Sign In
Learn bytes
G.S. 2
Mahesh

07/04/22 04:20 AM IST

Electoral Bonds

  • WHAT
  • WHY
  • WHEN
  • WHERE
  • WHO
  • HOW
What are electoral bonds?
  • Simply put, electoral bonds are an instrument through which anyone can donate money to political parties.
  • Such bonds, which are sold in multiples of Rs 1,000, Rs 10,000, Rs 1 lakh, Rs 10 lakh, and Rs 1 crore, can be bought from authorised branches of the State Bank of India.
  • As such, a donor is required to pay the amount — say Rs 10 lakh — via a cheque or a digital mechanism (cash is not allowed) to the authorised SBI branch.
  • The donor can then give this bond (just one, if the denomination chosen is Rs 10 lakh, or 10, if the denomination is Rs 1 lakh) to the party or parties of their choice.
  • The political parties can choose to encash such bonds within 15 days of receiving them and fund their electoral expenses.
  • On the face of it, the process ensures that the name of the donor remains anonymous.
  • At the time of its announcement, in Finance Minister Arun Jaitley’s Budget speech in 2017, electoral bonds were understood to be a way for companies to make anonymous donations.
  • However, the fine print of the notification has revealed that even individuals, groups of individuals, NGOs, religious and other trusts are permitted to donate via electoral bonds without disclosing their details.
Why are electoral bonds being so vehemently opposed by transparency activists?
  • The anonymity provided to donors donating electoral bonds is the point of contention here. Through an amendment to the Finance Act 2017, the Union government has exempted political parties from disclosing donations received through electoral bonds.
  • In other words, they don’t have to disclose details of those contributing by way of electoral bonds in their contribution reports filed mandatorily with the Election Commission every year.
  • This means the voters will not know which individual, company, or organisation has funded which party, and to what extent.
  • Before the introduction of electoral bonds, political parties had to disclose details of all its donors, who have donated more than Rs 20,000.
  • According to transparency activists, the change infringes the citizen’s ‘Right to Know’ and makes the political class even more unaccountable.
  • Moreover, while electoral bonds provide no details to the citizens, the said anonymity does not apply to the government of the day, which can always access the donor details by demanding the data from the State Bank of India (SBI).
  • This implies that the only people in dark about the source of these donations are the taxpayers.
  • It may also be noted that the printing of these bonds & SBI commission for facilitating the sale and purchase of the bonds is paid from the taxpayers’ money by the central government,” the Association of Democratic Reforms (ADR), which has moved the Supreme Court against electoral bonds.
When were electoral bonds introduced ?
  • The central idea behind the electoral bonds scheme was to bring about transparency in electoral funding in India.
  • In the Union Budget speech on February 1, 2017, then Finance Minister Arun Jaitley stated: “Even 70 years after Independence, the country has not been able to evolve a transparent method of funding political parties which is vital to the system of free and fair elections…
  • Political parties continue to receive most of their funds through anonymous donations which are shown in cash. An effort, therefore, requires to be made to cleanse the system of political funding in India.
  • In response, he proposed two main changes. One, he reduced the amount of money that a political party could accept in cash from anonymous sources — from Rs 20,000 to Rs 2,000.
  • Two, he announced the introduction of electoral bonds as a way to make such funding more transparent.
  • Formally, these bonds were introduced in 2018.
Where had opposition filed the petition regarding Electoral bonds?
  • The NGO, Association for Democratic Reforms, had filed the PIL in 2017 on the alleged issue of corruption and subversion of democracy through illicit and foreign funding of political parties and lack of transparency in the accounts of all political parties.
  • It filed an interim application in March last year before the assembly polls in West Bengal and Assam seeking that window for sale of electoral bonds be not reopened.
  • The NGO, in its application filed in the pending petition, had claimed that there is a serious apprehension that any further sale of electoral bonds before the upcoming Assembly elections, including in West Bengal and Assam, would further “increase illegal and illicit funding of political parties through shell companies”.
  • It had alleged that as per data on electoral bonds declared by political parties in their audit reports for 2017-18 and 2018-19, the “ruling party had received more than 60 per cent of total electoral bonds issued till date.”
  • The application had claimed that so far more than Rs 6,500 crore worth of electoral bonds have been sold with the majority of donations going to the ruling party.
  • In its order, the Supreme Court said that while it wanted to hear the matter at length at a later stage, for the interim it wanted a situation where the balance was not tilted in anyone's favour.
  • It has asked political parties to reveal details of the donations they received through electoral bonds to the Election Commission. The poll panel, on the other hand, has been asked to keep all the details in a sealed cover until further orders of the top court.
Future of Electoral Bonds 
  • While experts are divided on whether the order provides for an answer to the issue of transparency that was raised by the petitioners, they say the interim arrangement will ensure that there is some transparency going ahead. 
