• UGI USER
  • Nov 17, 2023
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A BOND OF SECRECY

Relevance: GS2– Salient features of the Representation of People’s Act.

Tags: #Electoralbonds #PoliticalFunding #RPA #GS2 #UPSC

 

Why in the News?

A Constitution Bench, led by CJI Chandrachud and comprising Justices Sanjiv Khanna, B.R. Gavai, J.B. Pardiwala, and Manoj Misra, conducted hearings over three days starting October 31, 2023. During the proceedings, petitioners contended that the electoral bonds scheme amplified corporate funding, facilitated the circulation of black money, and heightened the risk of corruption.

It is contended that the January 2, 2018, notification on electoral bonds is ultra vires Section 31(3) of the Reserve Bank of India Act, 1934, making it illegal according to legal perspectives.

Introduction to Electoral Bonds:

  • Electoral bonds, introduced in 2017, have garnered attention in the lead-up to general elections.
  • Primary objective: Electoral bonds aim to protect the identity of donors, addressing concerns about potential repercussions if the opposition learns about contributions to the ruling party.
  • Legislative changes, including an amendment to Section 31 of the Reserve Bank of India Act, 1934, were made through the Finance Bill of 2017.
    • The amendment was categorized as a money bill, raising concerns as the Reserve Bank of India Act itself is not a money bill.
    • The unresolved contradiction questions the classification of an amendment to a non-money bill as a money bill.

 

Features of Electoral Bonds

  • Secrecy in Buyer Details: Electoral bonds intentionally do not carry the name of the buyer, reflecting a genuine fear among donors of facing consequences if the opposing party gains power.
  • Confidentiality Assurance: The scheme ensures confidentiality by prohibiting the disclosure of buyer details to any authority for any purpose, as outlined in the finance ministry’s January 2018 notification.
  • Implementation Issues: The details of electoral bonds were notified under Section 31(3) of the Reserve Bank of India Act, 1934.
    • Critics argue that the confidentiality and non-disclosure policy regarding donors is a matter of legislative policy and should be addressed in the parent Act, not through subordinate legislation like a notification.

 

Political Funding Landscape in India:

Political parties rely on funds from corporate houses and affluent individuals for election campaigns. The high costs of elections necessitate external financial support, often from corporates.

  • Black Money Concerns: Corporate donations, often constituting a significant portion of political funding, are frequently associated with black money.
    • Despite income tax exemptions for political parties and donors, a considerable amount of these donations remains unaccounted for.
  • Election Impact on Black Money: Each election contributes to the escalation of unaccounted black money in the country. Political promises to eradicate black money stand in contrast to the ongoing influx of such funds during elections.

 

Legal Concerns:

  • References the Supreme Court’s history of striking down orders, regulations, and notifications perceived as exceeding the scope of the parent Act.
  • Legislative Limits on Executive Power: The executive cannot undermine transparency, a crucial element of public policy in a democratic system.
    • While state secrets may be kept confidential, protecting the anonymity of private donors in political funding goes against democratic principles.
  • Public Interest Perspective: Safeguarding donor confidentiality serves no public interest and may, in fact, harm public interest.
    • Argues that transparency in political funding is in the public interest, and any executive action diminishing it is detrimental to democracy.
  • Amendment to Representation of People Act, 1951:
    • Section 29(C) of RPA 1951, mandates political parties to disclose contributions exceeding Rs 20,000 in their annual report to the Election Commission.
    • The introduction of electoral bonds negates this requirement through an amendment, which is criticized as contrary to the public policy of transparency.
  • Unconstitutionality of Amendment:
    • Contends that the amendment to Section 29(C) is unconstitutional due to its opposition to the public policy of transparency.
    • Argues that transparency is an essential aspect of democracy, as highlighted in the Preamble to the Right to Information Act, 2005.
  • Democracy and Right to Information: 
    • The Right to Information Act, 2005, emphasizes the importance of transparency and an informed citizenry for the functioning of democracy.
    • Concealing donor identities through electoral bonds contradicts a fundamental democratic principle — transparency.
    • Emphasizes that any executive action diminishing transparency is inherently anti-democratic and not in the public interest.

 

Basic tenets of Electoral bonds

·        Nature of Electoral Bonds: Electoral bonds function as financial instruments/securities for donating funds to political parties.

·        Eligibility for Purchasers: Citizens of India or entities incorporated or established in India are eligible to purchase Electoral Bonds.

·        Individual Purchases:  Individuals, as citizens, have the option to buy Electoral Bonds either individually or jointly with others.

·        Eligibility Criteria for Political Parties: Only political parties registered under Section 29A of the Representation of the People Act, 1951, securing at least one percent of the votes in the last General Election, can receive Electoral Bonds.

·        Encashment Process: Eligible political parties can encash Electoral Bonds only through a bank account with the Authorized Bank.

·        State Bank of India (SBI) has been authorized to issue and encash Electoral Bonds through its 29 designated branches.

·        Validity Period:

·        Electoral Bonds remain valid for fifteen calendar days from the date of issue.

·        No payment is permitted to any political party if the Electoral Bond is deposited after the expiration of the validity period.

·        Crediting Process: Electoral Bonds deposited by an eligible political party are credited on the same day to their account.

·        Denominations Available: Electoral Bonds can be issued or purchased for values in multiples of ₹1,000, ₹10,000, ₹1,00,000, ₹10,00,000, and ₹1,00,00,000.

·        Issuance and Purchase Locations: Electoral Bonds are issued and purchased exclusively from specified branches of the State Bank of India (SBI).

 

Electoral Bond Sales Distribution:

·        Electoral bond sales data from May 2023, obtained through India’s Right to Information Act, reveals a concentrated pattern.

·        Approximately 90% of all electoral bonds sold were purchased in just five cities: Mumbai, Kolkata, Hyderabad, New Delhi, and Chennai.

·        Mumbai leads with the highest contribution, accounting for 26.16% of the total electoral bonds sold.

·        Bengaluru, despite being known as the tech capital of India, only represents just over 2% of the total electoral bond sales.

·        Notably low sales in Bengaluru are observed, considering its status as the capital of election-bound Karnataka.

·        Preferred Redemption Location:

·        The New Delhi branch of the State Bank of India (SBI) emerges as the favored choice for redeeming electoral bonds.

·        64.55% of all redeemed bonds were encashed in the capital, New Delhi.

·        Alternative Redemption Choices:

·        Hyderabad and Kolkata are identified as the second and third choices, respectively, for the redemption of electoral bonds.

·        Despite Mumbai’s substantial sales contribution (26.16%), only 1.51% of all electoral bonds were redeemed in the city.

·        Concerns about Transparency and Fairness:

·        The concentration of political funding in a few cities, as evidenced by the Electoral Bond Scheme data, raises concerns about transparency and fairness in the political financing process.

·        The issue is particularly pertinent given the prevalence of anonymous donations within the scheme.

Source

 

Mains question

Examine the impact of electoral bonds on the transparency of political funding in India. Critically analyze the pros and cons of electoral bonds as a means of financing political parties.