By Suchindran B N & Param Pandya

Electoral bonds represent the latest attempt at removing black money from the electoral system. It is a financial instrument, much like a demand draft or currency note, which will conceal the identity of the donor from the intended recipient political party from everyone except the issuing bank.

These bonds can be purchased for any value, in multiples of Rs 1,000, Rs 10,000, Rs 1,00,000, Rs 10,00,000 and Rs 1,00,00,000 from the specified branches of the State Bank of India. The bonds will have a 15-day validity that will ensure that they don’t become a safe haven or a parallel currency.

It seeks to address the reprisals that many donors fear or face. Significantly, the scheme, as per the Press Information Bureau (PIB) press release made public on Tuesday, would not be available to new political parties, since it is necessary that a party should have obtained at least 1% votes polled in the last election contested.

A Party for Bond
Also, it stated that the bonds can only be encashed into designated and registered bank accounts of those political parties that qualify for the scheme.

It’s a view of sorts.So, both political parties and donors will be required to comply with ‘Know Your Customer’ (KYC) norms.

These bonds will be available for purchase for 10 days each in January, April, July and October. An additional period of 30 days may be specified by GoI in a Lok Sabha election year.

A report by the Association for Democratic Reforms (ADR) states that funding to national and regional political parties from 2004-05 to 2014-15 has largely remained opaque. About 69% of the donations received by these parties amounting to Rs 7,832.98 crore were from unknown sources. Another ADR report reveals that 30.71% of the income of national parties in 2015-16 was from unknown sources. These data suggest that black money is channelled into parties in return for political patronage.

GoI believes that the introduction of electoral bonds is a second step towards eliminating black money in India’s electoral funding, the first being the reduction of limit for cash donation from Rs 20,000 to Rs 2,000. Both these reforms were first spoken about by finance minister Arun Jaitley in his Budget speech last year.

The very basis for electoral bonds, though, is a matter of doubt. Both the 255th Law Commission of India Report on Electoral Reforms and the report on Proposed Electoral Reforms by the Election Commission (EC) do not mention electoral bonds or anything similar as a weapon to fight black money in political parties’ financing. As per an RTI reply, the Reserve Bank of India, the EC or the finance ministry did not have any information about who suggested electoral bonds for political funding in India.

Non-consultation with the EC, as indicated in the RTI reply, is particularly troubling. It is the constitutional body entrusted with the conduct of elections and, yet, it was left in the dark. According to media reports, the EC has submitted its opinion to a parliamentary panel, in no uncertain terms, that electoral bonds are a retrograde step.

First, while the monetary aspects will be routed through banking channels — which is a good thing — there is an apprehension that information of all donors will be available to the ruling government and party. Our banking system is not protected by a secure cloak of privacy that will enable banks to withhold such information from the government of the day.
Donation: Dos & Dons
Second, the choice of remaining anonymous is left to the prospective donors. So, if any donor makes a donation for a quid pro quo, then he can easily reveal his identity to the intended recipient party. The scheme will protect such donors from identifying the recipient either to the EC or the tax authorities.

Third, the Finance Act, 2017 (passed as a money Bill), that amended various laws to facilitate the issuance of electoral bonds has been constitutionally challenged in the Supreme Court. An adverse judgement could put electoral bonds in limbo. There seems to be no parallels to the Indian electoral bonds scheme in other jurisdictions. While the general trend in most countries is to remove the anonymity of donors and move towards disclosure, India’s electoral bonds seem to set a novel contrarian precedent.

Countries like Britain, Germany, the US, Japan and the Philippines all have strict mechanisms for reporting the identity of donors. In Britain, if necessary, parties are required to return donations from unknown or impermissible sources. Both Britain’s Electoral Commission and the Federal Election Commission have published guidelines on reporting electoral donations.

Unfortunately, this scheme seems to be an elaborate ruse to protect anonymous donations from any capping or regulation by the authorities, while at the same time ensuring incometax benefits to the donor. With electoral bonds being, at the most, a halfbaked reform, one is left to ponder the words of Chief Justice M C Chagla in a 1957 judgement. He had warned that the “very springs of democracy” would be contaminated if political funding is allowed to determine policy outcomes. And electoral bonds will not prevent this.

*The writers are fellows, Vidhi Centre for Legal Policy, New Delhi