The Election Commission believes fraudulent political parties are being floated to launder money which finds its way into the stock market and is also used to buy jewellery, but has little to do with electoral campaigning or any other political expenses.
It says tax evasion and dubious donations could be behind a high number of defunct political parties. The commission says only 16% or 200 of 1,200 registered parties are actually involved in political activities. Most of the other parties are floated to park money illegally as donations to exploit the tax exemptions enjoyed by registered political outfits.
Although not all inactive parties are dodgy, several instances of cash transfers ranging from Rs 15-30 lakh, have been detected by the commission which, it feels, were for non-political purposes.
Chief Election Commissioner S Y Quraishi told TOI, " We have repeatedly written to the government about defunct political parties asking for powers to strike them off the rolls." He said the commission had proof about party funds being "channelled into the stock market and also used to purchase jewellery." But little has been done to check fraudulent parties.
Documents accessed through the RTI Act show the EC has been raising the alarm over a rise in dud parties since 2006."
The then CEC N Gopalaswami had in a letter to the PM expressed concern over donations collected by political parties. "The commission has reason to believe there could be something more than what meets the eye in these donations," he said in a communication on July 31, 2006.
The letter said, "Recently the commission has come across many cases of little known unrecognized political parties receiving donations running into lakhs of rupees, many times in cash, from individuals and companies."
The commission had also asked finance ministry and the Central Board of Direct Taxes (CBDT) to examine the accounts of some parties. RTI documents, accessed by the Association for Democratic Reforms (ADR), shows two registered unrecognized political parties — Parmarth Party and Rashtriya Vikas Party — received cash and came under scrutiny.
On March 3, 2006 EC secretary K F Wilfred asked CBDT to scrutinize the transactions.
Parmarth Party received Rs 15 lakh in just one transfer in 2004 while Rashtriya Vikas Party received two "donations" of Rs 75 lakh and Rs 50 lakh from one company within two months.
