contrary to Government's transparency theory, EBs would make political donations opaque. EBs would push headlines disclosing ‘who gave how much to whom' into archives.

Readers would henceforth miss the chance of devouring breaking news such as these: "In 2015-16, over 90% corporate donations went to BJP via 2 electoral trusts". "BJP largest recipient of corporate donations, realtors top list: ADR". "BJP is darling of corporates, shows ADR report; party gets Rs 705 crore donation in four years". "BJP receives maximum funding from corporate donors, says report".

Such headlines torment BJP, which has identified itself the poor. Such news makes it difficult for BJP to rationalize quid pro quo governance.

Leave aside BJP, no ruling party would like to see such embarrassing ‘breaking news'. This is because such headlines serve as trigger for reporters and analysts to probe further which company gave how much to which party and how much it got in return as favours.

The favours can come as tweaked or new policy, rule, procedure, enhanced outlay to sector in which the donor operates, grant to its over-invoiced public private partnership (PPP) project, invitations to accompany PM on foreign visits, bailouts or derailment of an investigation against the donor.

Such probes into quid pro quo deals are normal and legitimate in any vibrant democracy. After all, crony capitalism and institutionalized, political corruption are integral part of democracy even in the United States, which pioneered lobbying disclosure law.

Instead of enacting a lobbying disclosure law, BJP-led NDA Government is facilitating lobbying through EBs. This is yet another proof of Government's yawning anti-corruption deficit, which includes reluctance to set up Lokpal.

EBs would facilitate political corruption. A company seeking favour from the ruling party at the Centre or the State can now route bribes through EBs. Companies at present route speed money as donations to NGOs aligned with ministers of ruling party or with top officials. Such donations are accounted under corporate social responsibility.

The Government notified EBs Scheme last week in pursuance of its EB proposal incorporated in the Budget Speech for 2017-18. The subsequent Finance Act, 2017 provided legal framework to EBs through amendments to four laws. These are:

The Income-tax Act,1961; The Companies Act, 2013; The Reserve Bank of India Act, 1934; and The Representation of the Peoples Act, 1951.

These amendments are contrary to the recommendations made by the Law Commission in its 255th report on electoral reforms submitted during March 2015.

While recommending new initiatives to make political donations more transparent,

LC's report says: "Disclosure is at the heart of public supervision of political finance and requires strict implementation of the provisions of the RPA, the IT Act, the Company Act, and the ECI transparency guidelines."

Under EBs scheme, the names of donors and recipients would be kept confidential by State Bank of India (SBI). This is the sole bank authorized to issue interest-free EBs to prospective donors. EBs would thus empower political parties to disclose such donations as EBs received from "unknown sources" in their annual returns filed with Election Commission of India(ECI).

Similarly, EBs would serve as the 2 nd option for companies to make donations without revealing the name of beneficiary(ies) in their respective annual accounts. They can now merely disclose political donations as contribution towards EBs. The first option, notified during 2013, enables routing of donations via Government-approved electoral trust companies (ETCs), whose number stood at 15 as on June-end 2015.

ETCs file their annual reports with ECI, revealing names of donating companies and political parties to whom it passed on the donations.

Certain companies, however, donate directly to political parties and make the requisite disclosures in their annual report as stipulated by Section 182 of the Companies Act. Cairn India, for instance, disclosed a payment of Rs. 7.5 crore to BJP in its 2014-15 report. It did not disclose donations to any other political party.

Similarly, Larsen & Toubro disclosed payment of Rs 5 crore each to BJP and Congress Party in its 2014-15 report, apart from mentioning small donations made to two more parties.

Political parties have to make matching disclosures in their annual reports filed with ECI. EBs would make such transparency redundant or restrict it to only those entities that would opt for direct donations.

Instead of introducing EBs, the Government should have waited for Supreme Court's verdict on public interest litigation (PIL) petitions against EBs filed last year.

EBs scheme has implicitly enlarged the domain of political donations by including seven categories under the definition of persons. One category is "an association of persons or a body of individuals, whether incorporated or not."

Such groups can receive funds from unapproved sources directly or indirectly and route the dubious money as EBs.

Put simply, EBs would give a huge setback to transparency. The Government must scrap the scheme immediately and instead go the whole hog for comprehensive electoral reforms to restore citizens' faith in democracy and to rein in vibrant political and institutionalized corruption.

The Government should issue a white paper on unimplemented recommendations of various committees on electoral reforms. More than eight panels have given recommendations over several decades.

It is here pertinent to recollect observations made by National Commission to Review the Working of the Constitution (NCRWC) that gave its report in March 2002.

NCRWC observed: "the demand for transparency must be conceived as a democratic value in itself, a tool designed to avoid any wrongful influences of money in politics. If laws are intended to be effective with regard to transparency, they should be general in nature and enforced with respect to everyone, and not just political parties or candidates, but also to the donors as well".

Noting that regulation of political donations is governed by different laws, NCRWC recommended enactment of "a comprehensive legislation providing for regulation of contributions to the political parties" as well as their expenses.

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