The political system in India has traditionally been hostile to the idea of transparency in electoral financing. When the Bharatiya Janata Party government announced the launch of a new instrument of political party funding to ostensibly ensure greater transparency and eliminate black money from the system, it was hoped that the issue of anonymous financing would be squarely dealt with. However, using the Money Bill route to bypass the Rajya Sabha, the government brought regressive amendments to the Income Tax Act, Companies Act, RBI Act and the Representation of the People Act, to introduce electoral bonds which allow donors to anonymously donate unlimited amounts of funds to political parties.
Under the Electoral Bond Scheme, an electoral bond (EB), issued in the nature of a promissory note, can be bought by any Indian citizen or company incorporated in India. The scheme allows parties to receive these bonds without the public, the Election Commission or even the Income Tax Department knowing the identity of donors. It has legitimised opacity and opened the floodgates for anonymous donations to parties, dealing a severe blow to voters’ right to know. People’s ability to track donations by big businesses and expose quid pro quo have been severely undermined.
Responses to Right to Information (RTI) applications reveal that the government was forewarned of the grave dangers associated with electoral bonds. Copies of communication between the Reserve Bank of India and the finance ministry obtained under the RTI Act reveal that the RBI warned that EBs will violate the principle and spirit of the Prevention of Money Laundering Act (PMLA), as the original buyer need not be the actual contributor to the political party. While the person buying the bearer bond will need to fulfil KYC requirements, the identity of the intervening entities will be unknown.
The ministry rejected objections raised by the RBI claiming, among other things, that they came late “at a time when Finance Bill is already printed” even though the RBI replied within two days! It would appear that comments of the financial regulator were sought after the Bill was finalised.
Even after amendments were made to the four laws through the Finance Act of 2017, the RBI governor flagged serious concerns about the Electoral Bonds Scheme on the grounds that it could easily be misused for money laundering, forgery and counterfeiting.
Documents accessed under the RTI Act show that the Election Commission of India, expressing its opposition to amendments made to laws for enabling the introduction of electoral bonds, contended that they will have an adverse impact on transparency in political party financing and would make it impossible for the ECI to ascertain whether donations received were in compliance with the statutory framework governing political parties. Further, the ECI warned that amendments to the Companies Act, which remove the cap imposed on companies to contribute no more than 7.5% of the average net profits in the preceding three financial years, opened up the possibility of shell companies being set up with the sole purpose of making donations to political parties. The Commission expressed its apprehension that the abolition of the relevant provision of Section 182 would lead to increased use of black money for political funding through shell companies.
These objections were particularly alarming given the amendments that were made to the Foreign Contribution (Regulation) Act, which enabled Indian subsidiaries of foreign companies to make donations to political parties. Electoral bonds, therefore, allow anonymous financing by even foreign entities opening Indian elections to the influence of foreign interests.
In violation of the pre-legislative consultation policy of the Union government, the draft of the Electoral Bond Scheme was not made public before notifying it. Information obtained under RTI law suggests that the proposal to hold consultations with political parties and seek public comments on the EB Scheme, which would have a far reaching impact on democracy in the country, was scrapped after a meeting with the prime minister. The views of political parties were sought without sharing a draft of the Electoral Bonds Scheme – the Congress, Communist Party of India and Bahujan Samaj Party objected and sought a copy of the same.
Even the objection raised by the legislative department of the law ministry the criteria laid down in the EB Scheme that parties need 1% of votes polled in order to accept bonds was a violation of the Representation of Peoples Act.
It is clear from records accessed under the RTI Act that the Union government did not hold meaningful pre-legislative consultation while introducing electoral bonds and rode roughshod on all concerns raised by regulators. Bonds of more than Rs 13,500 crore have been sold so far. They have consolidated the role of big money in electoral politics. Information obtained under the RTI Act shows that bonds with the highest denomination value of Rs 1 crore are the most preferred by donors.
Electoral bonds militate against every known principle of transparency and lend themselves to use by special interest groups, corporate lobbyists and foreign entities to acquire a stranglehold on the electoral process and governance at the expense of citizens. To ensure public trust in the electoral process in the country, we hope the Supreme Court scraps the bonds and upholds citizens right to know.
Anjali Bhardwaj and Amrita Johri are associated with the National Campaign for Peoples’ Right to Information and Satark Nagrik Sangathan. All the documented embedded in this article were accessed by Anjali Bhardwaj under the RTI Act, 2005.