Opaque political financing due to Electoral Bonds

19 Nov 2022 Opaque political financing due to Electoral Bonds

Significance for Prelims: Not Much relevance

Significance for Mains: Electoral Bonds and associated issues. 

News: Electoral bonds were presented as an instrument to clean the electoral politics but it became mechanisms to legitimize ‘institutionalised corruption.

Political pathologies prevalent in our system:

• Crumbling organisations
• Political centralisation
• Nexus of business and politics fuelled by rent-seeking and cronyism. 

Influence of political finance on the political competition:

• Shows the efficacy of institutional safeguards: The efficiency of an institution like the Election Commission of India depends on the degree of transparency of political funding. For example: Due to the opaque nature of electoral bonds the Election Commission of India (ECI) failed to ensure a level playing field. 
• Increasing unfairness of electoral processes due to opacity of political finance due to greater information asymmetry between the ruling and the Opposition parties. 
• Centralisation of political funding within a party determines the power structure in the party whether it is derived from organisational structures or exercised in a personalistic manner. For example, earlier Dravida Munnetra Kazhagam and the Bahujan Samaj Party were highly organised parties due to membership funding of these parties. In these parties, leaders wielded power in a responsive and programmatic manner. 
• Impact of political financing regime on grounding ideas in political competition: Ideological base of political competition starts corroding when political finance is anchored only to a narrow concentration of economic capital. 

About Electoral Bonds:

• In Union Budget,2017 government of India launched electoral bonds. 
• These are interest-free bearer instruments used to donate money anonymously to political parties. 
• A bearer instrument does not carry any information about the buyer or payee, and the holder of the instrument (which is the political party).
• Denominations of the bonds: State Bank of India is the only bank authorised to sell electoral bonds in multiples of Rs 1,000, Rs 10,000, Rs 1 lakh, Rs 10 lakh, and Rs 1 crore.
• SBI deposits these bonds into the Prime Minister’s Relief Fund if the party does not enchase the bonds within 15 days.
• A political party can encash the bonds through their verified account within 15 days. There is no limit on the number of bonds an individual or company can purchase.

Issues associated with electoral bonds:

• The colonisation of the declared sphere of political funding by the electoral bonds: According to Association for Democratic Reforms (ADR) within two years electoral bonds cover 52% of the total income of national parties and 53% of the total income of regional parties. 
• Design of electoral bonds gives an advantage to the ruling party: According to ECI data, out of the total electoral bonds sold the ruling Bharatiya Janata Party (BJP) in 2019-20 got over 75% as opposed to the 9% share of the Congress. 
• Only the government or ruling party have access to the transaction trails: as it inverted the concept of transparency and openness in political funding.
• Information asymmetry and institutional scrutiny barriers also divert the electoral bonds towards the ruling party.
• Electoral bonds centralise political funding: So national leadership got leverage over the State and local units. As a reply to a Right To Information (RTI) query n 2018-19, 80% of the bonds were redeemed in Delhi. 
• Change in the legal architecture of political finance (removal of erstwhile limits (7.5% of net profit) on corporate donations) along with the introduction of Electoral bonds enables the nexus of the national political elite and big business conglomerates. Hence, it squeezes the space of local elites and regional capital.
• The ruling Bharatiya Janata Party now do not fear the outcomes of policies like demonetisation and Goods and Services Tax (GST) on its traditional backers (small businessmen and trading castes) as their contribution to the political treasury is decreasing. 

Conclusion: Black hole of electoral bonds negatively affects the institutional safeguards provided by Independent institutions provided by ECI and the Supreme Court of India. This so-called political finance  “reform” is the marker of democratic decline.

Prelims Question(2019):

Consider the following statements:

1. The Parliament (Prevention of Disqualification) Act, 1959 exempts several posts from disqualification on the grounds of ‘Office of Profit’.
2. The above-mentioned Act was amended five times.
3. The term ‘Office of Profit’ is well-defined in the Constitution of India.

Which of the statements given above is/are correct?

(a) 1 and 2 only

(b) 3 only

(c) 2 and 3 only

(d) 1, 2 and 3

Mains Question(2019): 

1. In the light of recent controversy regarding the use of Electronic Voting Machines (EVM), what are the challenges before the Election Commission of India to ensure the trustworthiness of elections in India?

Source: The Hindu; The Indian Express

Article: Opaque political financing could cost democracy dear( Asim Ali); Explained: Why is the electoral bond scheme being opposed by transparency activists?

Article Link:

https://www.thehindu.com/opinion/lead/opaque-political-financing-could-cost-democracy-dear/article66149909.ece 

https://indianexpress.com/article/explained/electoral-bond-scheme-transparency-elections-7243078/ 

Yojna IAS Daily current affairs eng med 19th November

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