Electoral Bonds

• 01 Aug 2022

For Prelims: Electoral Bonds, Political Parties, Representation of the People Act 1951

For Mains: Effects of Electoral Bonds on the election process, Issues Arising Out of Design & Implementation of Policies

Why in News?

Recently, the State Bank of India (SBI) shared data reporting that Donations to political parties through electoral bonds (EBs) have crossed the Rs 10,000-crore mark.

• In the 21^st sale of EBs conducted in July 2022, parties received another Rs 389.5 crore from EB purchases.
• The total amount collected by parties has gone up to Rs 10,246 crore since 2018 when the EB scheme was introduced.

What are Electoral Bonds?

• About:
  • State Bank of India is authorised to issue and encash these bonds.
  • Electoral bonds are purchased anonymously by donors and are valid for 15 days from the date of issue.
  • As debt instruments, these can be bought by donors from a bank, and the political party can then encash them.
  • These can be redeemed only by an eligible party by depositing the same in its designated account maintained with a bank.
  • The bonds are issued by SBI in denominations of Rs 1,000, Rs 10,000, Rs 1 lakh, Rs 10 lakh and Rs 1 crore.
  • The bonds are available for purchase by any citizen of India for a period of ten days each in the months of January, April, July and October as may be specified by the Central Government.
• Eligibility:
  • Only the political parties registered under Section 29A of the Representation of the People Act, 1951 and have secured not less than 1% of the votes polled in the last general election to the House of the People or the Legislative Assembly, are eligible to receive electoral bonds.

Why are Electoral Bonds a Concern for India?

• Contradicting its Basic Idea:
  • The central criticism of the electoral bonds scheme is that it does the exact opposite of what it was meant to do i.e. to bring transparency to election funding.
    • For example, critics argue that the anonymity of electoral bonds is only for the broader public and opposition parties.
• Possibility of Extortion:
  • The fact that such bonds are sold via a government-owned bank (SBI) leaves the door open for the government to know exactly who is funding its opponents.
    • This, in turn, allows the possibility for the government of the day to either extort money, especially from the big companies, or victimise them for not funding the ruling party — either way providing an unfair advantage to the party in power.
• A Blow to Democracy:
  • Through an amendment to the Finance Act 2017, the Union government has exempted political parties from disclosing donations received through electoral bonds.
    • This means the voters will not know which individual, company, or organization has funded which party, and to what extent.
  • However, in a representative democracy, citizens cast their votes for the people who will represent them in Parliament.
• Compromising Right to Know:
  • The Indian Supreme Court has long held that the “right to know”, especially in the context of elections, is an integral part of the right to freedom of expression (Article 19) under the Indian Constitution.
• Against Free & Fair Elections:
  • Electoral bonds provide no details to the citizens.
  • The said anonymity does not apply to the government of the day, which can always access the donor details by demanding the data from the State Bank of India (SBI).
  • This implies that the government in power can leverage this information and disrupt free and fair elections.
• Crony Capitalism:
  • The electoral bonds scheme removes all pre-existing limits on political donations and effectively allows well-resourced corporations to fund elections subsequently paving the way for crony capitalism.
  • Crony Capitalism: An economic system characterized by close, mutually advantageous relationships between business leaders and government officials.

Way Forward

• There is a need for effective regulation of political financing along with bold reforms to break the vicious cycle of corruption and erosion of quality of democratic polity.
• It is crucial to plug the loopholes in the current laws to make the entire governance machinery more accountable and transparent.
• Voters can also help bring in substantial changes by demanding awareness campaigns.
  • If voters reject candidates and parties that overspend or bribe them, democracy would move a step higher.

Source: IE