Electoral Bond | UPSC Mains Current Affairs | PSIR Current Affairs
Electoral bonds are a financial instrument introduced by the Government of India in 2018 to enable transparent political funding.
What is the Electoral Bond Scheme?
Electoral Bonds:
- Money instruments like promissory notes.
- Bought from State Bank of India and donated to political parties.
- Redeemable only in designated account of registered political party.
- Individuals can buy bonds singly or jointly.
Electoral Bond Scheme:
- Launched in 2018 to cleanse political funding in India.
- Aimed to bring transparency in electoral funding.
- Described as an “electoral reform” in a “cashless-digital economy”.
Amendments in 2022:
- Additional period of 15 days specified by Central Government during general elections.
- Originally available for 10 days in January, April, July, and October.
- Additional 30 days specified during General election to the House of People (Lok Sabha).
Validity of Electoral Bonds:
- Electoral Bonds are valid for 15 days from the date of issue.
- Payments cannot be made to political parties if the bond is deposited after the validity period.
- Bonds deposited by eligible political parties are credited on the same day.
Eligibility for Electoral Bonds:
- Only political parties registered under Section 29A of the Representation of the People Act, (RPA, 1951) with at least 1% of votes in the last General Election are eligible.
Why did Supreme Court Strike Down the Electoral Bonds Scheme?
Violation of Right to Information:
- SC struck down the scheme due to anonymous political donations violating the right to information.
- Right to information is crucial for participatory democracy and holding the government accountable.
- Economic inequality leads to differing levels of political engagement due to money's influence.
Not Proportionally Justified to Curb Black Money:
- SC found the government did not adopt the least restrictive method to curb black money.
- Examples of least restrictive methods include ₹20,000 caps on donations and Electoral Trusts.
- Curbing black money is not a legitimate purpose for restricting the right to information.
Right to Donor Privacy:
- Contributions made for support or quid pro quo.
- Huge corporate contributions should not be treated same as others.
- Right to privacy does not extend to contributions made to influence policies.
Corporate Donations and Free Elections:
- Amendment to Companies Act allowing unlimited political contributions found arbitrary.
- Changes in Finance Act removed cap on donations by companies.
- Requirement to disclose political party contributions in P&L (Profit and Loss) accounts eliminated.
- Companies' contributions often made with intent of securing benefits.
Amendment to RPA, 1951:
- Amendment to Section 29C quashed by court.
- Original requirement to disclose contributions over ₹20,000 balanced voters' right to information and donors' right to privacy.
- Exception for donations through electoral bonds removed by court observation.
Observations by SC regarding Electoral Bonds:
- SBI ordered to stop issuing electoral bonds immediately.
- Details of bonds purchased by political parties since April 12, 2019, must be provided to ECI by March 6, 2024.
- Details to include date of purchase, name of purchaser, and denomination of bond.
- ECI to publish information on its website by March 13, 2024.
- Electoral bonds within validity period but not encashed must be returned, with refund to purchaser's account by issuing bank.
Concerns with Electoral Bonds:
- Contradicts Transparency: Critics argue that electoral bonds do not bring transparency to election funding as intended. Anonymity of bonds only benefits the ruling party and not the public or opposition parties.
- Possibility of Extortion:
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- Bonds sold through a government-owned bank (SBI) allow the government to know who is funding its opponents.
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- This opens the door for potential extortion or victimization of big companies by the ruling party.
- A Blow to Democracy:
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- Political parties are exempt from disclosing donations received through electoral bonds.
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- Voters are left unaware of who is funding which party, compromising the democratic process.
- Compromising Right to Know:
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- The Supreme Court of India has emphasized the importance of the "right to know" in elections.
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- Electoral bonds limit this right and hinder freedom of expression.
- Against Free & Fair Elections:
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- Lack of transparency in electoral bonds can be exploited by the government in power.
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- Access to donor details allows for potential disruption of free and fair elections.
- Electoral Bonds and Crony Capitalism: The electoral bonds scheme allows corporations to fund elections without limits, leading to crony capitalism. Crony capitalism is characterized by close relationships between business leaders and government officials.
- Potential for corruption: There are concerns that electoral bonds could be used as a means for quid pro quo arrangements between donors and political parties.
- Disproportionate influence of corporate donors: The scheme allows for corporate entities to donate large sums of money to political parties, potentially giving them undue influence over policy decisions.
- Lack of accountability: The lack of disclosure requirements for political parties receiving electoral bonds makes it difficult to track the sources of their funding.
- Impact on level playing field: Small and regional parties may be at a disadvantage compared to national parties that have easier access to corporate donors.
- Bypassing of existing laws: Electoral bonds bypass the existing legal framework for political funding, such as the requirement for parties to disclose donations above a certain threshold.
