Following the sudden demonetisation decision, the Union Budget for 2017-18 was keenly watched for possible reform roadmap to curb black money and illicit political funding — that lay at the roots of big scams and scandals. During the course of demonetisation, Prime Minister Narendra Modi had sought cooperation of opposition parties to debate on key electoral reforms, particularly the election funding laws. Expectedly, Finance Minister Arun Jaitley devoted a complete section on electoral finance and ways and means to curb illicit political donation. The Budget package seems to have an imprint of Prime Minister Narendra Modi.
In an effort to limit anonymous donations and illegal funding, the Finance Minister proposed to reduce cash donation from the current Rs. 20000 to just Rs. 2000 per person. According to Section 29C of the Representation of the People Act (RPA), 1951, registered political parties are allowed to receive contribution up to Rs. 20,000 from individuals and for which parties need not have to submit documentary proofs. While the present measure that reduces cash donation by one-tenth is a welcome move, it still leaves a lot of loopholes for possible misuse. While the new measure would be laborious and cause inconvenience for political parties to multiply the number of fictitious donors, if past records are an indicator, they would still opt for this mode which is considered “safe”. It is common knowledge that a mammoth 75% of donations to parties are sourced through this clause and these are mostly hawala money.
Notwithstanding the fact that it is a half-hearted measure which appears to keep political parties happy, the Finance Minister has done well to tighten the noose on the books of accounts of political parties by linking tax exemption to timely compliance of the Income Tax provisions. From now on, all political parties will have to file returns as per the I-T Act and tax exemption from income tax will be extended to political parties only on compliance with the I-T Act. If Revenue Secretary Hashmukh Adhia’s subsequent announcement has to be believed, the government would make it mandatory for the political parties to file tax return by December every year.
This was something that the Election Commission of India (ECI) has been pressing for years before successive governments at the Centre. This would certainly bring political parties under the scrutiny of tax officials and the ECI and this may prompt more transparency and accountability among political parties. The fact of the matter is that the existing I-T Act has no strict deadline for the political parties to submit their accounts and file I-T returns. No wonder, out of 51 regional parties, an alarming 45 parties did not submit their donation statements to the ECI in the last financial year. According to Association for Democratic Reforms (ADR), there are at least 12 regional parties who have never filed their contribution reports. Given this, making I-T return filing a mandatory exercise for the parties would force them to be careful about their books of accounts and sources of donations.
Electoral bond is the way to go!
The most surprising reform proposal in the Budget is the issuance of electoral bonds. Possibly, this could be a game changer as it promises to expand clean political finance options. Taking cues from Barack Obama’s inspiring grassroots fund raising campaign in 2008 (that largely avoided the established public funding system), the Finance Minister has unveiled a proposal to float bonds for political parties so as to help them tap clean donations from the open market. According to this proposal, potential donors can buy bonds from the central bank and donate the same to a political party which then can redeem the same within a specified time. Importantly, the bond has to be bought through cheque or digital payments. This could discourage shady fund raising techniques routinely adopted by parties and candidates to fight elections. Importantly, bond scheme would spur political start ups and popular parties and charismatic leaders can use this opportunity to raise the required fund in a cleaner and transparent fashion. A major shortcoming of the bond proposal is the non-disclosure of donor identity. This would greatly defeat the cause of disclosure and transparency in the campaign finance system. Yet, the bond scheme with its anonymity clause is far superior a scheme than the existing anonymous cash donation clause. Given the transactions will be in the form of cheques and digital modes, anonymous donors would stay in the hooks.
Time to push for more enabling measures
While critics are up in arms against the budgetary announcements on electoral reforms, some calling them “half measures” and “political gimmicks”, one has to evaluate these measures in their totality. While these may not be very bold and radical in nature, these are definitely positive steps and may propel more initiatives in the future. Remember, in India’s 68 years of budget making, this is the first Union Budget to have devoted a distinct section on electoral reforms. Let us not forget the fact that it has taken more than a decade and plentiful of struggles by hundreds of civil society organisations, election watchdogs, dozens of public interest litigations and a proactive judiciary to push a handful electoral reforms to curb the growing role of criminal and illicit money in elections.
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It was after years of activism, persuasion and constant litigations that political parties finally agreed to enact The Election and Other Related Laws Bill in 2003. And not long ago, all political parties, including the Left, fought tooth and nail to keep parties out of the Right to Information Act. In other words, this is probably the most difficult arena to push any reforms, let alone radical reforms. Therefore, by unveiling a sets of reforms, no matter how “half hearted” these may be, the government of the day has chosen to walk the tough road. Time now is to push for other enabling measures, especially strong disclosure laws and a regulatory body, that would go after each and every penny that parties and candidates raise to run political offices in the country.