ELECTORAL BOND
Electoral Bond, a brainchild of the present Union Government was announced in the Budget 2017-18 along with the reduction of cash funding by a single anonymous donor to Rs. 2000 from the existing limit of Rs, 20000. It was proposed that it will take effect from Apr 2018. The reason attributed to this scheme is to bring in greater transparency in the funding of political parties.
Before implementing the above measures, the section 13A of the Income-tax act 1961 to be amended that the political party exemption of the donation exceeding Rs. 2000 received through Electoral Bonds. The RBI act also amended to facilitate the introduction of electoral bonds and make RBI as the Intermediary. The Representation of People Act, 1951 also to be amended. The amendments were made through Section 133 to 136 of Finance Bill, 2017.
What is the electoral bond?
It a financial instruments for making the donation to political parties. Electoral bonds will be issued by a scheduled commercial bank authorized by Central Government/ Reserve Bank of India. RBI will act as an intermediary for such bonds. It is a bear bond payable only to a registered political party like a bearer cheque with a specific expiry. The custody of the bond will remain with the bank issuing the bond till redemption by the political party through their designated bank account.
These bonds are issued only against cheques/ drafts/ electronic/ digital payments to the donor. These bonds will carry an expiry date. The bonds cannot be purchased against cash. These bonds can be redeemed at the designated branch of the bank through the designated account of the registered political party within the prescribed time limit from the issuance of the bond. For this purpose, each political party should be designated an account under information to the Election Commission.
The donor will be anonymous for the Political parties and hence they need not submit any details about the donor to the Election Commission or Income Tax.
Why is it important?
Most of the Political parties use the tax regime on donation to accept cash donations from anonymous sources. Nearly 70 percent of the ₹11,300 crore in parties funding over an 11-year period came from unknown sources, according to the Association for Democratic Reforms (ADR).
At present, the parties are expected to report to the IT department the sources of donations exceeding Rs.20000. To restrict the cash donation, the Government has reduced the existing cap for the cash donation from Rs. 20000 to Rs,.2000 and also insist that all the donations exceeding Rs. 2000 should be by means of cheques/drafts/ electronic and digital payment.
On introduction of the electoral bonds, the details of the purchaser will be available with the issuing branch of the designated bank and the details of the receiver are available with the bank branch through which it is redeemed. The Bonds are serially numbered and managed by RBI. Hence, RBI will have both the details and will not be disclosed to the public.
What electoral bonds do
Electoral bonds are like cash but with an expiry date. If Company XYX ltd wishes to contribute Rs. 10 crore to political party ABCY’. It could buy one electoral bond of Rs.10 crore from bank ‘A’. These bonds would carry only a serial number and not the identity of the buyer. XYZ Ltd, deposit the bonds in ABCY ‘s designated account with Bank B. Since it is the purchase of bearer bonds and do not have the names of the parties to which they have donated (so shareholders won’t know where their money has gone) it is not clear whether this transaction attract the provision of section 182 of the Company’s which says
a. loss-making companies cannot make political contribution
b. The contribution should not exceed 7.5 % of the average net profit of last three years.
c. The approval of Board of directors is necessary.
d. Disclosure of contribution to the political parties
As for political parties, they no longer need to reveal the donor’s name for contributions above ₹2000, provided these are in the form of electoral bonds. In a nutshell, a foreign company can anonymously donate unlimited sums to an Indian political party without the knowledge of the EC or the IT department. It is difficult to imagine a better instrument to ease the flow of black money into the coffers of political parties.
Danger to democracy
By far the most pernicious feature of electoral bonds is their potential to load the dice heavily in favor of the ruling party. Although the issuing bank only knows the details of the purchaser and the redeeming bank knows only about the receiver but RBI who receives the reports from both the banks will know all the details. These details will be available to the Ruling parties. It is then free to use the organs of the state to gently dissuade (or retaliate against) these misguided donors. This may cause difficulty for the opposition parties to raise adequate funds to put up a fight.
While the reduction in maximum cash donation limit to parties has been welcomed, the proposal to introduce electoral bonds has attracted a fair bit of criticism from various quarters.
Further, it is not clear whether the purchaser of the bond can cancel the sum during its currency and receive back the money if they decided against making a donation to political parties. If the answer is yes, how many times it can be done by the donor to cancel the bond within its validity.
Way Ahead:
1. Let all the donations done through banking/ electronic/digital channels.
2. If all the transactions and accounts being done and used by political parties are regulated under a piece of legislation, it might prove to be more effective and simple. There are many political parties at present which do not file the return every year.
3. Setting aside the election of such candidates against whom there are pieces of evidence of spending black money or excluding them from future elections as a penalty can be a strong measure.
4. Voters have to be made aware through awareness campaigns as often illiterate voters are bribed for votes before elections.
5. It is evident, even after introducing a stringent measure, using the black money for purchasing the votes for cash cannot be ruled out as they will find innovative ways of executing it. In one by-election, the cash is being distributed by calling the voters to another constituency and also through the payment banks.
These measures if taken into consideration seriously along with the will to control illicit funding in elections, some changes can be expected in future.
