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03 Apr 2017

Political Funding: Could electoral bonds, corporate funding ensure transparency?

Political funding: The quest for transparency

Union Budget 2017 made tall claims towards bringing in transparency in political funding in India. Months later, moving forward on the proposals on electoral bonds and corporate funding might have rendered the process more opaque than before.

The mismatch between the problem and solution brings into question concerns including voters' right to be informed and the pros and cons of unchecked political funding.

In context

Political funding: The quest for transparency


Problems with political funding in India

Activities of political parties and candidates in India are known to be backed by a steady flow of cash, which is often untraceable.

Characterized by an absolute lack of transparency, the identities of both the giver and receiver are often unknown.

Further, absence of an independent audit system for political parties render the stated accounts farcical.


Union Budget strives to bring in transparency in electoral funding

The Budget limited cash donations to political parties to Rs. 2000, mandating use of cheques or digital transfer for higher payments.

Under "electoral bonds", corporations were enabled to purchase bonds from scheduled banks and then transfer to party accounts.

Introducing last minute changes to the finance bill, the ceiling on corporate donations and public disclosure on political contributions were discarded.

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Far from the stated objectives

Although the limit on donations have been substantially reduced, the disclosure-requirements have remained at Rs. 20,000, although the name of the party need not be given anymore.

The digital paper trail would further render details inaccessible to media and public, enabling parties to receive unlimited funds, unhindered by disclosure requirements.

The opposition accused the government of "creating new avenues for large scale money laundering".

Political funding and Right to Information

Central Information Commission (CIC) in 2013 ruled political parties under the RTI Act are mandated to furnish information if requested. Despite being hailed a victory for RTI activists, the parties have refused to comply, as evidenced by government stance on a case pending before SC.


The RTI road to political transparency

As per the CIC logic political parties receive funds from the government, have constitutional and legal rights and perform public duties and hence become public authorities.

The Act's definition of public authority, "substantially financed, directly or indirectly, by funds provided by the appropriate government", renders this holding weak, with no clarity on the meaning of "substantially financed".

What do the political parties say?

Counter Narrative

What do the political parties say?

Political parties suggest that they lack the resources to aptly respond to a flooding of queries, especially in the background of ambiguity as to what kind of information can be sought.

Absence of clarity on the matter further renders the provision prone to misuse, with political parties targeting each other driven by political motivations, interrupting the routine functioning of democracy.


The larger picture

While the spirit behind efforts made to render political funding transparent is laudable, attempting to circumvent scrutiny bolsters voters' disillusionment and distrust towards actions taken by political institutions.

The changes could bring in an increased influence of interest groups including business lobbies, similar to the system prevalent in the US, detrimentally in the absence of stringent disclosure requirements.

Political Funding and the FCRA Amendment

A SC Bench in 2014 found the Congress and BJP guilty of accepting funds from Vedanta, in violation of the provisions of the Foreign Contribution Regulation Act (1976). Last year, the government retroactively amended the FCRA through the Finance Bill allegedly to evade the judgement.

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