megha engineering

Electoral Bonds: Or the Story of How the Rich Buy Their Way Up

The electoral bonds scam has opened up the complex nexus between business and politics, making it visible for all to see – how favours are earned and exchanged by the top 1% even as over 800 million have to be grateful for getting ‘free’ rations.

Many reports on inequality in recent years clearly show that the gap between the rich and the poor has widened rapidly.

Even during the COVID-19 pandemic, when everything came to a standstill and people had neither work nor money, the rich kept getting richer while their profits skyrocketed. The country’s billionaires increased their wealth by 35% during the lockdown. Mukesh Ambani earned Rs 90 crore per hour while 24% of the country was earning just Rs 3,000 per month.

The country’s middle class shrank, while poverty spread its clasps.

Economists believe we are still struggling with the economic effects of the COVID-19 pandemic. The little recovery that is happening is being attributed to K-shaped recovery. That means the GDP is increasing, but only because of the consumption and economic activity of the top 20%. More luxury goods are being purchased in the country, while the sales of essential goods are constantly declining.

Now, if we put this widening gap between the rich and the poor with the data of electoral bonds, it gives us some insights into how the rich end up hoarding so much of the country’s wealth. Today, the richest 1% of people have 40% of the country’s total wealth.

Why the electoral bonds scam is an eye-opener

The electoral fund scam has opened up a complex nexus between business and politics, which shows how intertwined they are. Huge favours are being exchanged in the name of the ‘ease of doing business’.

By now, you must have heard the name of Megha Engineering. Started in 1989 with less than ten people, today it has a turnover of Rs 40,000 crore. It came in second place in giving donations through electoral bonds to political parties. The Megha group donated Rs 1,232 crore to political parties between April 2019 and November 2023.

Would it not have received anything in return for this donation? In April 2023, just a month after it donated Rs 140 crore, it got the Thane-Borivali Twin Tunnel Project worth Rs 14,400 crore.

Also read: As Media Continues to Expose Electoral Bond Issues, What’s Next?

The directors of this company also moved forward in the list of the global rich from the 800s to 500s. The wealth of P.P. Reddy and P.V. Krishna Reddy has increased by 53% and 51% respectively, and today both have assets worth $6 billion each.

This is not just about one company: there are many such companies which are said to have received favours in exchange for bonds.

An RTI inquiry revealed that out of the Rs 5,896 crore raised in the first eleven phases, electoral bonds worth Rs 1 crore accounted for more than 91%. It is obvious that poor people are not buying electoral bonds worth Rs 1 crore.

Then there is the story of corporate haircuts. The Insolvency and Bankruptcy Code (IBC) was passed in May 2016 with the objective of recovering the increasing debt of the corporate sector. Between the years 2016 to 2023, 7,325 cases of defaulters came under this.

The value of these loans till December 2023 was Rs 23.19 lakh crore. But out of that, only Rs 3.867 lakh crore has been recovered or is expected to be recovered. Meaning more than 80% discount is being given.

Who suffers such a huge loss? This money belongs to the common citizens who deposit money in banks and whose taxes run such a system. The Financial Accountability Network has come out with an extensive report on IBC, do read it to understand how IBC functions.

The myth of ‘self-made’ billionaires

On the other hand, there is the talk of self-made billionaires. The idea is that even you can become rich if you work hard and diligently.

But would you ever have this kind of money to buy deals and favours for your business? The public is being forced to work tirelessly, while a different game is being played on the other side.

Also read: Who Were the Top Buyers of Electoral Bonds Paying?

From time to time, lectures on a trickle-down economy are handed out, which means that some money will trickle down to your account too. But then you see your share snatched away in the middle by a trick like electoral bonds.

The only lesson learned from this is that if we want to save the wealth and resources of the country, we will have to adopt strict measures. Today, all over the world, people are talking about a wealth tax. There should not only be a wealth tax but also an inheritance tax on the rich.

Redistribution only way out

Economist Prabhat Patnaik estimated in 2020 that if we impose a 2% wealth tax on the richest 1% of the country, the country will earn an income of Rs 8 lakh crore, and that if a 33% inheritance tax is charged, an additional Rs 7 lakh crore can be secured.

This money can be rightfully invested towards health, employment and education.

The job of organisations like the World Equality Lab is to show us the way, but it is our government’s job to implement it.

Will the people who we elect with so much effort work for us? Or only for the rich who donate to them?

Kavita Kabeer is a writer and satirist, associated with the Centre for Financial Accountability.

Seven Points That Merit Investigations: The Electoral Bonds Saga Isn’t Over with Data Spilling Out

Companies newly formed or making losses donating vast sums of money, contracts awarded just before or after donations, SBI’s claims of not having data…and more.