  • The Election Commission, in its submission to the Standing Committee on Personnel, Public Grievances, Law and Justice in May 2017, had objected to the amendments in the Representation of the People (RP) Act, which exempt political parties from disclosing donations received through electoral bonds. It described the move as a “retrograde step.
  • In a situation where the contribution received through electoral bonds are not reported, on perusal of the contribution report of political parties, it cannot be ascertained whether the political party has taken any donation in violation of provision under Section 29(b) of the RP Act which prohibits the political parties from taking donations from government companies and foreign sources.
Who can receive electoral bonds?
  • Issued in multiple values of Rs 1,000, Rs 10,000, Rs 1 lakh, Rs 10 lakh and Rs 1 crore, these bonds can only be encashed by political parties, which had secured at least 1 per cent of the votes polled in the most recent Lok Sabha or state election.
  • Monies received from electoral bonds will be deposited in a bank account verified by the Election Commission.
  • All the transactions for electoral bonds can be done only through that account.
  •  It is like a promissory note that can be bought by any Indian citizen or company incorporated in India from select branches of State Bank of India. The citizen can then donate the same to any eligible political party of his/her choice.
  • Experts point out that electoral bonds are most likely the first-of-its-kind instrument in the world used for funding political parties. While the United States has Political Action Committees which receive money from individual and corporate donors and manage them, they do not have any scheme that allows the citizen to directly purchase a bond and donate the same to a political party.
  • The introduction of the electoral bond scheme is part of what appears to be a growing trend away from transparency and accountability, two values which were already sparse in relation to Indian political parties.
  • Opponents to the scheme allege that since the identity of the donor of electoral bonds has been kept anonymous, it could lead to an influx of black money. Others allege that the scheme was designed to help big corporate houses donate money without their identity being revealed.
  • Some experts, however, differ and say the idea of electoral bonds was never to entice big corporate houses into making political donations without being identified. "It is more for the individual donator and keeping a check on such scrupulous donations that could have come without any checks and balances.
How popular are electoral bonds as a route of donation?
  • In less than three years of their introduction, by virtue of the anonymity they offer to donors, electoral bonds have become the most popular route of donation.
  • More than half the total income of national parties and the regional parties analysed by ADR for the financial year 2018-19 came from electoral bonds donations.
  • The Bharatiya Janata Party (BJP) is the biggest beneficiary of this scheme.
  • In the years 2017-18 and 2018-19, political parties received a total of Rs 2,760.20 crore from electoral bonds, of which Rs 1,660.89 cr or 60.17% was received by the BJP alone.
  • one of the arguments for introducing electoral bonds was to allow common people to easily fund political parties of their choice but more than 90% of the bonds have been of the highest denomination (Rs 1 crore).
  • Moreover, before the electoral bonds scheme was announced, there was a cap on how much a company could donate to a political party: 7.5 per cent of the average net profits of a company in the preceding three years.
  • However, the government amended the Companies Act to remove this limit, opening the doors to unlimited funding by corporate India.
Other conditions
  • Every party that is registered under section 29A of the Representation of the Peoples Act, 1951 (43 of 1951) and has secured at least one per cent of the votes polled in the most recent Lok Sabha or State election will be allotted a verified account by the Election Commission of India. Electoral bond transactions can be made only via this account.
  • The bonds will be available for purchase for a period of 10 days each in the beginning of every quarter, i.e. in January, April, July and October as specified by the Central Government. An additional period of 30 days shall be specified by the Central Government in the year of Lok Sabha elections.
  • As explained by Mr. Jaitley, the electoral bonds will not bear the name of the donor.
  • In essence, the donor and the party details will be available with the bank, but the political party might not be aware of who the donor is.
  • The intention is to ensure that all the donations made to a party will be accounted for in the balance sheets without exposing the donor details to the public.

More Related Current Affairs View All

08 Nov

One Rank One Pension (OROP) in India

'As the One Rank One Pension (OROP) scheme completes 10 years, data presented by the Defence Ministry reflects a significant financial expenditure for armed forces pensioners over

Read More

08 Nov

Can all private properties be acquired by the state?

'A nine-judge Constitution Bench of the Supreme Court, in a majority judgment (8:1), held that not every private resource can be considered a ‘material resource of the commun

Read More

08 Nov

UP introduced new rules for appointing its police chief

'The Uttar Pradesh government has framed new rules for appointing the state’s Director General of Police (DGP).' This comes in the wake of the Supreme Court (SC) issuing n

Read More

India’s First Ai-Driven Magazine Generator

Generate Your Custom Current Affairs Magazine using our AI in just 3 steps