Polity and Governance

Electoral Bond Controversy

Introduction
•The Supreme Court on in April 2019 ordered all political parties to disclose to the Election Commission of India the details of every donation they receive through electoral bonds.
•The court, passing an interim order refused a stay on the controversial anonymous bond scheme that had been sought by the not-for-profit Association for Democratic Reforms (ADR).
•The apex court told political parties to furnish all details of all donations they receive, including amounts, names, and bank details of the donors, in a sealed envelope to the poll panel by 31 May.
 
Background
•Electoral bond scheme was announced by Government of India in Union Budget 2017-18.
•It was said to be an attempt to “cleanse the system of political funding in the country.”
•It was introduced through the Finance Act 2017 by making suitable amendments in Reserve Bank of India Act 1934, Representation of Peoples Act 1951, Income Tax Act 1961 and Companies Act.
•It is criticised for lack of transparency of political funding   
 
Legal provision
•The Government of India notified the Electoral Bond Scheme 2018 on 02nd January 2018.
•As per provisions of the Scheme, Electoral Bonds may be purchased by a person who is a citizen of India or incorporated or established in India.
•A person being an individual can buy Electoral Bonds, either singly or jointly with other individuals.
•Only the registered Political Parties and which secured not less than one per cent of the votes polled in the last General Election to the House of the People or the Legislative Assembly of the State, shall be eligible to receive the Electoral Bonds.
•The Electoral Bonds shall be encashed by an eligible Political Party only through a Bank account with the Authorized Bank.
 
Salient provisions
•State Bank of India (SBI) has been authorized to issue and encash Electoral Bonds through its 29 Authorized Branches  
•The Electoral Bonds shall be valid for fifteen calendar days from the date of issue and no payment shall be made to any payee Political Party if the Electoral Bond is deposited after expiry of the validity period.
•The Electoral Bond deposited by an eligible Political Party in its account shall be credited on the same day.
 
Issues involved
•The anonymity provided to the donor and the recipient political party raised concerns among campaigners over transparency in funding.
•Since donor’s name is not known, any shell company can make donations and the source from where the money is coming would be difficult to trace.
•It allows funding from foreign companies with a majority stake in Indian companies, which can lead to Indian policies being influenced by foreign companies.
•The 7.5% cap on the net profits removed. Hence, now no limit to how much a company, including loss-making ones, can donate.
•It favours ruling party. The ruling party has received more than 90% of the subscription.
 
Election Commission’s Objection 
•The Election Commission has filed an affidavit to the SC on some provisions in the scheme.  
•The Election Commission had stated that it will support the electoral bond scheme only if the donor’s name is revealed.
•EC can’t check violation of provisions in the Representation of the People Act as it does not know the donors.
•Representation of the People Act, 1951 prohibits the political parties from taking donations from government companies, but that can’t be checked by ECI.
 
Government’s Stand
•It reduces the use of cash in political funding and curbs the use of black money in election.
•Payments for electoral bonds are accepted only by proper banking channel, hence no black money can be used for the purchase of these bonds.
•Buyers of these bonds must comply with KYC requirements
•Political parties have to account for the receipt of this money  
•Limited validity period is limited
•Protects donor from political victimization
 
Suggestions
•Investigating agencies like CBI, Income tax and ED may have the access of the information to check if any favouritism by Government is involved.
•Corporate to declare their political donation in their annual statement to public
•Political parties may be brought under the ambit of RTI.
•Crate a national electoral fund under ECI and distribute the funds to all parties based on agreed criteria.



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