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The Case of Electoral Bonds

· 6 min read
PSVNL SAI KUMAR
PSVNL SAI KUMAR
SDE @ Intralinks

Electoral Bonds have become one of the most significant and controversial tools of political funding in India. Designed to provide a transparent mechanism for contributions to political parties, the actual implementation has raised numerous concerns. In this article, we will explore the structure, the legal framework, the intent, the controversy, and the possible solutions related to electoral bonds.

Table of Contents​

  1. Introduction
  2. What Are Electoral Bonds?
  3. Legal Framework and Process
  4. Purpose and Claims
  5. Controversies
  6. Impact on Democracy
  7. Judicial Scrutiny and Public Debate
  8. Conclusion

Introduction​

In 2017, the Government of India introduced electoral bonds as a way to reform political funding. The primary aim was to curb black money and ensure transparency in political donations. However, the method of implementation and the lack of disclosure requirements have led to a significant debate about the effectiveness and fairness of this system.

This article critically examines the concept of electoral bonds, their intended goals, and the controversies that surround them.

What Are Electoral Bonds?​

Electoral Bonds are financial instruments that allow individuals or entities to donate money to political parties anonymously. The State Bank of India (SBI) is authorized to issue these bonds, which donors can buy in various denominations and give to political parties.

Once the party receives the bond, they can redeem it for money from designated bank accounts. These bonds are available for purchase during specific windows set by the government.

Key Features of Electoral Bonds​

  • Anonymity: The identity of the donor is kept confidential, and political parties are not required to disclose the source of donations.
  • Transparency: The government claims that the electoral bonds reduce the flow of illegal cash into politics.
  • Legitimacy: Only registered political parties that have secured at least 1% of the vote in the last election can redeem these bonds.

Electoral bonds were introduced through amendments to several laws, including the Representation of People Act, the Income Tax Act, and the Companies Act. The introduction was part of the Union Budget of 2017-18.

How It Works​

  1. Purchase: Donors purchase electoral bonds from designated branches of the State Bank of India.
  2. Validity: The bonds are valid for 15 days from the date of issue.
  3. Redemption: The political party redeems the bond into its designated account.
  4. No Cap: There is no limit on the amount a person or entity can donate through electoral bonds.

Important Amendments​

  • Removal of Cap on Corporate Donations: The previous limit of 7.5% of the average net profits of a company over the last three years has been removed.
  • Anonymous Donations: The donor’s identity is not disclosed, even to the Election Commission or the public.

Purpose and Claims​

The government claims that electoral bonds were introduced to:

  • Curb Black Money: Political parties often received large amounts of cash in unaccounted funds. Electoral bonds aim to reduce this by routing donations through formal banking channels.
  • Enhance Transparency: By enabling donations through bank instruments, it was argued that the bonds would bring transparency to the system.
  • Promote Accountability: Political parties would be required to redeem the bonds through specific accounts, making the flow of money trackable.

Controversies​

While the electoral bonds were introduced with the stated intention of reforming political funding, they have been criticized for several reasons.

1. Anonymity and Lack of Transparency​

  • Critics argue that anonymity leads to a lack of transparency, contrary to the government's claims. Since donors' identities are hidden, large corporate donations could influence political parties without any public scrutiny.

2. Potential for Cronyism​

  • The bonds can be purchased by both individuals and corporations, leading to concerns about large corporations using the bonds to gain political favors.

3. Favors to Ruling Party​

  • It has been alleged that since only the government knows the identity of donors, there could be preferential treatment toward the ruling party in terms of donations.

4. Amendments Passed Without Debate​

  • The changes to laws like the Representation of People Act and the Companies Act were passed as part of a Money Bill, thus avoiding detailed parliamentary debate and scrutiny.

Impact on Democracy​

Electoral bonds, while attempting to address the problem of unaccounted cash in political funding, raise questions about their impact on the democratic process:

  • Unequal Access: With anonymity and the potential for huge corporate donations, political parties with closer ties to big businesses may receive more funds, leading to unequal competition.
  • Reduced Public Oversight: The public, and even regulatory bodies like the Election Commission, cannot trace the source of funds, reducing accountability.
  • Crony Capitalism: The anonymity could lead to corporations influencing policy in return for large donations, potentially eroding public trust in political institutions.

Judicial Scrutiny and Public Debate​

The issue of electoral bonds has also been challenged in court. Public Interest Litigations (PILs) have been filed in the Supreme Court of India, arguing that the bonds promote opacity and are unconstitutional.

Arguments Against Electoral Bonds​

  • Violation of Free and Fair Elections: Critics argue that the anonymity of donations violates the fundamental right to free and fair elections.
  • Disempowering Citizens: Citizens lose the ability to know who is funding political parties and whether those donations are influencing policies.

Government's Defense​

The government has defended the bonds, stating that they are necessary to prevent illegal cash donations and to protect donors from potential retribution.

Conclusion​

The electoral bonds system, while intended to bring reforms to political funding, has led to heated debates about transparency, accountability, and fairness. While the government has defended the move as necessary to combat black money, the lack of transparency and the potential for misuse have raised concerns about its impact on democracy.

The future of electoral bonds lies in the hands of the judiciary and continued public debate. To truly reform political funding, a balance between transparency and privacy for donors must be struck, ensuring a democratic process free from the influence of money.