Answer:
In India, a series of legislative changes have been made to reform electoral funding process and bring in more transparency. Some of them include:
♤ Electoral Trusts were given legal sanctity in 2013 by bringing them under the Section 25 of the Companies Act, 1956. By routing the political contributions through an electoral trust, companies can escape from the dislikes of any political party to which it has not donated.
♤ Income Tax Act has been amended to lower the limit for anonymous cash donations from Rs 20,000 to Rs 2,000 to be received by political parties.
♤ Companies Act was amended which removed the cap where corporate entities could contribute only 7.5 per cent of average net profit in the past three financial years.
o Besides, previous requirement to disclose the names of beneficiary political parties in companies’ profit and loss statements was also done away with. These moves were aimed to curb unaccounted money flowing into the political system.
♤ Finance Act 2017, allows anyone, including corporates, to donate to political parties via electoral bonds. This measure was taken to “infuse democratic processes with white money” as it aimed at cheque and digital payments ensuring the identity of donors.
Despite these changes, there are many challenges related to transparency in electoral funding. According to Association for Democratic Reforms (ADR), more than half of all the income of national parties in India for 2017-18 is derived from unknown sources. Some of these challenges include:
♤ Some of the steps taken by the government are themselves said to be compromising on transparency. For instance:
o Schemes like Electoral Bond further promote anonymity.
o Limit for anonymous cash donation is said to be ineffective without a cap on the amount of money that can be collected anonymously through cash
♤ Political parties are outside the ambit of RTI despite CIC directive in 2013 to comply with the RTI norms.
♤ While there is limit on electoral expenditure for each candidate, there is no such capping for party expenditure.
To overcome these challenges, certain committees and commissions such as Inderjit Gupta Committee, Law Commission, 2nd ARC have advocated state funding of elections. It can help promote transparency in electoral funding in the following manner-
♤ It is argued that state funding of elections will establish a fair playing field for parties with less money.
♤ It will also discourage political parties to source funds from illegitimate means, thus breaking the nexus of business-criminals-politicians.
♤ It will encourage individuals with passion for public service but devoid of financial resources to contest elections.
However, there are some concerns regarding state funding of election:
♤ State funding should not be implemented before functioning and finances of political parties are not made transparent. This is because there is no guarantee that state funding of elections will stop the use of undisclosed additional funds by political parties.
♤ There is a lack of clarity on distribution of funds. For e.g. if parties are given funds on the basis of vote share in previous elections, then the winning party will always have an unfair advantage over others.
♤ There is also an argument that there will be misuse of taxpayers’ money on frivolous candidates.
For making electoral funding truly transparent, reforms are needed not only at candidate level at the time of elections but also in political parties, which need to engage in political activity all through the year, whether there is an election or not. For political parties a starting point could be bringing political parties under RTI as recommended by Central Information Commission (CIC).
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