An investigation by The Quint has recently revealed that electoral bonds have a hidden alphanumeric number printed on them which is not visible to the naked eye. They bought two electoral bonds of Rs 1,000 each and sent these to a forensic lab which found that these bonds had a serial number on them which could only be seen under UV light. This exposé has resulted in questions being raised about the motives behind the introduction of electoral bonds, a step which has not found many supporters since the very beginning.
The current government has been advocating greater transparency in political funding in India. The finance minister, in the 2017 Union budget speech, had proposed the introduction of electoral bonds as a measure to ensure clean political funding in India. The step was considered necessary to stop the use of cash donation in order to fund political parties.
With this background, the FM announced the Electoral Bonds Scheme in a Press Information Bureau release on 2 January 2018. Electoral bonds, which are interest-free banking instruments, can be bought only from specified branches of State Bank of India in multiples of Rs 1,000, Rs 1 lakh, Rs 10 lakh or Rs 1 crore.
The life of the electoral bond is 15 days and they can be encashed only by registered political parties through a designated bank account. The electoral bonds are available for purchase for a period of 10 days each in the months of January, April, July and October, as specified by the government. Additionally, a 30-day period will be specified by the central government in the year of general elections.
Advantages of Electoral Bonds
The finance minister had argued that electoral bonds were essential to change the existing system of political funding and move towards a more transparent system. Political funding has so far been based on donations, big and small, corporate or private, by cheque or cash, besides revenues on investments and properties.
These donations, coming from a range of sources, including political workers, party sympathisers, small business people and large industrialists, were mostly anonymous and did not reveal the source. This resulted in ‘unclean’ money (read black money) entering the system making the whole process non-transparent.
As opposed to this, the FM believes that electoral bonds will be the beginning of political reforms in the country, as all parties will have to operate through the banks only. The aim is to root out the current system of anonymous cash donations made to political parties which led to the generation of black money in the economy.
The Issue With Electoral Bonds
As I had pointed out earlier, one major problem with electoral bonds is that under the scheme, the name of the donor and the receiver is not revealed. Electoral bonds aim to conceal the identity of the donor. The rationale given is that many a time, people wish to donate to political parties anonymously to guard against reprisal or harassment from others to whom they have not donated or donated less.
I think the real reason could be that they don’t want return favours (quid pro quo) bestowed by the governments in the form of contracts, licences, loans etc to become public. It’s a clear case of private interest of donors in conflict with public interest in transparency. In such a scenario, electoral bonds will serve the opposite purpose of what they were introduced for in the first place. Instead of making electoral funding more transparent, the process will become way more opaque and information blacked out from the public.
‘Heavy Bias in favour of Ruling Party’
The recent revelation by the investigation team of The Quint has raised even more important questions regarding the other major issue with electoral bonds – its heavy bias in favour of the ruling party. The ruling party may easily be able to find out which corporation has bought the electoral bonds.
With the recent disclosure that electoral bonds in fact have a serial number printed on them, which is not visible to the naked eye, this apprehension regarding the government’s misuse of the information seems to be a very real possibility. While buying an electoral bond, one needs to furnish their KYC (know your customer) details. These details are recorded before the sale of the bonds.
The recipients can only encash these bonds at select SBI branches. The serial number of the bond, matched with the KYC details, will clearly reveal who donated how much money to whom. While it is true that even bank notes have a serial number on them, why is the number on electoral bonds hidden from the people and could only be discovered in a forensic lab?
Slyness is not the option available to the government. It’s every move has to be in public domain – except of course on defence and security matters.
While the government is claiming that it wants to move towards transparent political funding in India, the truth is that in the last year it has in fact introduced new laws which seems to be taking the electoral system in the opposite direction. Through the Finance Bill 2017, the government scrapped the ceiling that till then restricted corporate firms from donating more than 7.5 percent of their average three-year profit to political parties.
This effectively meant that corporations can now legally exist with the sole purpose of funding political parties. The recent amendment to the Foreign Contribution (Regulation) Act (FCRA), 2010 also exempts political parties from scrutiny of foreign funds received by them. The amendment, making it legal for political parties to receive funding from foreign donors, that too with 42 years retrospective effect, has made the electoral funding system in India more opaque than ever before. Secret numbers on electoral bonds compound the problem manifold.
Transparent political funding is a must for a successful Indian democracy. For this purpose it is essential that the government be accountable to its citizens and answer and respond to whatever concerns they might have. It is essential that the government clarifies these latest findings by the Quint so as to ensure that its credibility remains intact.
(The writer is former Chief Election Commissioner of India and the author of ‘An Undocumented Wonder — The Making of the Great Indian Election’. He tweets @DrSYQuraishi. This is an opinion piece and the views expressed above are the author's own. The Quint neither endorses nor is responsible for them.)