Information made public by the State Bank of India and then the Election Commission of India, following orders of the Supreme Court, has revealed sordid details about the state of political funding of major parties. Placing this information in public domain is important but these revelations have raised deeper questions about corruption and the illegality that needs further investigation.

The Supreme Court would be best placed to monitor such a probe which should be conducted quickly.

There are at least seven issues that need further probing, and subsequent legal action.

1. Loss making companies donating vast sums of money through electoral bonds, or companies donating several times their profits. The February 15 order has deemed certain amendments to the Companies Act, 2013, and the Finance Act, which facilitated these contributions, as unconstitutional, and flagged concerns regarding the potential misuse of “shell companies” in making political contributions. This calls for an investigation into the source of these funds to probing if it is tantamount to cheating the shareholder of companies.

2. Newly minted – often months-old – companies, have contributed huge amounts to parties through electoral bonds. The Hindu reported that “at least 43 firms newly incorporated in the year 2018 or later have bought electoral bonds worth over Rs 384.5 crore.” Of them, four companies, all established in 2023 in Hyderabad, bought bonds worth crores of rupees, within months of being established. Nine firms in 2020 and eleven companies in 2021 were formed in the middle of the pandemic, and cumulatively purchased bonds worth close to Rs 100 crore, “in just one or two years after getting formed.” Were the firms started with the sole purpose of paying money to certain parties has to be probed.

3. Companies which were awarded major contracts coinciding with their purchase of electoral bonds. The ‘quid pro quo’ move deserves an enquiry under the Prevention of Corruption Act (POCA).

4. Companies which have donated money via electoral bonds only after they were raided by agencies like the ED, CBI and IT, and the cases against them have either stalled or withdrawn. An investigation in February found that 30 firms facing ED, IT probes “donated Rs 335 crore to the BJP.” The Wire reported on companies cited as dubious by the Ministry of Finance’s Financial Intelligence Unit (FIU), donating significant sums as electoral bonds and also coincidentally making their way out of the lists by the ministry in subsequent years.

5. Redemption of electoral bonds by a party even after their expiry. In order to allow the Bharatiya Janata Party (BJP) to encash expired electoral bonds worth Rs 10 crore, the Union government broke the official rules on the eve of 2018 Karnataka assembly elections, as per a report by The Reporters’ Collective. This needs investigation, and those who broke the law should be identified and prosecuted.

6. The claims made by SBI that it did not maintain matching data, or needed till June 30 to provide the data, deserves a probe to investigate the motives behind their attempt to mislead the Supreme Court.

As former Election Commissioner Ashok Lavasa wrote shortly before the SBI furnished the data, there were mixed signals emanating from India’s leading public sector bank. He wrote in The Hindu, that while Section 7(4) of The (now scrapped) Electoral Bond Scheme (EBS), 2018, said that 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”, the ‘designers’ of the EBS are also saying “that the bank could not have legally kept any record of the secret number on the bond issued to the purchaser (in keeping with the provision of anonymity enshrined in the EBS).

If this is the case, it would be almost impossible to establish any link between purchaser and recipient.” Lavasa is saying this inconsistency is critical. If the bank is now saying that the bond was “akin to currency”, then “how could SBI, when forced to disclosed to an enforcement agency, reveal the identity of the purchaser but limit the scope of the investigations only to the sources of funds? Does this not rule out the possibility of providing the donor-political party link, thereby eliminating the clue that would be vital to probe allegations of a quid pro quo?”

Former Finance Secretary S.C. Garg has added a double twist to this on the weekend, by castigating SBI for recording the unique alpha-numeric. He termed the bank’s actions in the electoral bonds case “completely unlawful and unexpected”. Speaking with the Indian Express, Garg said, “Doing so, it [SBI] had violated the anonymity promised to donors under the Electoral Bond Scheme, 2018.” It is the bond numbers that have enabled a match between the purchasers of the bonds with the political parties that encashed them.

The SBI must answer for inconsistencies in its position and statements to the court.

7. The Election Commission also dilly-dallied on the question of bonds. First, taking a position that the concept underpinning electoral bonds was flawed, to then saying all was well. It maintained a silence on the matter even as the Supreme Court issued its historic decision. In the press conference to announce the general elections, chief election commissioner, Rajiv Kumar, in contravention to the Supreme Court’s decision, batted to preserve the “confidentiality of the donor”.

What does that do to the institutional integrity of a key institution mandated to conduct elections?

