Half-way house

Ever since the Modi government announced the launch of electoral bonds in a bid to cleanse the system of political funding and enhance transparency in its 2017 Budget, there has been much speculation about how the new instrument would achieve these objectives. The uncertainty is now at an end with the finance ministry specifying the features of these bonds. The features suggest that while electoral bonds may indeed do a lot to curb the rampant funnelling of unaccounted money into Indian politics, this may be achieved at the cost of lower transparency to the voter.

There’s no doubt that, from the taxman’s perspective, electoral bonds present a leak-proof alternative to anonymous cash donations that used to dominate political funding (cash donations beyond ₹2,000 were barred in the 2017 Budget). Electoral bonds will be available only from one bank (SBI) and buyers will have to meet KYC requirements, ensuring that political parties cannot accept unaccounted money through this route. They can be used only to donate to registered political parties, thus curbing the flotation of bogus parties with the sole purpose of laundering wealth. Their structuring as interest-free bonds with a limited shelf life of 15 days will also ensure that they aren’t used as an anonymous currency alternative to store wealth. While these features may be essential to curb money-laundering through electoral bonds, restricting such donations only to parties that won 1 per cent of the votes in the preceding election appears superfluous, and may pose a formidable entry barrier to new contenders in the political arena. However, an even bigger concern, and one that has been voiced by many pro-democracy activists, is the opacity they encourage in big-ticket electoral funding by protecting the anonymity of the donor. Under earlier tax laws, political parties were required to compulsorily disclose to the Election Commission the identity, PAN and other details of all donors who contributed over ₹20,000 to their coffers. Finance Bill 2017, while restricting cash donations, specifically exempted electoral bonds from this requirement. Inexplicably, it also did away with the statutory limit on corporate donations to parties (7.5 per cent of three years’ net profits) and waived the need to disclose the identity of the receiving party.

All this gives rise to legitimate concerns that electoral bonds, while cleaning up funding, will end up strengthening the corporate-political nexus. Large corporate donors seeking to curry favour may find the anonymous electoral bonds a convenient conduit to lobby with political parties without voters being any the wiser. The Centre’s counter is that the anonymity will help small-ticket donors actively contribute, without fear of a witch-hunt by the ruling regime. While that may be true, the Centre can still strike a balance by requiring political parties to disclose the identities of their large donors (corporate or otherwise) through the electoral bond route, beyond a certain threshold. Only this can make the sources of election funding truly transparent.

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