According to an analysis by the Association of Democratic Reforms last year, national and regional parties received ₹78.33 billion between 2004-05 and 2014-15, with 69 per cent of their income from unknown sources. With this in mind, the finance minister announced measures to cleanse political funding by restricting cash donations to ₹2000 and promising that a scheme of electoral bonds would be issued. Less than a month before the 2018 Budget , the scheme has been announced, thus ticking that particular box.

How it works

The electoral bond would be a bearer instrument in the nature of a promissory note and an interest-free banking instrument. They would be issued from a few specified branches of the State Bank of India (SBI). The purchaser would be allowed to buy these bonds only upon fulfilment of KYC norms and by making payment from a bank account. It will not carry the name of payee.

Electoral bonds would have a life of only 15 days during which they can be used for making donations only to political parties registered under section 29A of the Representation of the Peoples Act 1951 (43 of 1951) and which secured not less than 1 per cent of the votes polled in the last general election to the Lok Sabha or a Legislative Assembly. They would be available for purchase for a period of 10 days each in the months of January, April, July and October, as specified by the Centre. An additional period of 30 days can be specified by the Government in the year of the Lok Sabha election.

These bonds can be encashed by an eligible political party only through a designated bank account with the authorised bank. If political parties fail to encash their bonds within 15 days of the purchase, they may lose the donation to the Prime Minister’s National Relief Fund.

The notification also makes it clear that an application to purchase electoral bonds, which can be made online also, will be rejected if the KYC documents — voter ID, passport, or Aadhaar — are not submitted by the purchaser under the present Reserve Bank of India policy.

Problem areas

Budget 2017 also removed the erstwhile caps of limiting donations to 7.5 per cent of average 3-year profits, approval from the board, and other disclosure requirements.

The weakest link in the electoral bond scheme is that the name of the donor would be anonymous though he is required to submit all his KYC information. Keeping the name of the donor anonymous would go against the concept of transparency, which was the main theme of the finance minister’s Budget speech on electoral funding.

The ministry of finance only needs to look at how participatory notes were initially announced and later tightly regulated to understand how an open-ended scheme of electoral bonds can be misused.

Since political parties need not follow any accounting standards or tax regulations, the entire transaction goes unchecked even if it is unreported.

It is clear that political parties continue to receive most of their funds through anonymous subscribers to electoral bonds — this is a statement that we cannot expect the finance minister to make. As we are seeing with most laws in India, the more things change, the more they remain the same.

The writer is a chartered accountant