Electoral Bonds: Many Owners of Big Media Are Also in List of Heftiest Political Donors

Owners of many large and influential news television networks, radio stations, newspapers, magazines, portals and OTT have emerged as political donors. Questions about media being an effective ‘fourth pillar of democracy’ have sprung up as its ties with big business and now political funding have been partially unveiled.

New Delhi: Significant groups who have shown up as electoral bond donors have a strong foothold in the media world. If pharma companies, infra companies and mining groups stick out in the list, so does big media.

Large sections of news media, often termed the fourth pillar of democracy and expected to function as a watchdog, have passed into the hands of India’s largest corporate groups. Advertisement-driven media has been compromising its independence gradually over the years.

However, the pattern emerging, of big media owners, who are also big business, now also some of the largest donors of hefty amounts to political parties, anonymously takes the problems of independence to another level.

The Wire explores some of the linkages between media, big business and political funding the SBI and EC data has revealed. Electoral bonds could be pointers to how the information ecosystem of our country is greatly influenced by whom it is meant to interrogate.

Qwik Supply Chain Private Limited: Rs 410 Crore

As reported by The Wire on March 15, Qwik Supply Chain Private Limited, a Mumbai-based company which bought electoral bonds worth Rs 410 crore, has strong links with Mukesh Ambani’s Reliance group. According to the company information available on Zauba Corp, the company’s two present directors are Vipul Pranlal Mehta and Tapas Mitra. According to Zauba Corp, Tapas Mitra, is also the director of Reliance Oil and Petroleum, Reliance Eros Productions, Reliance Photo Films, Reliance Fire Brigades, Ral Investment Private Limited, Reliance First Private Limited, Reliance Polyester, among others.

As per the data on the EC’s website, Qwik Supply Chain made its first purchase of bonds on January 5, 2022. The second batch of purchases took place five days later, on January 10. This was followed on November 11, 2022 and a year later on November 17, 2023. All electoral bond purchases were made in bonds of denomination of Rs 1 crore each.

The Reliance media footprint with CNBC-TV18 on television screens has fast morphed onto multiple levels of media. As per Reliance Industries, they are “one of India’s largest media houses, with an omni-channel presence, bringing authentic news and wholesome entertainment to diverse Indian audiences.”

Network18 Media & Investments (Network18) is India’s “only Media & Entertainment conglomerate with presence across the full spectrum of content genres – news, entertainment, sports, movies, and live entertainment.” They speak of being committed to more investments in News18.com, Moneycontrol.com, and Voot (an over-the-top or OTT media service). Jio Cinemas with the popular cricket streaming has further strengthened its dominance over the infotainment universe.

Of late, this group is said to be preparing for an even larger media footprint. On February 28, Reliance Industries, Viacom18 Media and The Walt Disney Corporation have entered an agreement to form a joint venture “that would merge the television and digital streaming businesses of Viacom18 and Star India and create an entertainment giant in India.” A joint statement put the valuation at approximately $8.5 billion.

There have been concerns about this becoming a monopoly. Variety magazine wrote that “a combination of the two – which include rival streaming platforms, India’s leading pay-TV platform and over 100 linear TV channels – has the potential to substantially re-shape the Indian media and entertainment scene and command a 40% market share.” The new venture “will have over 750 million viewers across India and will also cater to the Indian diaspora across the world,” the companies said.

‘Laxmidas Vallabhdas Asmita Mercha’: Rs 25 Crore

Individuals have also bought electoral bonds. Of the total of 374 individuals who have bought bonds worth Rs 384 crore, as per BusinessLine, Lakshmi Mittal topped the list, but at number two is Laxmidas Vallabhdas Asmita Mercha, as per the SBI list, one of two persons who has bought bonds worth Rs 25 crore each. Assumed to be a mis-spelling for Laxmidas Vallabhdas Merchant, who is Group Controller of Reliance Industries Ltd and listed as a director with Reliance Life Sciences, and many more Reliance companies. The Reporter’s Collective has identified at least six of the companies he is director in, which enabled Reliance to takeover the media group, Network 18. Asmita Merchant is “related to” Laxmidas V. Merchant, as per public information available, analysed by the Collective.

The bonds bought by this individual donor were of Rs 1 crore each; all 25 bonds purchased on the same date, November 17, 2023.

In another instance of how different business groups exercise indirect hold over media groups, a company, Media Matrix Worldwide, in which the Reliance group has a small stake owns MN Media Ventures which purchased electoral bonds worth Rs 5 crore in November 2022, and also NexG Devices which spent Rs 35 crore on bonds in May 2019 and November 2022.

