Amid the blame game between the Congress party and BJP regarding the onus of bringing back the black money stashed in tax havens, India may be missing out its big chance to identify the primary illness concerning black money right in its own soil — lack of transparency in political funding.

According to data compiled by the Association for Democratic reforms (ADR), total income of national parties between fiscal year 2004-05 and 2012-13 stood at Rs 5,890.66 crores. These numbers exclude funding of regional parties. To be sure, these figures only include the declared income, which typically constitute less than a quarter of the total income of the outfit.

Of the total declared income of national political parties in 2013 (Rs 991 crore), declared donations formed only a fraction (10%) of the total income. The remaining came from other channels such as sale of coupons and voluntary donations in the form of cash donations, where the identity of the donor is difficult to establish for taxmen.

In other words, there is high probability that significant chunk of cash mobilised by Indian political parties for election funding and other expenditure are black money transactions that take place right under the nose of the government, central bank, taxmen and a myriad of investigative agencies.

“This implies that a lot of cash donations received remain unaccounted for in the books of accounts as only those amounts would be recorded for which a receipt has been issued,” warns the report.

Given that unearthing black money is one of the major poll promises in Modi’s election agenda, why is he silent about lack of transparency in political funding? Remember, Modi himself emerged victorious in the recent election riding a massively funded campaign.

But then Modi is not the only person who can be accused of keeping mum on the issue. Almost all politicians are complicit. Their silence on lack of transparency in political funding is probably linked to their existence itself.

In 2012-13, the Congress party declared the highest total income of Rs 425.69 crore, followed by the BJP with Rs 324.16 crore and the BSP with a declared total income of Rs 87.63 crore. The NCP had a total income of Rs 26.56 crore, CPI Rs. 1.07 crore and CPM Rs 126.09 crore.

Corporates topped the list of contributions with 72 percent to the national parties followed by individual donations with 17%. According to the ADR, 11 percent was donated by those donors who couldn’t be traced by name or address.

About 63 percent of donors to the national parties have not declared their PAN details in the contribution form. Interestingly, the BJP has listed the maximum number of donors, who have not declared their PAN details. How much money has changed hands from corporate and wealthy individuals to politicians?

The details of income/ donations post March, 2013 is not available yet.

According to Section 29C of the Representation of People Act, 1951, the political parties have to submit their contribution details received in excess of Rs 20,000 from any person or a company to the election commission of India annually.

According to ADR report, named contributions i.e. single contributions above Rs 20,000 were found to be very few in number for all the parties when compared with their total income, raising serious questions about the source of the significant part of their funding.

The myth of 627

The current hype created over the list of 627 account holders, which the Modi-government has submitted to the Supreme Court, doesn’t hold much water since the list has entries only until 2006. Also, mere mention of the name in the list may not be sufficient to tag an account holder as guilty.

For that, the government must be able to prove the account holder on charges of tax evasion.

Besides, given that the list is eight years old, any investor/depositor in his right mind would have moved the illegal holdings to ‘safer’ locations.

Given these facts, what real benefit the country will have chasing the 627 names? Even if the battle is won, it will neither bring the money back home, nor will it necessarily prove the charges of financial misconduct of 627 suspects.

The bitter reality is there is a sizeable, thriving market for unaccounted transactions in the home soil. This ranges from the real estate transactions to routing of funds to India through the P-Note channel.

Giving first priority to put right checks and balances on transactions involving unaccounted money in domestic market makes much more sense than chasing the billions of dollars once existed in Swiss banks, which can be achieved only with more political will and bilateral consensus with target countries.

If Modi is as serious as he appears in the black money battle, the NDA-government should first initiate action to make political funding transparent, as a first step of the clean-up process.

Every penny that flows into the coffers of political outfits should be made available public scrutiny.

Besides increasing the credibility of political establishments, revealing the source of funds for politicians will immensely help break off the infamous nexus between corporations, politicians and banks that has given rise to a huge amount of bad loans in India’s banking system.

The last time the government made any change in the election funding rules was in 2003 when it allowed corporations and individuals to seek income tax exemption on donations made to political parties of Rs 20,000 or more in a year.

Any significant change that relates to the political funding should happen through appropriate legislation.

The question is whether Modi has the political will to undertake the much needed overhaul in own soil to fight the black money market.