Electoral Bonds

In News

• The Supreme Court asked the government whether the electoral bond system reveals the source of money pumped in to fund political parties.

About

• Free and fair elections are central to democracy and an opaque way of funding political parties that destroys the concept of Article 324, the petitioner argued.

What are Electoral Bonds?

Arguments in favour of Electoral bonds 

• Transparency
  • The government said that the methodology of receiving money is absolutely transparent and it is impossible to get any black or unaccounted money in.
• Threshold hearing
  • The Attorney General recently said there should be a threshold hearing on the question of reference to a larger Bench.
• Tax exemption 
  • These donations enjoy 100 per cent tax exemption and even foreign companies can donate through Indian subsidiaries. 
• Ensures Accountability
  • Donations through Electoral Bonds will only be credited in the party bank account disclosed with the ECI. 
  • Every political party shall be obliged to explain how the entire sum of money received has been expended.
• Discouraging Cash
  • The Purchase will be possible only through a limited number of notified banks and that too through cheque and digital payments. Cash will not be encouraged.

Arguments against Electoral bonds 

• Article 324 of the Constitution 
  • The scheme affects the very idea of free and fair elections provided under Article 324 of the Constitution.
• Malpractices
  • The government has been issuing electoral bonds before every State election to have a strong hold on the results.
• Opaque way of funding political parties
  • Free and fair elections are central to a democracy. It is part of the Basic Structure of the constitution. 
  • Now, an opaque way of funding political parties where you do not even know who is funding who destroys the very concept of the fair elections.  
• Right to Information Act
  • Separate petitions have questioned whether or not political parties came under the ambit of the Right to Information Act.
• Foreign Contributions Regulations Act
  • The challenge to the retrospective amendments made to the Foreign Contributions Regulations Act by which subsidiaries of foreign companies would not be treated as foreign sources.
    • By not treating subsidiaries of foreign companies as foreign sources, political parties and others, including public servants, can get foreign money through the subsidiaries of foreign companies by virtue of these amendments. 
• Money bill
  • The electoral bonds system was introduced by way of a money bill introducing amendments in the Finance Act and the Representation of Peoples Act.
• Legitimising bribery
  • Such an anonymous route of funding amounted to legitimising bribery as corporates could fund the party in power in a state or Centre as a matter of quid pro quo.
• Repercussions on the Indian democracy
  • The Finance Act of 2017 exempts contributions by way of electoral bonds to be disclosed to the EC under Section 29C of the Representation of Peoples Act.

Way Forward

• The government may reconsider and modify certain provisions of the Electoral Bonds Scheme to ensure full disclosure and transparency.
• At the same time, the bonds should ensure that the funds being collected by the political parties are accounted for clean money from the appropriate channels without any obligation of give and take.
• In the case of continuance of the Scheme, the principle of anonymity of the bond donor enshrined in the Electoral Bond Scheme must be done away with.

Source: TH