February 4, 2023 1:48 pm

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Explained| Everything you want to know about Electoral bonds

Several NGOs, activists and political parties have opposed electoral bonds, claiming it as undemocratic

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Electoral Bonds

The Supreme Court last Friday (14 October 2022) said that it would decide on 6 December about transferring the case regarding electoral bonds to a larger bench. The bench comprised Justices BR Gavai and BV Nagarathna. Several NGOs, activists and political parties have opposed electoral bonds, claiming it as undemocratic.

Petitions Against Electoral Bonds 

The Apex court was hearing petitions filed by the Association of Democratic Reforms, Communist Party of India (Marxist), etc on electoral bonds.

Electoral Bond Sample
Electoral Bond Sample

Senior Advocates Kapil Sibal, Gopal Sankaranarayanan, and Advocate Prashant Bhushan appearing for the petitioners, pressed for an early hearing of the matter, either next week or in November, ahead of Gujarat and Himachal Pradesh assembly elections.

Solicitor General Tushar Mehta defended the electoral bonds as he termed them the most transparent form of electoral funding by eliminating black money.

The judicial bench ultimately decided to hear the matter on 6 December to transfer it to a higher bench.

What are Electoral Bonds? 

An electoral bond is similar to a promissory note that can be purchased from select SBI branches by any Indian citizen or company incorporated in India.

The bonds are similar to banknotes. They are non-interest bearing and payable to the bearer on demand. Individuals or parties will be able to purchase these bonds digitally or with a cheque. 

The bearer can then donate the bond to any political party which can encash it within a limited period. Put simply, electoral bonds are just like gift vouchers, although the amount of money involved offers no parallels.

The Background

The Indian government introduced electoral bonds in 2017 with the Finance Bill claiming to make political funding more transparent. The government officially notified the Electoral Bond Scheme (EBS) on January 29, 2018. 

Former Union Finance Minister late Arun Jaitley said in 2017, “This year, before the budget was being prepared, the PM had told us to take some steps in the budget to cleanse the political parties of electoral malpractices, and out of that the electoral bonds scheme was born”.

How do they work?

The process of political donation through bonds is quite simple. The bonds are issued in multiples of ₹1000, ₹10,000, ₹1,00,00 and 1,00,00,000. A donor with a KYC-compliant account can buy the bonds and then donate them to a political party or individual of their choice. 

The receiver can redeem the bonds using the party’s verified bank account. It is only valid for fifteen days after the purchase. The bonds are available for purchase for 10 days at the start of each quarter. The government has designated the first ten days of January, April, July, and October for the purchase of bonds. In year of the Lok Sabha elections, the government will specify an additional period of 30 days to purchase the bond.

The electoral bonds scheme was criticised since its announcement and subsequent notification by the government.

The Framework

The following conditions were laid initially under the financial bill 2017 in pertinence for electoral bonds.

  • Any party that is registered under Section 29A of the Representation of the Peoples Act, 1951 (43 of 1951) and has received at least 1% of the total votes cast in the most recent General or Assembly elections is eligible for electoral bonds.
  • The Election Commission of India will assign the party a verified account, and electoral bond transactions will be conducted only through this account.
  • The electoral bonds will not bear the name of the donor. Thus, the political party might not be aware of the donor’s identity.

Controversy on Electoral Bonds 

Ever since its implementation, the scheme has been criticised by opposition politicians, experts, activists, etc.

Many had alleged that it would promote political corruption as donors’ identities would not be disclosed. Critics of the electoral bonds scheme argue that it would lead to an influx of black money.

According to a report, the Reserve Bank of India had objected to Finance Ministry about the EBS.  The Congress claimed in 2019 that “the bonds had become instruments of anonymous political funding bordering on opaque money laundering”. Though even the Congress has accepted donations in form of electoral bonds since 2018.

It should be noted that the government had made two amendments, removing the cap on how much a company can spend on electoral bonds. Previously, only 7.5% of a company’s average net profits over the previous three years were permitted.

The new amendment also makes it possible for foreign corporations to purchase the bonds. 

According to experts, this might offer foreign agencies clout over the government’s operations, foreign relations, and the company’s investment plans.

Dissenting Voices

In 2018, several petitions were filed in Supreme Court challenging the Electoral Bonds Scheme.

The Association for Democratic Reforms (ADR) and the Communist Party of India-Marxist (CPI-M) are key petitioners. They argued that several amendments by the Central govt. to enable the scheme, allowed for limitless corporate donations to Indian political parties. They alleged that it will bear a threat to national autonomy and democracy as foreign companies are allowed for donating to political parties. 

In an interim order, the Supreme Court in 2019 directed political parties to submit donations via electoral bonds to ECI.

Indian Government on Electoral Bonds

The Indian government has vouched for the electoral funding scheme, from its formulation to its implementation.

In the recent hearing on electoral bonds, the central government supported the scheme. The Solicitor General Tushar Mehta told the judicial bench that political funding under Electoral Bonds Scheme-2018 is absolutely transparent.

“The methodology of receiving the money has been so transparent. We will take the court through it step by step. Now it’s impossible to get any money in black or any unaccounted form…It is the most transparent system,” the Solicitor General informed the bench of Justices BR Gavai and BV Nagarathna.

Donations Received by Electoral Bonds

As of now, the donations to political parties from electoral bonds have crossed ₹10,000 crore mark, as per official figures from SBI.

According to the report by ADR, between FY 2017-18 & 2018-19, political parties received a total of ₹2,760.20 crore from bonds. A whopping 60.17% or ₹1,660.89 crore of this was received by BJP.

Report by Association of Democratic Reforms on Electoral Bonds
Report by Association of Democratic Reforms

For the 2018-19 period, BJP’s income increased by 134.59%, whereas for Congress, it increased by 360.97%. The largest income rise of any party throughout the period was TMC’s, which had a phenomenal increase of 3,628.57% .

Political parties redeemed bonds totalling ₹3,429.56 crore in FY 2019–20, with the BJP, Congress, TMC and NCP receiving 87.29% of the total amount.

Political funding has always remained a black spot over Indian democracy. For many, it is a safe way for money laundering as political backing will ensure that the black money turns into white.

Several might just oppose it for furthering their political vendetta against a particular individual or party but ensuring transparent electoral funding is a necessity that should be borne by every rightful citizen.

Yash Rawat
Yash Rawat

Its been hard to express myself so here I am.. writing.

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