The NDA government aims to clean up political funding through electoral bonds, but the move raises quite a few questions. Proposed in the general budget last year, the scheme for electoral bonds was notified recently with Union Fince Minister Arun Jaitley outlining its contours. Basically these bonds will be bearer instruments like a promissory or bank note that any citizen or corporate body with a KYC compliant bank account can purchase from specified State Bank branches. The bonds will be issued in multiples ranging from Rs 1,000, 10,000, 1 lakh, 10 lakh and 1 crore. After the buyer dotes the bonds to a registered political party of choice, the party will have to encash it within 15 days at the bank through its verified account. Jaitley has explained that the bonds will be shown in the balance sheet of the donor, but there will be no disclosure about the political party to which these have been doted; in turn, the political party in its annual return filed before the Election Commission will reveal how many bonds have been deposited in its account. The bonds will not bear the me of the donor — so donor details of the party will not be made public. It will be the bank that will have details of both the donor and the political party. “Which donor gave how much to a political party will not be told. Once that is told and the identity is known, the past experience has shown, as in the case of cheque dotions, then people will again go back and prefer to give by cash rather than allow clean money. Dotion by cheques has not helped significantly improve the situation,” the Fince Minister has said. This apart, the dotions would also be tax deductible. Regarding tax benefits from such dotion, the Fince Minister had stated last year after tabling the budget that donors will get tax deduction and the recipient political party will get tax exemption, provided returns are filed by the party concerned.
With banks given a central role after demonetisation to keep track of money trails, votaries of the electoral bond scheme are all praise for the government closing off the ‘cash route to political funding’. More importantly, it is being touted as a bold and innovative instrument to block the flow of black money into the kitties of political parties. The Fince Minister has further said that not disclosing the party to whom bonds have been given ‘will substantially help a lot of opposition parties’. “Because in case a disclosure is made, it will be in the favour of ruling party and not in favour of the opposition party. The fact that it is not known, people will be free to dote to any political party of their choice,” Jaitley has contended. However, opposition parties and a section of independent observers remain sceptical. The Congress party has already dubbed the hiding of donor mes “a regressive step” that will end up stifling transparency. The suspicion voiced by observers is that the government’s stress on anonymity and non-disclosure actually keeps out the people, particularly public spirited individuals and organisations, from knowing about who dotes how much to which political party. And it is such individuals and organisations who blow the whistle and move the courts whenever they smell something fishy or detect any hanky-panky. The electoral bond scheme straightaway excludes them from the picture. While the government claims that both the identities of donor and recipient political party will be kept secret, fears are being expressed that if this digital money trail is known to the bank, it will be known to the Fince ministry and thereby the government as well. There will thus be yet another ‘information asymmetry’ between those in power and those in opposition. Donors to other parties will be vulnerable to reprisal from the ruling party, while those who take the electoral bond route through the bank are more likely to favour the party in power. Some observers have also pointed out that thanks to the amended Companies Act, corporate bodies are now free to dote their profit without any upper cap (earlier 7.5 percent) to a political party, while keeping secret the me of the party or the amount doted. Overall, the suspicion remains that by replacing anonymous cash dotions with anonymous donors, the government has taken two steps forward and then a step backward. The system will thus remain opaque as before, which is a pity.