Many questions have been raised about the mechanism of political funding in India following the recent Supreme Court judgment deeming the Electoral Bonds (EB) scheme unconstitutional due to its lack of transparency. Approximately ₹16,518 crore was received by the political parties in the form of bonds from FY 2018-24.

Before the EB scheme, a significant portion of donations occurred through other transparent means, ‘declared as received by political parties above ₹20,000.’ The total sum from FY 2013-23 donated to the political parties through this other mechanism is ₹7,726 crore, and part of this donation also included contributions from electoral trusts.

Political finance laws

In 2003, the Bharatiya Janata Party (BJP)-led National Democratic Alliance government introduced a law mandating political parties to disclose details of all donors if the donations were ₹20,000 or more to the ECI annually. Such donations are 100 per cent tax-deductible for individuals or corporations, incentivising donations through bank cheques.

The Election Commission of India (ECI) data shows that in FY14, approximately ₹309 crore was donated to political parties through the other mechanism. In the year of the 17th Lok Sabha elections, party funding increased to ₹1,247 crore in FY20. Subsequently, donations decreased to ₹1,101 crore in FY23.

Anonymous donations

In the book ‘Costs of Democracy: Political Finance in India,’ authors Eswaran Sridharan and Milan Vaishnav explain that parties are not required to disclose donations below ₹20,000, resulting in more anonymous contributions. According to the authors, “These anonymous donations constitute nearly 75 per cent of the income of six national parties.”

Out of the ₹7,726 crore donated through other transparent means in FY23, the BJP received 64.7 per cent donation, followed by the Congress, Bharat Rashtra Samithi, and Aam Aadmi Party, with 10.7 per cent, 3.3 per cent, and 3.1 per cent, respectively.

Corporate donations

Notably, the list of donors includes top corporate houses, with Prudent Electoral Trust (PET) emerging as the leading donor in FY23. PET contributed ₹256 crore to the BJP and ₹90 crore to BRS. Additionally, M/S MKJ Enterprises Limited disbursed ₹45 crore to the INC, while B G Shirke Construction Technology PVT Limited donated ₹35 crore to the BJP.

The Head of the Association for Democratic Reforms, Anil Verma, explains the transition from transparent to opaque political donations in India, “Party politics in India has become increasingly competitive over the years, leading to a rise in party expenditures for elections. To meet these growing expenses, parties often rely on resources generated from the corporate sector. This dynamic has resulted in the development of opaque funding mechanisms. Regardless of which political party is in power, they tend to utilize funding mechanisms to their advantage.”