Electoral Bonds : A Brief Overview

Introduction:

• Electoral bonds, introduced in 2018, revolutionised political funding in India by allowing anonymous contributions to political parties. 

• These financial instruments function akin to promissory notes or bearer bonds and were designed specifically for political donations.

Background:

• The Electoral Bonds Scheme (EBS) was first announced during the 2017 Budget Session and later notified in January 2018 through amendments to key legislations such as the Finance Act of 2017, the Representation of the People Act of 1951, the Income Tax Act of 1961, and the Companies Act of 2013. 

• These amendments aimed to streamline political funding by removing various restrictions and introducing electoral bonds as a new mode of donation.

Donations Through Electoral Bonds:

• Electoral bonds are issued by the State Bank of India (SBI) and its designated branches in denominations of Rs 1,000, Rs 10,000, Rs 1 lakh, Rs 10 lakh, and Rs 1 crore.

• Donors, whether individuals or companies, can purchase these bonds through a Know Your Customer (KYC)-compliant account, ensuring transparency. 

• Notably, the identities of the donors remain confidential, and donations made via electoral bonds enjoy 100% tax exemption. 

• There is no limit on the number of electoral bonds that a person or company can purchase.

Eligibility of Donors:

Any citizen of India or entities incorporated or established in India can purchase electoral bonds, either singly or jointly with other individuals.

Eligibility of Political Parties:

Only political parties registered under Section 29A of the Representation of the People Act, 1951, and which secured not less than 1% of the votes polled in the last elections to the Lok Sabha or a state legislative assembly, are eligible to receive electoral bonds.

Functioning of the Electoral Bond Scheme:

• The State Bank of India (SBI) issues electoral bonds in specified months.

• Electoral bonds are available in various denominations.

• Donors purchase electoral bonds and transfer them to the accounts of political parties as donations, with the donor's identity kept confidential.

• Political parties create verified accounts, approved by the Election Commission of India (ECI), to encash the electoral bonds.

• Electoral bonds remain valid for 15 days, during which political parties must encash them in designated accounts.
  

Concerns Related to the Electoral Bond Scheme

Contradicting Transparency:

• Critics argue that the Electoral Bond Scheme contradicts its intended purpose of bringing transparency to election funding.

• Anonymity provided by electoral bonds is perceived to benefit the ruling party while withholding information from the public and opposition parties.

Possibility of Extortion:

• Electoral bonds being sold via a government-owned bank (SBI) raises concerns about potential government interference in funding opposition parties.

• This could lead to extortion or victimisation of companies for not funding the ruling party, providing an unfair advantage.

A Blow to Democracy:

• Amendments exempting political parties from disclosing donations received through electoral bonds undermine transparency in a representative democracy.

• Voters are deprived of knowing who funds political parties, compromising their ability to make informed choices.

Favouritism towards Rich Corporates:

• The Electoral Bond Scheme facilitates unlimited corporate donations and anonymous financing, potentially favouring wealthy corporations.

• Tax exemptions for corporate donations benefit wealthy entities and may influence policy decisions in their favour.

Compromising Right to Know:

• The scheme undermines the right to freedom of expression, as transparency in elections is essential.

• Amendments passed as money bills have been challenged as unconstitutional and violative of fundamental rights.

Against Free & Fair Elections:

• Lack of transparency in electoral bonds allows the government access to donor details, potentially disrupting free and fair elections.

• The government's ability to access donor information undermines the anonymity supposedly provided by electoral bonds.

Crony Capitalism:

• Removal of pre-existing limits on political donations enables well-resourced corporations to influence elections, fostering crony capitalism.

• Close relationships between business leaders and government officials may lead to biased policy-making.

Way Forward:

• Effective regulation of political financing and bold reforms are essential to combat corruption and strengthen democratic governance.

• Loopholes in current laws must be addressed to enhance accountability and transparency.

• Voter awareness campaigns can empower citizens to demand accountability from candidates and parties, fostering a more transparent democratic process.