India's Prime Minister Prime Minister Narendra Modi after voting in last month's Gujarat state assembly election. His government's "bonds" scheme has come under fire. Photo: Reuters / Amit Dave

A plan to make political funding more transparent has been heavily criticized by electoral reform activists and constitutional experts. On Jan. 2, Arun Jaitley, the Union Finance Minister in the Bhartiya Janata Party (BJP)-led Indian government, rolled out so-called  “electoral bonds.”

In a widely-anticipated speech in parliament, Jaitley claimed that these “interest-free bonds”, which had been announced in last year’s budget, would help solve the problem surrounding political funding.

But the decision has come under mounting pressure. Critics claim that a government, which came into power with the promise to clean up political funding, has now twisted the law to make it more opaque.

This opacity in political funding is contrary to the Modi government’s public position on corruption and black money. The demonetization of 87% of India’s cash and the mandatory introduction of a digital identity was touted as a step against large corruption. However, political funding, which is the most significant source of corruption, is now beyond public scrutiny.

The “bonds”, worth between 1,000 to 1o million rupees, can be bought through the State Bank of India. But since the identities of the bondholders will remain secret outside of government circles, the program has come under fire.

For tax purposes, the government will know the identities of bondholders, while opposition parties will be left in the dark. This has triggered a wave of criticism.

Venkatesh Nayak, a program coordinator of the Access to Information Program for the Commonwealth Human Rights Initiative in  New Delhi, did not pull his verbal punches when called the step a “leap backward to the era of secrecy.”

These so-called “electoral bonds” are unique to India. In the United States, and the United Kingdom as well as other mature democracies, individuals or corporations must disclose their identities in a transparent system.

But India’s “electoral bonds” allow donors a relative degree of anonymity in order to protect them from “adverse consequences.”  According to Section 29C of the Representation of the People Act, political parties have to declare donations above 20,00 rupees to the Election Commission.

Scathing attack

Under Clauses 135 and 136 of Jaitley’s 2017 Finance Bill, parties will not have to submit records of “electoral bonds.” Bishwajit Bhattacharya, a former Additional Solicitor General of India, was scathing about the program when the idea was first mooted last year.

“It is true that businesses and their associations and federations do not want the donors named,” Bhattacharya wrote at the time. “But then the transparency of the system cannot be achieved when donations have no upper limits and names of groups making payments are blacked out.

“Why are the donors shying away from maintaining transparency? Why should the State kneel down before them? And, what are the ‘adverse consequences’ that the finance minister alludes to?” he went on to say.

“Electoral bonds” are also exempt from Section 13A of the Income Tax Act. Before, donors who contributed more than 20,000 rupees could be found in the public records.

The Finance Bill also removed the cap on political funding by corporations. Companies could only donate 7.5% of their average net profits of the last three years to political parties under Section 182 of India’s Companies Act. But now, that limit has been removed.

Milan Vaishnav, a senior fellow at the Carnegie Endowment for International Peace and author of When Crime Pays: Money and Muscle in Indian Politics, has heavily criticized the Finance Bill for its cynicism toward transparency.

“Today, India’s political finance regime is plagued by three major infirmities,” Vaishnav wrote. “First, there is a steady torrent of undocumented cash that lubricates the activities of both parties and candidates. Second, there is virtually no transparency regarding political contributions.”

Civil rights

Similar views were put forward by Jagdeep Chhokar, a founding member of the civil rights organization, Association of Democratic Reforms (ADR), in New Delhi and a long-time crusader for electoral reform. He pointed out that the Finance Bill unduly favors corporations when it comes to political funding and insisted the government was “hoodwinking the public and electorate”.

Although political parties would have to show the amount of funding on their balance sheet, they would not have to disclose the names of corporations, Chhokar stressed. This could lead to crony capitalism with corporate donors “rewarded” with major government contracts.

S. Y. Quraishi, a former Chief Election Commissioner, was just as scornful when he said that “electoral bonds” were the exact antithesis of transparency. They will not only assure anonymity to donors but “will also kill whatever little transparency exists now.”

“Very soon we will see companies spending all their profits on politics alone so they can control governments,” he told Asia Times. “In future, no one will know which corporations are donating how much and to which party. And the inevitable quid pro quo will never be apparent.”

Nasim Zaidi, another former Chief Election Commissioner who retired last year, also voiced his misgivings about the government’s decision and accused it of trampling on the people’s fundamental right to know.

Subhash C Kashyap, a former Secretary General of the Lok Sabha (Lower House of Parliament) and an expert in constitutional law, went even further.

He felt the that the government’s latest move would not stand up in court because “electoral bonds” run contrary to the right of information and the principle of “free and fair elections” in the constitution.

Kashyap told Asia Times he is of the opinion that the government should take concrete steps toward curbing the massive expenditure that candidates and parties incur in elections. “Electoral bonds”, he said, are only “eyewash” in the guise of transparency.

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