Political funding, as opaque as ever

The proposals made in the Union Budget to reform the existing methods of political donations will not help clean up the system of political funding in the country. Finance Minister Arun Jaitley has made two proposals. One is to reduce the cap on anonymous donations to parties from Rs 20,000 to Rs 2,000. The other is for issuance of electoral bonds by banks which donors can buy and transfer to parties of their choice. The parties can redeem the bonds from the banks. Most of the donations to parties now are from unknown sources. Under the existing law, parties have to disclose the identity of donors if the donations exceed Rs 20,000. They get around this rule by splitting up the donations into amounts less than Rs 20,000. If the new proposal becomes law, they will split them further into smaller amounts of less than Rs 2,000 and find more fictitious donors. They will only have to deploy more accounting manpower for that. The ceiling should be removed altogether, and every rupee that parties receive should be accounted for. Otherwise, the provision will only be misused.

The second proposal, which is claimed to be the first of its kind in the world, is equally faulty. The identity of the buyers of bonds will not be known to the public. Only the banks, the RBI and the government will know the buyer’s identity. This may favour ruling parties and disadvantage opposition parties in many ways. Bonds may be used to make even big donations to parties without the public coming to know about it. This in fact negates the claimed purpose of lowering the ceiling to Rs 2,000. It makes big donations by unknown persons legitimate. Any provision that allows donors to conceal their identity is wrong, whatever be the amount of the donation. The bonds also do not preclude donations in the form of cash.

Transparency and accountability are the most important requirements of political parties’ finances. The people have the right to know where the funds come from and how they are used, because political corruption has much to do with the funding of parties. The two proposals do not address the concerns about such funding. The government has also said that filing of timely returns by parties will be made mandatory. But no penalty has been prescribed for default. It is difficult to escape the impression that the scope for misuse of provisions and the loopholes in them are deliberate. The rules in any case are only about the declared income of parties. It is well known that the actual income and expenditure are much more than that.
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