Electoral Bonds and Politics in India
How many times have we seen in Bollywood movies how a crooked NETA (minister) and a Don have partnered to win elections. The Don in Bollywood movies would generally be a businessman with the backing of a powerful minister. In return, the Don would carry out political propaganda and electoral booth hacking and funding during elections for the minister. These reel life stories are a real-life political scenario in India.
Funds of Political parties during the election campaign have always been questionable as we never get the information about the sources of political funding. The funding may be from corporate, individuals, foreign investors etc. which seems legit. Again how much money are they offering for political funding and how they are able to provide such amount to any political party has never been transparent. Moreover, there are numerous accounts of fake currencies being distributed to Below Poverty Line people to please and gain their vote at the time of the election.
Prime Minister Narendra Nodi led NDA government came into power in 2014 with a promise to eradicate the cancer of black money that was eating away Indian Economy at that time.
The NDA government kept their promise by signing several agreements with central banks of other countries for sharing of information of bank accounts of Indian keeping abroad. And, asked businessmen, bureaucrats, ministers to declare their unaccounted wealth within a time period where they can escape criminal prosecutions by paying a heavy tax for their unaccounted wealth. It was a success and also a good move as most industrialists, businessman got the window to escape from defamation and criminal prosecutions without harming their growth and above all economy of India.
The second was demonetization where all fake currencies entering India from Pakistan, Nepal, Bangladesh was rendered valueless which was also a big blow to ministers, businessmen, industrialists who had stored money in form of Rs 500 and Rs 1000 had to dispose of the unaccounted wealth. Even stone pelting in Kashmir stopped after demonetization or in other words terror funding suffered a mighty blow. Even unaccounted political funding took a blow.
Still, the funding of political parties has never been transparent. In order to bring transparency in political funding government has proposed a new scheme called “Electoral Bonds”.
What are Electoral Bonds?
An electoral bond is designed to be a bearer instrument like a Promissory Note - in effect, it will be similar to a banknote that is payable to the bearer on demand and free of interest. It can be purchased by any citizen of India or a body incorporated in India.
How can it help bring transparency?
Political parties need donations to function. These donations, big or small, come from a range of sources from political workers, small business people and even large industrialists.
The age-old practice of this donation system is to take donations in form of cash and spend the donations for party works in form of cash. The sources of these funding are generally anonymous or fake companies. The funding amount was never disclosed. But, most political parties seem content with these type of funding. This new scheme will cleanse and make the funding process and resources transparent.
A major step was taken during the first NDA Government led by Shri Atal Bihari Vajpayee. The Income Tax Act was amended to include a provision that donations made to political parties would be treated as expenditure and would thus give a tax advantage to the donor. If the political party disclosed its donations in a prescribed manner, it would also not be liable to pay any tax. A political party was expected to file its returns both with the income-tax authorities and Election Commission. It was hoped that donors would increasingly start donating money by cheque. Some donors did start following this practice but most of them were reluctant to disclose the details of the quantum of donation given to a political party. This was because they feared consequences visiting them from political opponents. The law was further amended during the UPA Government to provide for “pass-through” electoral trust so that the donors would park their money with the electoral trusts which in turn would distribute the same to various political parties. Both these reforms taken together resulted in only a small fraction of the donations coming in form of cheques.
Now, in present NDA government regime efforts are being made to make the funding system more transparent and systematic. A donor could enjoy a tax deduction by donating in cheque. Donors were also free to donate money online to political parties. A cash donation to a political party could not exceed an amount of Rs.2000/-. In addition, a scheme of electoral bonds was announced to enable clean money and substantial transparency being brought into the system of political funding. A donor can purchase electoral bonds from a specified bank only by a banking instrument. He would have to disclose in his accounts the amount of political bonds that he has purchased. The life of the bond would be only 15 days. A bond can only be cashed in a pre-declared account of a political party. Every political party in its returns will have to disclose the amount of donations it has received through electoral bonds to the Election Commission. The entire transactions would be through banking instruments. As against a total non-transparency in the present system of cash donations where the donor, the donee, the quantum of donations and the nature of expenditure are all undisclosed, some element of transparency would be introduced in as much as all donors declare in their accounts the amount of bonds that they have purchased and all parties declare the quantum of bonds that they have received. How much each donor has distributed to a political party would be known only to the donor. This anonymity, in this case, is a necessary evil as disclosure may bring trouble from opposition parties.
How to use Electoral Bonds?
The bonds will be issued in multiples of Rs1,000, Rs10,000, Rs1 lakh, Rs10 lakh and Rs1 crore and will be available at specified branches of State Bank of India. They can be bought by the donor with a KYC-compliant account. Donors can donate the bonds to their party of choice which can then be cashed in via the party's verified account within 15 days.
Prerequisites for availing Electoral bonds by a political party:
Every party that is registered under section 29A of the Representation of the Peoples Act, 1951 and has secured at least one percent of the votes polled in the most recent Lok Sabha or State election will be allotted a verified account by the Election Commission of India. Electoral bond transactions can be made only via this account.
The bonds will be available for purchase for a period of 10 days each in the beginning of every quarter, i.e. in January, April, July, and October as specified by the Central Government. An additional period of 30 days shall be specified by the Central Government in the year of Lok Sabha elections.
India is booming in economic growth and is projected to surpass the United Kingdom and France to become the fifth largest economy in the world in 2018. But, corruption, black money, and fake currency are slowing down the pace of economic growth. Government is no doubt, making all types of efforts and taking necessary steps to counter these illegal activities. But, changes can really be seen when we start to cooperate with the government. English historian Thomas Fuller once quoted “charity begins at home” which means if we want to see a change in the world we should start with ourselves, like that, a change is required in our mindset and action towards corruption which should be “do no corruption and tolerate no corruption “, so that we can see an economically strong and poverty free India.
Reference: Finance Ministry page.