Finance minister Arun Jaitley on Sunday said the government is willing to consider fresh suggestions to better clean up the political funding process. But he asserted that the electoral bonds, announced in Parliament last week, are a substantial improvement on the current opaque funding system that has only abetted corruption and yet the Opposition seems satisfied with it. In a Facebook post, Jaitley also countered the Opposition’s criticism that keeping the bond holder’s name anonymous won’t bring in transparency, suggesting that instruments that require the donors to be named, have only pushed people towards cash donations. “I do believe that donations made online or through cheques remain an ideal method of donating to political parties. However, these have not become very popular in India since they involve disclosure of the donor’s identity.” According to a report by the Association of Democratic Reforms (ADR), “unknown sources” accounted for over 77% of the income of the country’s top two political parties — the BJP and the Congress — in 2015-16, when parties were not required to disclose sources for cash donations up to Rs 20,000.
The concept of electoral bonds was first announced by Jaitley in the Budget for 2017-18. He had also announced limiting cash donation by a single donor to Rs 2,000 from Rs 20,000 earlier. The finance minister further said the conventional practice of funding the political system was to take donations in cash. The sources of such donations are anonymous or pseudonymous. The quantum of money was never disclosed and such a system ensures unclean money coming from unidentifiable sources. “It is a wholly non-transparent system. Most political groups seem fairly satisfied with the present arrangement and would not mind this status-quo to continue. The effort, therefore, is to run down any alternative system which is devised to cleanse up the political funding mechanism,” Jaitley said. Maintaining that the government is open to fresh suggestions for a better system, the finance minister, however, added: “It has to be borne in mind that impractical suggestions will not improve the cash-denominated system. They would only consolidate it.”
Last week, Jaitley announced broad contours of electoral bonds, with a validity of 15 days, that donors can buy from State Bank of India (SBI) and a receiving political party can encash only through a designated bank account. The bonds won’t name the donor or the political party she is donating to, but these can be bought only through bank accounts after meeting all the KYC norms. These bonds will be bearer instruments in the nature of a promissory note, carrying no interest, and can be bought for any value, in multiples of Rs 1,000, Rs 10,000, Rs 1 lakh, Rs 10 lakh or Rs 1 crore. The validity period of the bonds is restricted to just 15 days to ensure they do not become a parallel currency.
Jaitley had pitched the bonds as an alternative to shoddy and anonymous cash donations. These would reflect in the balance sheet of the donors as well, he had said.
On Sunday, Jaitley said the choice has now to be “consciously” made between the existing system of substantial cash donations involving unclean money and other transparent options like cheque, online transactions or electoral bonds.
A transparent system of political funding assumes importance in the wake of a surge in corporate donations in recent years. The corporate donations received by political parties in just four years through 2015-16 surged two-and-a-half times the funds collected in the seven years between 2004-05 and 2011-12.
According to ADR, which analysed details of all donations above Rs 20,000 to five national parties (BJP, Congress, NCP, CPI and CPM), corporate donations accounted for 89% of all known donations in four years through 2015-16. Together, corporate houses had collectively donated Rs 957 crore from 2011-12 to 2015-16, against Rs 378.89 crore (87% of all donations) over four years from 2004-05 to 2011-12.