This is the first part of a two-part series based on HuffPost India’s investigation on the electoral bonds scheme. Read the second part here.
Elections in India are like a big fat Indian wedding with a majority of political parties extravagantly spending crores of rupees for their respective candidates to swing votes in their favour to form a government by every possible means. These crores of rupees spent by political parties are received by various methods of donations. One such novel approach is the Electoral Bond scheme. This scheme was broached with euphoria in 2017-18 Union Budget Speech by the then Finance Minister Shri Arun Jaitley. It was claimed that it is a step to promote transparency and accountability in political funding.
Electoral Bonds are an interest-free instrument which is like a promissory note that can be bought by any Indian citizen or company incorporated in India from selected branches of State Bank of India (SBI) within a fixed period time which then can be donated to any eligible political party keeping the identity of the donor a secret.
Bonds worth more than Rs. six thousand crores have been sold so far in 12 tranches. 95% of the money gathered by the first tranche of these bonds have gone to the ruling Bhartiya Janata Party (BJP) as per the Association for Democratic Reforms. In 2018-19, BJP received donations through electoral bonds worth Rs 1450.89 crore, Congress received Rs 383.26 crore, and TMC Rs 97.28 crore.
In November 2019, investigative journalist Nitin Sethi did an exclusively audacious series named Paisa Politics for Huffington Post India in which some alarming revelations were made. These revelations were based on the documents obtained by transparency activist Commodore Lokesh Batra (Retr) under the Right To Information Act. The series revealed that to legalize the scheme of electoral bonds, the Reserve Bank of India (RBI) Act needed to be amended, and hence RBI had to be brought on board first.
When these amendments were sent to the RBI, it responded that electoral bonds and amendments to the RBI Act would set a ‘bad precedent’ by encouraging money laundering and undermining faith in India banknotes, and would erode a core principle of central banking legislation. Electoral bonds, the RBI said, would effectively be a type of “bearer bond” — a notoriously opaque financial instrument that carries no trace of its ownership.
“Bearer instruments have the potential to become the currency and, if issued in sizeable quantities, can undermine faith in banknotes issued by RBI,” the bank wrote. “The bonds are bearer bonds and are transferable by delivery. Hence who finally and contributes the bond to the political party will not be known.”
However, RBI’s concerns were ignored with a flaccid argument that the RBI has not understood the proposed mechanism, and its advice come late at a time when Finance Bill was printed, despite the RBI responding on the first working day after it was asked for comment. With this reply, the scheme of Electoral Bonds was legalized using the government’s brute majority in Lok Sabha and bypassing Rajya Sabha, which can only comment and cannot amend it as it was a part of Money Bill. With this scheme and amendments in RBI Act now Indian companies, including shell companies which have no business but to channel money to political parties, individuals as well as other legal entities, such as trusts, can now anonymously buy unlimited amounts of electoral bonds and quietly hand them over to a political party of their choice to encash. Foreign companies can also now route money to Indian political parties, which was not possible earlier.
RBI was not alone objecting to such a contentious scheme, Election Commission (EC) also raised its concerns warning that electoral bonds would help political parties hide illegal donations from foreign sources and requested a rollback. To address this resistance, EC was told that companies would make accounting entries in their books when buying electoral bonds, which would ensure transparency. However, this argument turns out to be a lie as companies are not required to detail to whom they donated the bonds in balance sheets. EC was never satisfied with the government’s arguments and keep on insisting on a rollback of this scheme. These objections became public in March 2019 in an affidavit submitted by EC to the Supreme Court.
The government also pretended to be consulting with other political parties, where Congress and Bahujan Samaj Party (BSP) demanded more information before any comment because of the complicated nature of this scheme, CPI was completely against this scheme. Shiromani Akali Dal (SAD), an ally of BJP, nonetheless supported the plan with some recommendations which were utterly ignored.
Such a strident opposition from almost every sphere should have made the government take a pause, rethink or at least address the concerns effectively. But the government seems to have already taken the decision which they are in no disposition to take back.
The next part of this series will discuss how the government broke its own rules, bypassed Rajya Sabha, lie in the name of donors and secrecy and who pays for implementing this scheme in practice. You can read the next part here.
All the documents related to this series can be accessed here.