Why in news: The Supreme Court is expected to hear the petition filed by the Association for Democratic Reforms (ADR) challenging the Centre’s electoral bonds Scheme soon.

What are Electoral Bonds ?

  • The Electoral Bond Scheme was introduced in 2018as an alternative to cash donations made to political parties and also to cleanse the system of political funding in the country.
  • The broad features of the scheme are given below:
    • Electoral Bond would be a bearer instrument in the nature of a Promissory Note and an interest free banking instrument.
    • A citizen of India or a body incorporated in India will be eligible to purchase the bond.
    • Electoral bond would be issued/purchased for any value, in multiples of 1,000, 10,000, 1,00,000, 10,00,000 and 1,00,00,000 from the specified branches of the State Bank of India (SBI).
    • They are purchased anonymously by donors and they are valid for 15 days from the date of issue.
    • They can be used for making donation only to the political parties registered under section 29A of the Representation of the Peoples Act, 1951 (43 of 1951) and which secured not less than one per cent of the votes polled in the last general election to the House of the People or a Legislative Assembly.
    • The bonds under the Scheme shall be available for purchase for a period of 10 days each in the months of January, April, July and October, as may be specified by the Central Government.
    • The bond shall be encashed by an eligible political party only through a designated bank account with the authorised bank.

Advantages of the scheme :

  • Electoral bonds work with the aim of making process of election funding transparent and digitized. Cash donations are not allowed for rupees greater than 2000.
  • It will increase the digital and financial literacy of the public. All the transactions in this scheme are done using cheques or digital means.
  • It demotivates the people who form parties just to garner the cash from the public because only those parties who has secured minimum 1% of votes are eligible for funding through this scheme.

Drawbacks of the scheme :

  • May give edge to the party in power: All the information though is not available in public domain, it is available with the SBI. Since it’s a public sector bank the government can check who is donating to whom.
  • Lack of transparency : Though introduced with the intention of increasing the transparency, the scheme has worked in opposite.

EX: If a party receives funding from the company which promotes urbanisation and neglects forest cover and ecology the party may give preference to the companies policies neglecting environment.

  • Reduced public choice : This is because it is anonymous only to public and opposition so in effective it reduces the choice in voting.

Way forward :

As suggested by Indrajit Gupta Committee on State Funding of Elections (1998) and also Second Administrative Reforms Commission (2008), State funding of elections should be provided to the political parties to ensure the transparency and also state funding in kind can also be tried on.