A Constitution bench comprising five judges of the Supreme Court has embarked on the significant task of scrutinizing petitions that challenge the constitutional validity of the electoral bonds scheme. These electoral bonds, introduced as a means to finance political parties, offer anonymity to donors and were initially designed to combat the pernicious influence of unaccounted black money in the political arena. Nevertheless, the electoral bonds have been a subject of controversy, primarily due to their potential to introduce obscurity into the political funding system.
On a preceding day, the central government presented its viewpoint to the Supreme Court, asserting that, according to the Constitution, voters do not possess the right to access information about the financial backing of political parties.
To fully grasp the ongoing debate, we must delve into the fundamental questions surrounding electoral bonds: What exactly are they, and how are they issued? Who is permitted to acquire these bonds, and what portion of the funds do political parties receive through them? Finally, have electoral bonds succeeded in rendering the political party funding system more transparent?
ELECTORAL BONDS: A CONCEPTUAL OVERVIEW
The electoral bonds were introduced in 2018, with the Ministry of Finance releasing a statement in January of that year, stating that the scheme's aim was to cleanse the political funding system. The underlying principle behind these bonds was to diminish the prevalence of illicit funds in politics, offering both individuals and corporations a lawful and transparent channel for contributing to political parties.
As of 2018, the Finance Ministry declared that electoral bonds would assume the form of bearer instruments. Generally, such instruments do not record the identity of the owner, and the holder is presumed to be the rightful owner.
These bonds can be purchased by any Indian citizen or a legally incorporated entity within the country. They exist in various denominations, spanning from a modest Rs 1,000 to a substantial Rs 1 crore, and are available at designated branches of the State Bank of India (SBI).
To procure electoral bonds, individuals or entities must make payments from a bank account. Crucially, the bond does not reveal the recipient's name, and it carries a brief lifespan of only 15 days. During this period, the bond can be utilized for making donations to political parties that meet specific criteria. Importantly, political parties can redeem these bonds only through designated bank accounts.
The Finance Ministry further specified that electoral bonds would be available for purchase during ten-day intervals in January, April, July, and October, as determined by the central government. In the event of a general election year, an additional 30-day purchase period would be designated by the central government.
DID ELECTORAL BONDS INTRODUCE OPACITY INTO THE FUNDING SYSTEM?
Proponents of electoral bonds argue that they foster transparency by channeling political party donations through formal banking channels, which can be scrutinized by government authorities. Furthermore, the identity of donors remains confidential, mitigating the risk of retribution or intimidation based on political affiliations.
However, since their inception, electoral bonds have engendered considerable controversy, with many questioning whether they have indeed achieved their intended objectives or, conversely, exacerbated opaqueness in the realm of political financing.
A prominent criticism centers on the lack of transparency concerning the sources of funds. The identity of the donor remains undisclosed to both the public and the Election Commission, making it challenging to trace the origins of political contributions. This opacity has raised concerns that electoral bonds could potentially facilitate the funneling of illicit funds into the political system.
In 2017, the then Reserve Bank of India (RBI) Governor, Urjit Patel, voiced concerns about the potential misuse of electoral bonds, particularly through the employment of shell companies.
Moreover, a persisting issue revolves around the disproportionate distribution of funding, with the party in power typically receiving the lion's share. Critics argue that this situation undermines the concept of a level playing field in democratic elections.
ELECTORAL BONDS AND THE ALLOCATION OF FUNDS
Reports indicate that a substantial amount, approximately Rs 13,000 crore, has been transferred to various political parties between March 2018 and July 2023 through electoral bonds.
Between 2018 and 2022, electoral bonds amounting to Rs 9,208 crore were sold, with the Bharatiya Janata Party (BJP) securing a majority share of 58 percent of the total funds, according to reports.
Data released by the Election Commission in January 2023 revealed that four national political parties, namely the BJP, Trinamool Congress (TMC), Congress, and Nationalist Congress Party (NCP), collectively garnered 55.09 percent (Rs 1811.94 crore) of their total income through electoral bonds in the fiscal year 2021-22. The BJP emerged as the primary recipient of electoral bond donations, followed by the Trinamool Congress (TMC) and the Congress.
In a report released by the Association for Democratic Reforms (ADR) in March 2023, it was disclosed that over 66 percent of the total income of the seven national parties was derived from electoral bonds and unidentifiable sources. These seven national parties were the BJP, Congress, Trinamool Congress (TMC), Nationalist Congress Party (NCP), Communist Party of India (CPI), Communist Party of India (Marxist) (CPI(M)), and the National People's Party based in Meghalaya.
Of the total income, these parties obtained Rs 2,172 crore from undisclosed sources in the fiscal year 2021-22, with 83 percent of that sum (Rs 1,811.94 crore) attributed to electoral bonds. An "unknown source" denotes income that is declared in the annual audit report of political parties without specifying the income's origin, as per the Association for Democratic Reforms (ADR), a non-governmental organization dedicated to electoral reforms.
Electoral bonds were initially introduced with the goal of infusing transparency into political funding in India. However, concerns and controversies persist regarding their impact. While they have established a framework for political parties to receive funds through formal channels, questions about their implications for transparency and accountability remain unanswered. The issue of electoral bonds is currently under the scrutiny of a five-judge bench, presided over by Chief Justice of India DY Chandrachud. This development stems from a referral made on October 16 by a three-judge bench, recognizing the pivotal importance of the matter at hand.
