Mains Marathon

• Introduction: Start your answer with brief overview and objective of the Electoral Bond Scheme
• Body: Discuss its advantages, disadvantages and Way Forward.
• Conclusion: Summarize the key points and conclude with a way forward approach.

Introduction:

Electoral bonds are an instrument of political funding introduced by the government in 2018 to bring transparency and accountability in the process of donating money to political parties. They are interest-free financial instruments that can be purchased from State Bank of India and donated to any registered political party within 15 days. The identity of the donor and the recipient are not disclosed to the public, making the bonds anonymous.

Electoral Bonds were introduced with the objective of curbing the use of black money in elections and promoting transparency in political funding.

Body:

Advantages of Electoral Bonds:

• Electoral Bonds bring transparency to political funding by providing a legal and regulated way to donate to parties. This helps track funds and curb illicit funding.
• Electoral Bonds formalize political donations by reducing unaccounted cash transactions and black money. They provide a traceable and accountable means of funding, which can be audited and monitored.
• Electoral Bonds protect donors’ privacy by offering anonymity. This safeguards donors from reprisal or harassment and keeps the focus on parties’ policies and ideologies.
• Electoral Bonds expand the donor base by attracting new donors who were hesitant to donate due to fear of identification or scrutiny. By offering anonymity, they promote a more diverse and inclusive funding landscape.
• Electoral Bonds promote financial accountability by requiring parties to disclose funds received through them in their audited accounts. This makes parties accountable for their funds and ensures they are used for legitimate purposes.

Disadvantages of Electoral Bonds:

• Undermining Democracy: According to Section 29C of the Representation of the People Act, 1951, all registered parties were required to declare donations over Rs. 20,000. However, electoral bonds are kept out of the purview of this section, leading to a lack of transparency.
• Promotion of Favouritism: Association of Democratic Reforms (ADR), argue that electoral bonds favour ruling parties. The bonds allow the ruling parties to access information about donors through the SBI, while keeping the opposition and the public uninformed.
• Crony Capitalism & Foreign Influence: Electoral bonds increase corporate influence by removing the cap on corporate donations. Additionally, they allow foreign companies to fund political parties through their Indian subsidiaries. This opens the possibility of crony capitalism and raises concerns about foreign influence in Indian politics, which the Election Commission has also expressed.
• Lack of Oversight: Electoral bonds lack oversight as they bypass the scrutiny of constitutional and statutory authorities like the Election Commission of India and the Reserve Bank of India. This absence of oversight undermines the checks and balances necessary for fair and transparent political funding.
• Possible Involvement of Black Money: The removal of the cap on corporate donations in electoral bonds has raised concerns about the creation of shell companies for the purpose of funding political parties. This loophole allows for potential misuse and the involvement of black money in political funding.

Way forward:

• Public disclosure of donations above a certain threshold and frequency is essential to promote transparency in the electoral bond system.
  • In United Kingdom, Political parties must report all donations over £7,500 (British pounds) per quarter. The names and addresses of donors are published online by the Electoral Commission.
• Imposing a cap on corporate donations, reinstating the requirement to reveal political contributions in profit and loss statements, and restoring the provision that a corporation must be three years in existence, to prevent shell companies, black money and foreign influence.
• Focus on reducing the influence of money in politics, promoting transparency, and creating a level playing field for all political parties. This may include stricter limits on campaign spending, disclosure of all sources of political funding, and incentivizing small individual donations.
• Political parties should be brought under the ambit of RTI as followed in countries like Bhutan and Germany.
• Empowering the ECI to scrutinise and audit the electoral bonds and making them reportable in the income tax returns or audit reports of the political parties, to ensure accountability and oversight.
• Replacing electoral bonds with other alternatives, such as state funding of elections as recommended by Dinesh Goswami Committee, or a National Electoral Fund where donors can contribute without indicating their preference for any party.

Conclusion:

While Electoral Bonds aim to enhance transparency in political funding, their implementation has raised concerns regarding accountability and anonymity. By incorporating measures such as robust disclosure requirements, donation caps, and strengthened oversight, it is possible to strike a balance that promotes greater accountability and transparency in political funding, fostering a healthy democratic process in India.