The Indian government has launched a new form of electoral funding which aims to enhance the transparency of party funding and political donations.
In the new scheme, donors will purchase electoral bonds from India’s biggest state-owned banks creating paper records, replacing the current practice of cash donations to political parties, which Finance Minister Arun Jaitley believes will make political funding more transparent.
However according to critics the electoral bonds scheme will make no difference, and the public and the country’s election commission will still have not have access to the source of most of the money that comes in the various party coffers.
India’s Electoral Financing Opaque
Political financing in India is known to be opaque. A non-profit organisation based in Washington DC Global Integrity, ranking India 42nd out of 54 countries in its 2014 report. On the various transparency metrics studied in its survey India scored just 31 out of 100 on these metrics, just ahead of Bolivia but six ranks below neighbouring Pakistan.
Jaitley released the details of the electoral bond scheme on January 2. Under it, those wishing to donate to political parties will be able buy bonds in denominations ranging from 1,000 rupees to 10 million rupees from branches of state-owned State Bank of India.
The parties receiving these bonds can cash at the same bank, which in theory will be creating a paper trail of the donors and the amount they donated.
Individual cash donations to political parties have been limited since February 2016 to 2,000 rupees, dropping from the previous limit of 20,000 rupees.
Anonymous Donations Allowed Under New System
Jaitley defended the bond scheme in a Facebook post recently, stating parties often accepted large sums of “unclean” or “black” money. He emphasised that the electoral bond scheme will help bring “total clean money and substantial transparency” to the system.
The scheme however permits anonymous donations. The electoral bonds don’t bear the names of person donating, and parties are not required to disclose the donor names in their filings to the election commission.
The companies who have donated are also not required to specify the parties to which they have donated in their annual reports.
Such provisions for anonymity is a fundamental problem in Indian political financing, according to Anil Verma, head of the New Delhi-based non-profit Association for Democratic Reforms (ADR).
While the law requires parties to report the source of donation of over 2,000 rupees (or 20,000 rupees before February 2017), in reality, most parties fail to do so.
Typically reports filed by the parties with the election commission are sparse and incomplete. Furthermore, the commission doesn’t audit party finances, and all governments have allowed political parties to remain exempt from India’s Right to Information law .
Verma pointed out that while the information regarding donations is not available with the public or the commission, the State Bank Of India and consequently the government in power will be able to access such information, which can open up possibilities for harassment of opposition parties or the donors .
Another issue that is not tackled by the new scheme is that of parties fielding rich candidates so as to ensure that they spend their own money for campaigning.
ADR has repeatedly shown in its analyses of various campaigns that spending in such “self-funded” campaigns is often more than the mandated limit.
Verma noted that there was limited response from opposition parties to the announcement, since “every political party knows these bonds will do very little to change funding patterns.”