One of the board members of NexG Devices is Surendra Lunia, former Mukesh Ambani associate who sold his 29.18% stake in NDTV held by Reliance to the Adani group. This allowed the Adani group to do a hostile takeover of NDTV last year.

Now, Lunia also serves as a board member in Infotel Business Solutions, Infotel Enterprises, and Mankind Pharma which together with NexG made donations worth Rs 79 crore through electoral bonds.

Sun TV network: Rs 10 Crore

In its sealed cover declarations to the Election Commission, which were made public on Sunday, March 17, the DMK has declared that it received Rs 10 crore in donation from Sun TV Network Limited. This was received, it said, between April 5, 2021 and January 11, 2022. This was part of a haul of Rs 306 crore in this span of time.

Tamil Nadu-based Sun TV was founded by Kalanithi Maran in 1993. Two radio stations run by this mega media house, bought Rs 7 crore worth of electoral bonds on April 3, 2021. Kal Radio Limited and South Asia FM Limited purchased bonds worth Rs 3.5 crore and Rs 3.5 crore, respectively in different denominations. Sun distribution network bought three bonds of Rs 1 crore each on the same day. Assembly elections for Assam, Kerala, Puducherry, Tamil Nadu and West Bengal were being held at the time. Incidentally, Tamil Nadu, Kerala and Puducherry voted three days after these bonds were bought.

Sun TV has 35 TV channels in six languages. It claims to reach 140 million Indian households and also has a footprint across 27 countries. It has 69 FM radio stations, three daily newspapers and six magazines. It is one of the largest DTH (Direct To Home Satellite TV) service providers in India. It has a film division called Sun Pictures. The group also owns the SunRisers Hyderabad team in the Indian Premier League (IPL) & SunRisers Eastern Cape in the South Africa T20 League.

Megha Engineering: Rs 966 Crore

One of the top two donors through electoral bonds was Megha Engineering and Infrastructure Ltd, which incidentally also owns, albeit indirectly, one of the biggest television news networks TV9Bharatvarsh. The Hindi news channel is owned by Associated Broadcast in which the infrastructure giant is a majority stakeholder.

The channel is known for its pro-government coverage, and has mostly underplayed the coverage of the electoral bonds. According to the ECI data, Megha Engineering spent Rs 966 crore on electoral bonds between April, 2019 and January 2024. The figure may be higher if we include its unpublished donations in 2018-19.

Media groups owned by corporate groups often function as either a prestige project or a lobbying and a pressure group for its original business interests. By now, it is public knowledge that Megha Engineering has bagged multiple central and state infrastructure projects running into thousands of crores over the last few years.

In one of its recent stories, the News Minute described how electoral bonds was covered in TV9 Bharatvarsh:

Take TV9 Bharatvarsh, where Samajwadi Party spokesperson Sunil Sajan said “no big journalist” was speaking about electoral bonds or whether central agency action had influenced their purchase. “Aayega toh Modi hi, par kaise aayega Modi?” he asked. (“It will be Modi who wins, but how will he win?”). In response, anchor Gaurav Agrawal turned the discussion around to ask panellists how Modi might win the upcoming polls.

Sanjiv Goenka Group: Rs 609 Crore

The companies associated with industrialist Sanjiv Goenka that have spent hugely on electoral bonds, too, have a large media footprint. The Sanjiv Goenka group donated Rs 709 crore – Rs 609 crore through electoral bonds and Rs 100 crore through electoral trusts – in political funding since May 2019.

ECI data reveals that the Sanjiv Goenka group bought electoral bonds through its five companies – Haldia Energy Ltd, Dhariwal Infrastructure Ltd, Philips Carbon Black Ltd, known as PCBL from 2022 onwards, Crescent Power Ltd, and RPSG Ventures.

RPSG Ventures that spent Rs 3 crore in electoral bonds directly owns Open, an English weekly magazine, Editorji, a digital news platform, and Fortune India. The last few years have seen Open taking a decidedly pro-BJP stand. The Open Media Network removed its political editor Hartosh Singh Bal, who was critical of the Narendra Modi government. Its former editor Manu Joseph had then claimed that Sanjiv Goenka had told him that Bal’s views was “making a lot of political enemies” for the business group.

Besides these news platforms, the group also owns lifestyle magazines like Esquire, and the to-be-launched Hollywood Reporter.

Yet another curious case is of the Goa-based influential business group Dempo Industries. The company, along with its subsidiaries, spent Rs 1.5 crore on electoral bonds. The company, which has interests in ore mining, shipbuilding, food processing and other things owns the Navhind Times, a leading daily in Goa and Navprabha, a Marathi daily.

Interestingly, the company is also under the scanner of the Enforcement Directorate.