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Paisa, Polls and Politics Part V: Ahead of 2019 Polls, Electoral Bonds Make Political Funding for Parties All The More Opaque

Among the most questionable methods of unknown sources of funding are electoral bonds which were launched by the Union government through the Finance Bill, 2017.

Ghazanfar Abbas | News18.com

Updated:February 14, 2019, 7:54 AM IST
Paisa, Polls and Politics Part V: Ahead of 2019 Polls, Electoral Bonds Make Political Funding for Parties All The More Opaque
BJP supporters at Prime Minister Narendra Modi's public rally in Bengaluru. (File photo: PTI)

"News18New Delhi: Reforming the Indian electoral process by bringing in more transparency in political funding has been a demand for a long time.

However, as the 17th Lok Sabha elections for 2019 are due in about three months, a thought that one keeps pondering about is how the political funding received through unknown sources will affect the polling?

Among the most questionable methods of unknown sources of funding are electoral bonds which were launched by the Union government through the Finance Bill, 2017.

The second is through foreign donations following an amendment in the Foreign Contribution (Regulation) Act (FCRA), 2010, by the Centre in 2016.

The then finance minister Arun Jaitley, in his note, had stated the government’s motive for introducing electoral bonds was to bring in more transparency in electoral funding.

However, there are indications that electoral bonds and some other steps taken by the present BJP government will impact the general elections adversely.

The Finance Bill 2017 declared that the maximum amount of cash donation to a political party from one person would be Rs 2,000, reduced to 10% of the earlier limit of Rs 20,000.

The bill allowed identity of donors of amounts below Rs 20,000 to be kept hidden, while according to earlier provisions, political parties had to declare the names of donors who contributed even less than Rs 20,000 in cash.

Though parties can receive above Rs 2,000 donation in cash, it is mandatory to keep the records of donors. The bill also lifted the cap on corporate contributions from 7.5 per cent of the net profit of a company’s past three financial years and removed the obligation to report such contributions in the company's profit and loss account.

Since the passage of the bill, the common funding sources available for any political party are electoral bonds (worth Rs 1,000 to Rs 1 crore), besides foreign contribution, trusts, businessmen and voluntary donations.

Funding from Unknown Sources and Electoral Bonds (Year 2017-18)

According to a report of the Association of Democratic Reforms (ADR), the Bhartiya Janata Party (BJP) accounted for 80% (Rs 553.38 crore) of the total income (689.44 crore) of national parties from unknown sources in the financial year 2017-18. The report said electoral bonds worth Rs 222 crore had been purchased during the period.

The BJP was the biggest beneficiary of the electoral bond, bagging 94.5% of the bonds worth a little over Rs 210 crore for 2017-18.


The government had authorised some selected branches of State Bank of India (SBI) to sale electoral bonds in multiples of Rs 1,000, Rs 10,000, Rs 1 lakh, Rs 10 lakh and Rs 1 crore within a window of 10 days.

The first phase was opened in March 2018 and till December 2018, total seven phases were opened? for the issuance of the bonds. Hence, the 2017-18 financial year report reveals figures of electoral bonds of sold in first phase (March2018) only.

The first nine months of the financial year 2018-19 show that Rs 834.7 crore worth of electoral bonds have been purchased, nearly four times the amount in 2017-18. So, the final figures will reflect only in the 2018-19 audit reports of political parties.

After electoral bonds, the BJP raised a total of Rs 167 crore from electoral trusts in 2017-18, with Rs 144 crore from Prudent Electoral Trust, the biggest source of donations for the party.

Besides, according to the Election Commission, BJP got 93% share (Rs 437.04 crore) in 2017-18 donations in the above Rs 20,000 category. The Congress came a distant second with 5.67% (Rs 26.66 crore) of the total known donations to national parties.

How Much Money Parties Are Going to Spend in 2019?

As per the EC’s cap on expenditure by individual candidates, a candidate is allowed to spend Rs 70 lakh in 533 big Lok Sabha constituencies and Rs 54 lakh in 10 small constituencies.


An overview of the last three Lok Sabha elections shows that the collection and expenditure by political parties have been significantly increasing.

The 2004, 2009 and 2014 Lok Sabha elections cost the government exchequer about Rs 1,114 crore, Rs 1,483 and Rs 3,870 crore, respectively. In this view, the 2019 general elections are likely to be most expensive.


Transparency Issue Becomes Bigger

Talking to News18.com, ADR head Major General Anil Verma (Retd.) said that after the introduction of electoral bonds and changes in some other acts by the government, such as RBI, Income Tax and FCRA, transparency issue has become concern.

“In the name of transparency, the government had introduced the electoral bond system which hides the identity of the donor. The RBI and Income Tax acts and FCRA have also been amended. The clause of corporates having to be a pocket-making company and average of three years’ profits was to be taken to come to that 7.5% has also been removed. So the corporates can donate any amount. The electoral bonds are like a promissory note and it has to be purchased only through the state banks. Hence, only SBI, RBI and the government know about the donor’s identity,” Verma said.

“From the latest data which is available, it is evident that they are being sold with the highest denominations. Electoral bonds with lower denominations are not being purchased. This means that the corporates are buying it,” he said.

In June 2018, the State Bank of India (SBI) had refused to disclose details of buyers of electoral bonds citing it as personal information.

Earlier, the electoral trusts donations above Rs 20,000 were reflected and paper trail was available because they had to give details of the amount donated along with bank and donor’s details.

“What we have to see now is will there be reductions in the donations via the electoral trusts,” he said.

About the unknown funds, Verma said, “Over 50% of the donations collected by national parties have been coming from unknown sources. And this is not a good thing for democracy because people have a right to know who is donating to which party.”

Vipul Mudgal, director of NGO Common Cause that works for electoral reforms in the country, said, “If a company is not earning any profit and donating money, it means it is entering into a deal with the government.”

ADR and Common Cause had jointly filed a PIL in the Supreme Court challenging electoral bonds and sought directions from the apex court to strike down the amendments made through Finance Bill 2016 and 2017 both.

The PIL alleged that such wide-ranging amendments in The Representation of Peoples Act, 1951, The Reserve Bank of India Act, 1934, The Income Tax Act, 1961 and The Companies Act, were brought in illegally as a “Money Bill”, to bypass the Rajya Sabha.

The SC had issued notices to the Centre and Election Commission (EC) for their response over the PIL. The matter is pending before the apex court.

Citing an example of the US presidential elections which were allegedly affected due to foreign interference, Mudgal said, “The US is learning the hard way that there have been suspicious attempts from Russia and China affecting their election. We already had a provision that nobody else can affect our elections.”

He said, “Instead of making electoral bonds transparent, the government made it anonymous. The biggest problem with the electoral bonds is that the country does not know what is being done. It is unfortunate that even the opposition parties did not do the needful. The BJP is the main culprit and all other parties didn’t oppose it. This is the most retrograde step in India’s electoral politics since 1947. Now the political parties can receive funds from foreign countries because the government has opened the back door.”

Election Commission and Accountability of Parties

When the electoral bonds were launched, the EC had also raised its concerns about it. Every political party in its returns will have to disclose the amount of donations it has received through electoral bonds to the EC.

Mudgal Said, “The EC’s main job is to conduct fair elections. Democratic institutions can’t go beyond their working domain.” However, he suggested that there should be a sincere discussion among all the parties in Parliament.​

(This is the final part of News18.com’s special series ‘Paisa, Polls and Politics’ on election financing in the world’s largest democracy.)

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