Electoral bonds may lead to black money use: EC to SC

The Election Commission has told the Supreme Court changes in the law allowing electoral bonds and removal of a cap on donations even from foreign sources to political parties would lead to increased use of black money in the poll process. Besides, it would have serious repercussion and impact on transparency on funding to political parties and result in influencing of Indian policies.

“Any donation received by a political party through an electoral bond has been taken out from the ambit of reporting. It would be difficult to ascertain if the political parties received donations from government companies or foreign sources,” the poll panel said in an affidavit.

The Commission has shot off a letter to the government on March 15 seeking further amendments in the laws related to political funding and that of candidates.

It said the amendments introduced through the Finance Act, 2017 would lead to increased use of black money for political funding through shell companies.

“The Commission is of the view that the earlier provisions ensured that only profitable companies with proven track record could provide donations to political parties and accordingly, it is recommended that this provision may be re-introduced,” it said.

The EC said it had already informed the Law Ministry on May 26, 2017 that “certain provisions of the Finance Act, 2017 and corresponding amendments carried out in the Income Tax Act, the Representation of People Act and the Companies Act will have serious repercussion/impact on the transparency aspect of the political finance/funding of political parties.”

The amendments have brought a change in the existing regime that barred donations from all foreign sources. “This would allow unchecked foreign funding of political parties in India which could lead to Indian policies being influenced by foreign companies,” the EC said.

The poll panel said it has time and again voiced the importance of the declaration of donations received by political parties and also about the manner in which funds were expended by them for better transparency and accountability in the election process.

The apex court has fixed April 2 as the date for hearing on a batch of petitions filed by NGO 'Association for Democratic Reforms' and CPI(M), challenging the validity of the amendments into the Reserve Bank of India Act, the Representation of the People (RP) Act, the Income Tax Act, the Companies Act and the Foreign Contribution Regulation Act (FCRA) by the Finance Acts of 2016 and 2017.

The petitioners contended the amendments have removed the cap on political donations by companies and legalised anonymous donations by introducing the use of electoral bonds which can be issued by any scheduled bank for the purpose of funding any party.

They also said that by amending the RP Act, the donations made by way of electoral bonds are exempted from disclosure to the ECI and claimed that this would "adversely affect electoral transparency and encourage corrupt practices in politics"

The Lok Sabha polls begin on April 11.