ELECTORAL BONDS

ELECTORAL BONDS

WHY IN NEWS?

• The Supreme Court will hear batch of petitions challenging the constitutional validity of the electoral bonds scheme.

MORE ABOUT THE NEWS:

• A five-judge bench of the Supreme Court led by Chief Justice of India DY Chandrachud is expected to hear a batch of petitions challenging the constitutional validity of the Centre’s electoral bonds scheme.
• The case has been pending in the Supreme Court for over eight years now and its outcome is expected to have a significant bearing on the Lok Sabha elections scheduled to take place next year.

WHAT ARE ELECTORAL BONDS ?

• Electoral bonds are a financial instrument that allows individuals and businesses to donate money to political parties without declaring it.

• They were introduced by the BJP government in 2018 as an alternative to cash donations.
• They were pitched as an initiative to bring transparency in political funding.
• According to the provisions of the scheme, electoral bonds may be purchased by any citizen of India or entity incorporated or established in India.

CHARACTERSTICS OF ELECTORAL BONDS:

• Bonds are sold in multiples of ₹1,000, ₹10,000, ₹1 lakh, ₹10 lakh, and ₹1 crore and can be bought through a KYC-compliant account and donated to a political party, which can then encash them.
• The name and other details of the donor are not entered on the instrument and thus electoral bonds are, in effect, anonymous.
• There is also no cap on the number of electoral bonds that a person or company can purchase.
• Every political party registered under Section 29A of the RP Act which secured at least 1% of the votes polled in the most recent Lok Sabha or State elections is allotted a verified account by the Election Commission of India (ECI) in which the bond amounts can be deposited within 15 days of their issue.
• If a party does not encash any bonds within this period, the SBI deposits them into the Prime Minister’s Relief Fund.
• The bonds are usually made available for purchase for a period of ten days each at the beginning of every quarter, i.e. in January, April, July, and October, besides an additional 30-day period specified by the Central Government during Lok Sabha election years.

WHY WERE ELECTORAL BONDS INTRODUCED ?

• The Centre’s rationale behind introducing the electoral bonds scheme was to “cleanse the system of political funding in the country” and bring about “transparency in electoral funding in India”.

WHY SCHEME IS FACING CHALLENGE IN SUPREME COURT? 

• The petitions contend that the scheme opens the “floodgates” to unlimited political donations and anonymous funding of political parties by Indian and foreign companies.
• Thus, there is imminent danger of legitimising electoral corruption on a huge scale.
• They also highlighted that the scheme’s anonymity violates a citizen’s ‘right to know’.
• The pleas also stated that the amendment to the FCRA which permitted foreign companies with subsidiaries in India to fund Indian political parties would expose “Indian politics and democracy to international lobbyists” having their own agendas.
• They objected to amendments to the Companies Act, 2013 which exempted companies from divulging details of political contributions in their annual profit and loss accounts, saying that this would increase opacity in political funding and promote the extension of undue benefits to such companies by political parties.
• Prashant Bhushan, representing the NGO Association for Democratic Reforms (ADR), contended that anonymous funding through electoral bonds encourages corruption and violates citizens’ right to a corruption-free nation.

CONCERNS RAISED BY ELECTION COMMISSION OF INDIA:

• In an affidavit filed before the Supreme Court in 2019, the ECI said that electoral bonds would wreck transparency in political funding and invite foreign corporate powers to impact Indian politics.
• It also warned that the amendments brought about to key legislations would open up the possibility of shell companies set up for the sole purpose of making donations to political parties
• It underscored the importance of ensuring that donations received by political parties are declared for better transparency and accountability in the election process.
• The ECI opposed the amendment to the RP Act that permitted political parties to skip recording donations received through electoral bonds, terming it a retrograde step as far as transparency of donations was concerned and calling for its withdrawal.
• It also urged the Ministry to ensure that only profitable companies with a proven track record are permitted to make political donations.

GOVERNMENTS STANCE SO FAR:

• Defending the Centre’s scheme, the Attorney General said that it “extends the benefit of confidentiality to the contributor”.
• Bonds promotes the contribution of clean money.
• Recently Attorney General R Venkataramani through written submissions said that the right of citizens to be aware of candidates’ criminal antecedents cannot be extrapolated to mean that they have the right to information regarding the funding of political parties.
• Reiterating objections to judicial review, he contended that the Court “cannot be permitted to scan State policies for the purpose of suggesting better or different prescriptions.”
• Highlighting that the scheme promotes the contribution of clean money and adherence to tax obligations, he opined that scrutinising a new law must be left within the purview of the public and parliamentary debates in consonance with the doctrine of separation of powers.

WAY FORWARD:

• Political funding is a complex issue in every democracy, but the electoral bond as an instrument legitimises opacity in the name of transparency.
• Thus, there is a need of transforming the domain of election financing at a time when it is vital that electoral contests remain competitive and responsive to public interest.

SYLLABUS: MAINS, GS-2, INDIAN POLITY

SOURCE: THE HINDU, INDIAN EXPRESS