QUESTION : How electoral bond scheme can play role in preventing black money in elections and the issues with the electoral bond scheme? Critically examine the effectiveness of electoral bonds in ensuring transparent political funding and suggest alternatives?
NEEDED: FULL DISCLOSURE ON ELECTORAL BONDS
WHAT ?
- Electoral Bond
WHY IN NEWS ?
In 2014, the Delhi High Court held that both the Congress and the Bharatiya Janata Party (BJP) were guilty of illegally accepting donations from a foreign company.
BACKGROUND :
• The Delhi HC in 2014 held that both parties were guilty of illegally accepting donations from two companies registered in India but whose controlling shareholder was Vedanta, a foreign company.
• The court held that this was in contravention of the FCRA 1976, as the donations accrued from “foreign sources” within the meaning of the law.
• In 2016 and 2018, the government amended the FCRA through the annual Finance Bills, to retrospectively legalise the violations.
• The amendments and subsequent changes brought in by the current government enabled;
o New and regressive pathways that afford full anonymity to corporate and foreign political donors.
• The ADRs (NGO) PIL challenges electoral bonds as unconstitutional.
o In March 2021, the Supreme Court refused to stay the sale of electoral bonds before the West Bengal elections.
o The judgment listed several documents which supposedly establish a paper trail on donations.
All that is required is a little more effort to cull out such information from both sides (purchaser of bond and political party) and do some match the following.
• There are close to 25 lakh potential donors comprising just companies and firms.
o This includes about 12.6 lakh active private limited companies as of January 31, 2021
• Recently in an RTI reply, the State Bank of India (SBI) sold electoral bonds worth ₹695.34 crores, when the Tamil Nadu, Puducherry, West Bengal, Assam and Kerala polls were in full swing.
o According to the RTI reply, the amount sold was the highest-ever for any Assembly elections since the scheme started in 2018.
o The SBI declined to name the political parties that encashed the bonds, citing it was “third party personal information” that was exempted under the RTI Act.
o The bank also declined to share the details of how much commission it had earned from the sale of bonds since 2018, giving the reason that the information was of “commercial confidence in nature” and its disclosure would “harm the competitive position of the bank”.
o However, SBI was the only bank authorised to sell electoral bonds by the government.
CONCERNS :
• A new form of anonymity:
o The Supreme Court downplayed the concerns of the corrupting influence of anonymous corporate and foreign money.
o Earlier, only profit-making domestic companies could contribute to political parties;
Now loss-making companies can too.
o Earlier, foreign companies or companies where the controlling stake was held by a foreign company couldn’t contribute;
Now they can too.
• In 2017, the then Finance Minister said anonymous cash donations to political parties would be reduced from ₹20,000 to ₹2,000 to ensure greater transparency in political funding.
o However, the concurrent introduction of electoral bonds brought a new form of anonymity to thousands of crores of donations.
o It drastically reduced public and legislative oversight.
• The Right to Information (RTI) Act of 2005 enables easier access to information held by public authorities.
o No ordinary person has the resources to navigate documents on obfuscating government websites or pore over income tax returns.
o The few civic and non-profit organisations that attempt to simplify information to enable accountability have been systematically delegitimised.
• Suggested, “match the following” is incorrect for three reasons.
o If we set aside individual donors and focus just on registered entities, we will find that the full scale of registered entities is unknown.
o Even if registered companies filed annual financial statements, many do not disclose political donations.
o Crucially, political parties do not need to disclose their electoral bond donors either.
The political parties are not even supposed to know their electoral bond donors.
The only requirement is the annual audit reports with a total of all donations received via electoral bonds.
These reports are submitted with great delays.
• E.g., The audit reports for 2019-20 of major national parties were made available on the Election Commission’s website only in June 2021.
o Even if these reports are submitted on time, there is no way to match a donation of a company to that received by a political party as only aggregate amounts are available.
• Firms, unlike companies, have no regulatory mandate to submit their annual reports except for filing their annual tax returns, since their functioning is regulated by Acts other than the Companies Act of 2013.
o Conveniently, the Finance Bill of 2017 amended Section 182 of the Companies Act of 2013 to remove the requirement for declaring disaggregated donations to political parties.