- Lack of public scrutiny: The lack of transparency in electoral bonds makes it difficult for the public to hold political parties accountable for their funding sources.
- Potential for money laundering: There are concerns that electoral bonds could be used as a means to launder money through political parties.
Concerns Raised in Association for Democratic Reforms (ADR) Report, 2023:
Analysis of Donation Sources:
- In 2019-20, Electoral Bonds accounted for the highest donations at Rs 3,438.8237 crore during the general elections.
- In 2021-22, donations through Electoral Bonds amounted to Rs 2,664.2725 crore during 11 Assembly elections.
- Out of total donations of Rs 16,437.635 crore, 55.90% came from Electoral Bonds, 28.07% from the corporate sector, and 16.03% from other sources.
National and Regional Parties:
- National parties saw a 743% increase in Electoral Bond donations between FY 2017-18 and FY 2021-22.
- Corporate donations to national parties increased by only 48% during the same period.
- Regional parties also received a significant portion of their donations from Electoral Bonds.
Power-Biased Donations of Electoral Bond:
- The ruling party received the highest donations, with over 52% sourced from Electoral Bonds totaling Rs 5,271.9751 crore.
- The main Opposition party received the second-highest Electoral Bond donations at Rs 952.2955 crore (61.54% of total donations).
- The third largest party received Rs 767.8876 crore (93.27% of total donations) from Electoral Bonds.
Suggestions for Electoral Funding in India:
- Regulation of Donations:
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- Some individuals or organisations may be banned from making donations.
- Donation limits may be imposed to prevent capture by large donors.
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- Contribution limits are used in some jurisdictions to regulate money in politics.
- Limits on Expenditure:
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- Expenditure limits prevent financial arms races in politics.
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- Some countries impose expenditure limits on political parties.
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- US Supreme Court's interpretation of the First Amendment has hindered attempts at imposing expenditure limits.
- Providing Public Funding to Parties:
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- Public funds are distributed based on predetermined criteria in Germany.
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- Criteria include votes received in past elections, membership fees, and donations from private sources.
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- "Democracy vouchers" in Seattle allow voters to donate to candidates using publicly funded vouchers.
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- Voters get to "vote" with their money before casting their ballot.
- Disclosure Requirements:
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- Regulation assumes that public scrutiny influences politicians and voters.
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- Mandatory disclosure of donations not always desirable.
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- Donor anonymity can protect donors from retribution or extortion.
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- Struggle to balance transparency and anonymity addressed by Supreme Court.
- The Chilean Experiment: Donors could transfer money to Electoral Service anonymously. Anonymity system could prevent quid pro quo arrangements. Coordination between donors and parties eroded anonymity system.
- Establishing National Election Fund:
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- National Election Fund could eliminate concerns about donor reprisals.
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- Apex court raised concern about misuse of funds for illegal activities.
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- Control on end use of funds questioned by Centre.
- Implementing transparency measures: Political parties should be required to disclose all donations received, including those through electoral bonds, to ensure accountability.
- Limiting corporate donations: There could be a cap on the amount that corporate entities can donate to political parties to prevent undue influence.
- Encouraging small donations: Providing incentives for small donors to contribute to political parties can help reduce reliance on large corporate donations.
- Strengthening enforcement mechanisms: There should be strict penalties for non-compliance with funding regulations to deter illegal practices.
- Public funding of elections: Introducing a system of public funding for elections can reduce the influence of private donors and promote a level playing field.
- Enhancing oversight: Independent bodies should be tasked with monitoring and regulating political funding to ensure compliance with laws.
- Promoting transparency in electoral bonds: Requiring the disclosure of donor information for electoral bonds can increase transparency in political funding.
- Engaging civil society: Civil society organizations can play a role in advocating for reforms in electoral funding and holding political parties accountable.
Recommendations on Funding of Political Parties:
Indrajit Gupta Committee on State Funding of Elections, 1998:
- State funding of elections endorsed to create a level playing field.
- Limitations include funds only for national and state parties with symbols, not independent candidates.
- Initial funding in kind for recognized parties and candidates.
- Advocated partial state funding due to economic constraints.
Election Commission's Recommendations:
- Emphasised the need for political parties to publish annual accounts.
- Audited accounts should be made public for scrutiny by Comptroller and Auditor General-approved firms.
Law Commission, 1999:
- Described total state funding of elections as "desirable".
- Proposed amending the RPA, 1951 for maintenance, audit, and publication of political party accounts with penalties for non-compliance.
Conclusion:
- Supreme Court's landmark verdict on February 15, 2024, struck down the Electoral Bonds Scheme
- Upheld democracy as the Constitution's basic structure
- Requires government to cease issuing electoral bonds and disclose information to Election Commission
- Highlights scheme's violation of right to information and potential misuse concerns.