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Electoral Bonds As Means Of Political Funding – IMPRI Impact And Policy Research Institute

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Electoral bonds are interest-free bearer bonds that are treated as money instruments that companies and individuals in India can purchase from authorized branches of the State Bank of India (SBI). Electoral bonds are issued in the denominations of Rs 1,000, Rs 10,000, Rs 1 lakh, Rs 10 lakh, and Rs 1 crore.

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Introduction

Electoral bonds are interest-free bearer bonds that are treated as money instruments that companies and individuals in India can purchase from authorized branches of the State Bank of India (SBI). Electoral bonds are issued in the denominations of Rs 1,000, Rs 10,000, Rs 1 lakh, Rs 10 lakh, and Rs 1 crore. There is no limit on the maximum amount of electoral bond that an individual or company can purchase and these can be purchased via KYC a compliant account to make donations to a political party which has to be encashed by a political party within a stipulated time.

This scheme was implemented in 2018 by The Finance Ministry to ensure transparency and bring a significant reduction in corruption practices and black money. But the irony of this scheme is that the donor’s identity is not disclosed to the public which makes it difficult to track the origin of political contributions.

Necessity of Electoral Bonds

India being the largest democratic country largely relies on donations to fulfill election funding as elections are costly and expenses are incurred on staff salaries, travelling expenses, establishment costs, and regular expenditure which is operational. Moreover, political parties shape public policy and legislation. As a result, public policy and political funding are interwoven with the aim of public welfare.

Controversy Associated with Electoral Funding

As per the reports of the Association of Democratic Reforms (ADR), Electoral bonds, generated donations worth over ₹9,188 crore for all political parties, put together for 2016-22 out of which BJP received the largest share of 57%. Dispute the core purpose of the introduction of electoral bonds as a means to ensure transparency pleas have been signed regarding its validity as a result of which a 5-judge constitution bench has been formed to hear pleas regarding the same.

Challenges

  • Opaqueness- The Finance Act 2017, which introduced the system of electoral bonds for electoral funding, was passed as the Money Bill. However, the amendments brought through the Act do not require political parties to mention the names and addresses of those contributing by way of electoral bonds in their contribution reports filed with the Election Commission of India annually which acts as a hindrance in establishing transparency. 
  • Hindrance to Right to Know for Citizens- Since citizens do not know who is contributing how much their right to know is impacted which makes politicians more unanserwable and unaccountable.
  • Risk of Money Laundering- Since the source of origin is not known sometimes electoral bonds become the victims of terror financing and many times shell companies use these instruments to disperse their profits. 
  • Lack of Authority- Since political parties are not answerable for the political bonds there is no scrutiny and authority associated with electoral bonds at any stage or even at the time of redemption oo.

Way Forward

India follows the principle of free and fair elections but a trend has been observed from judicial activism to judicial evasion. Though electoral bonds have shifted the policy of collection of electoral bonds from cash to online there are chances of ensuring the credibility of these collections. However, electoral bonds are not an unalloyed good. Complete transparency and complete confidentiality both pose risks to electoral democracy.

So there is a need to create differential levels of confidentiality and disclosure requirements in this new operating environment with electoral bonds. Simple solutions can be adopted like disclosure of the names by the donors along with setting limits to the maximum amount that can be adopted so that limited black money can be circulated in this manner. 

References

Das, Y. S. (2023, October 31). Explainer: What are electoral bonds and what is the controversy? https://www.indiatoday.in/india/story/electoral-bonds-explained-political-funding-sbi-black-money-supreme-court-2455864-2023-10-31

Electoral Bonds Constitution Bench | Day 1: Anonymous corporate funding decimates a representative democracy – Supreme Court Observer. (2023, November 3). https://www.scobserver.in/reports/electoral-bonds-constitution-bench-day-1-anonymous-corporate-funding-decimates-a-representative-democracy/

Vaishnav, M. (2019, November 25). Electoral Bonds: The Safeguards of Indian Democracy Are Crumbling. https://carnegieendowment.org/2019/11/25/electoral-bonds-safeguards-of-indian-democracy-are-crumbling-pub-80428

Bhaumik, A. (2023, November 2). The legality of the electoral bonds scheme | Explained. https://www.thehindu.com/news/national/the-legality-of-the-electoral-bonds-scheme-explained/article67461007.ece

I. (2023, November 1). Explained: What are electoral bonds? How do they work and why are they challenged in SC?https://economictimes.indiatimes.com/news/how-to/explained-what-are-electoral-bonds-how-it-works-and-why-its-challenged-in-supreme-court/articleshow/104889034.cms

Burman, S. R. A. (2023, November 17). Analyzing the Benefits of Electoral Bonds | John Rawls on a Fair Society. https://carnegieindia.org/2023/11/17/analyzing-benefits-of-electoral-bonds-%7C-john-rawls-on-fair-society-pub-91044

L. (2023, October 31). Electoral bonds generated donations worth over  ₹9,188 crore in last 6 years; BJP emerges as biggest beneficiary | Mint. https://www.livemint.com/news/india/electoral-bonds-generated-donations-worth-over-rs-9-188-crore-in-last-6-years-bjp-emerges-as-biggest-beneficiary-11698770321900.html

Electoral bonds are a threat to Indian democracy. (n.d.). Retrieved from https://www.ft.com/content/521b4fb2-6f9f-48ae-8884-d4c0170609fe

Why Electoral Bonds are Necessary. (n.d.). https://pib.gov.in/newsite/PrintRelease.aspx?relid=175452

Sahu, S. (2023, November 1). Electoral Bonds Case: Transparency has Deep Roots in Indian Democracy. https://www.newsclick.in/electoral-bonds-case-transparency-has-deep-roots-indian-democracy

Sebastian, S., & Law, L. (2023, October 30). Live Law. https://www.livelaw.in/top-stories/citizens-dont-have-right-to-information-regarding-funding-of-a-political-party-centre-tells-supreme-court-in-electoral-bonds-case-241137

Disclaimer: All views expressed in the article belong solely to the author and not necessarily to the organization.

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IMPRI, a startup research think tank, is a platform for pro-active, independent, non-partisan and policy-based research. It contributes to debates and deliberations for action-based solutions to a host of strategic issues. IMPRI is committed to democracy, mobilization and community building.

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