• Electoral bonds give political power to companies, wealthy individual donors, and foreign entities;
o Thus diluting the universal franchise of one voter-one vote.
o Every vote is not equally valuable if companies can influence policies through hidden donations.
WHAT IS AN ELECTORAL BOND ?
• It’s a bearer instrument like a promissory note (Similar to a banknote that is payable to the bearer on demand and free of interest).
• The scheme allows any Indian citizen or company to purchase the bonds sold by the SBI in denominations of ₹1,000, ₹10,000, ₹1 lakh, ₹10 lakh and ₹1 crore (without any upper limit) and give them to political parties anonymously.
• The bonds are available for purchase by any person (who is a citizen of India or incorporated or established in India) for a period of ten days each in the months of January, April, July and October as may be specified by the Central Government.
o The individual can buy the bond, either singly or jointly with other individuals.
o The donor name is not mentioned on the bond.
• It is redeemable in the designated account of the registered political party.
o Registered under Section 29A of the Representation of the People Act, 1951 and which secured not less than 1% of the votes polled in the last General election to the House of People or the Legislative Assembly of the state are eligible for such bonds.
• The bond is valid for 15 days from the date of issue and no payment will be made after the expiry of the bond.
RTI ACT 2005:
• It empowers ordinary citizens to question the government and its work.
• This has been widely used by citizens and media to uncover corruption, progress in government work, expenses related information, etc.
• The genesis of RTI law started in 1986, through the judgement of the Supreme Court in Mr. Kulwal v/s Jaipur Municipal Corporation case:
o In this case, it was directed that freedom of speech and expression provided under Article 19 of the Constitution clearly implies the Right to Information, as without information the freedom of speech and expression cannot be fully used by the citizens.
THIRD-PARTY INFORMATION UNDER RTI ACT 2005 :
• Section 2(n) of the RTI Act 2005 defines ‘Third Party’ as a person other than the citizen making a request for information and includes a ‘public authority’.
o If an RTI application asks for any information other than Appellant or Respondent, information cannot be provided until the ‘third party’ consents to disclosure are given.
• Section 11 (1) the Act provides the procedure to access third party information wherein the appellant needs to request for the third party’s consent after which the CPIO will produce a written request to the third party and within a stipulated time period obtain their response.
• Unless the public information officer sees a ‘larger public interest’ in the disclosure of such information, it cannot be revealed.
EXEMPTION FROM DISCLOSURE OF INFORMATION UNDER RTI ACT 2005:
• Under Section 8(1) and Section 9 of the Act:
o Unless the public authority is able to demonstrate that information sought for falls under any of the exempted categories of information, it would be bound to provide the information and that reasons for rejection of requests for information must also be clearly provided.
o EXEMPTIONS ARE :
Information of messages intercepted in the interests of the sovereignty and integrity of India.
Relating to military movements and operations.
Information relating to ammunition issued to police officers during a specific time period.
Strategic defence secrets plans.
Information published during a conflict.
o Disclosure of information about working, regulations, exchange rates, interest rates, taxes etc. of financial institutions is not under exemptions. However such information in some cases could harm the national economy.
o This section says that lower-level economic and financial information, like contracts and departmental budgets, should not be withheld under this exemption.
WAY FORWARD :
• Companies and political parties could exercise moral leadership and voluntarily disclose the identity of recipients and donors.
o As the Jharkhand Mukti Morcha recently did.
• The audit of the account of the National Parties can be done by the Comptroller and Auditor General of India and disclosed in a time-bound manner.
• There is a need for effective regulation of political financing along with bold reforms to break the vicious cycle of corruption and erosion of quality of democratic polity.
• It is crucial to plug the loopholes in the current laws to make the entire governance machinery more accountable and transparent.
• Voters can also help bring in substantial changes by demanding awareness campaigns. If voters reject candidates and parties that overspend or bribe them, democracy would move a step higher.
CONCLUSION :
The government should take into account the distorting effect of the electoral bonds scheme and take measures to remove the provisions in the scheme that leaves the scope for its misuse.
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