Electoral Bonds: Did the government deceive parliament over ECI concerns?

Radhakrishnan in his written reply denied that there were any concerns flagged by the Election Commission over electoral bonds.

Did the Modi government brazenly lie to the parliament on Tuesday? This is the question that should haunt all of us who expect utmost accountability from our elected government.

On Tuesday, the Minister of State for Finance P. Radhakrishnan submitted a written reply in Lok Sabha to the question over electoral bonds posed by Trinamool Congress MP Nadimul Haque. He has asked whether it was a fact that the EC had raised concerns on the issue of electoral bonds. He had also sought the details as well as reasons and the steps taken by the government to address the concerns in case the matter is true.

Radhakrishnan in his written reply outright denied that there were any concerns flagged by the Election Commission over the issuance of electoral bonds. He informed the parliament that “the government has not received any concerns from the Election Commission on the issue of electoral bearer bonds.”

However, election commission sources say that the institution had raised concerns over the government introducing electoral bonds a year ago itself. Moreover, it had even written a letter to the Law Ministry terming the amendments made by the government as “Dangerous for Transparency”. It is learnt that the Law Ministry taking note of the seriousness of the concerns raised by the EC, had sent three letters to the Expenditure Department under the Ministry of Finance. However, the letters invoked no reply from the Finance Ministry.

This begs a question, why did the Radhakrishnan keep it under the sheets that the ministry indeed received these concerns? Did the government lie or misled the parliament? There are strong possibilities considering its recent gaffe in a letter to Supreme Court over CAG report in Rafale deal passed off as a “typo” error.

What are Electoral Bonds?

In the Budget presented in the year 2017, Finance Minister Arun Jaitley had introduced the Electoral Bond system to “cleanse the system of political funding in the country”. An electoral bond is designed to be a bearer instrument payable to the bearer on demand. It is free of interest and can be purchased by any citizen of India or a body incorporated in India.

The bonds are issued in multiples of ₹1,000, ₹10,000, ₹1 lakh, ₹10 lakhs and ₹1 crore. These are available at specified branches of SBI and any KYC-compliant account holder can buy these bonds. Donors can donate the bonds to their party of choice which can then be encashed by the party’s verified account within 15 days.

Further, the FM said cash donations to the parties will be capped at Rs. 2000 per person. Donations above this amount, however, can be made via cheque or digital mode.

Why Electoral Bonds raise concern?

While the idea of Electoral Bonds seems to be giving a boost to more transparency in political funding on the surface, in reality, it does the exact opposite. Several activists have slammed the Electoral Bond system for making the political funding even more opaque. The reason being amendments introduced by the government which go against the very motive of bringing transparency.

• Amendment to Companies Act, 2013:

The amendment government introduced to the Section 182(3) of the Companies Act 2013, abolishes the provision that the companies must provide details of the contribution made by them to political parties in their Final Accounts and Profit and Loss statement. Raising a flag over this, Election Commission in its letter to the Law Ministry said, “The requirement is now reduced to only showing a total amount under this head, which again, would compromise transparency.”

Not only does the EC raised concerns over transparency but also on the removal of the cap on the amount that can be contributed by the companies. Earlier, the act put a limit of 7.5% of the average net profits in the preceding three financial years on the contribution by companies.

Highlighting this, EC expressed a possibility that this can lead to an increase in shell companies being set up for the for the sole purpose of making donations to political parties.

• Amendment to the Representative of People Act, 1951

Section 29C of the Representative of People Act, 1951 made it compulsory for the political parties to include in their Contribution Report submitted to the ECI to mention all the donation and sources of it. However, the amendment, however, says, “Provided that nothing contained in this subsection (1) shall apply to the contributions received by way of an electoral bond”.

ECI in its letter noted, “This is a retrograde step as far as transparency of donations is concerned and this proviso needs to be withdrawn.”

• Inconsistencies in two acts:

There are many lacunae when it comes to anonymous donation. Amendment to the Section 13A of the Income Tax Act says that any donation above the amount of Rs. 2000 has to be made via cheque, bank draft, bank transfer or electoral bond.

However, Section 29C of the Representative of People Act, 1951 still maintains the limit of anonymous donation received by political parties at Rupees 20,000. This gap between the two acts is more likely to be exploited.

The EC asked the government to amend the RP Act reducing the limit of anonymous/cash donations to Rs 2,000 so as “to bring these two Acts in consonance with each other”.

When did the ECI send the letter to the government?

On May 26, 2017, i.e. just three months after the introduction of electoral bonds, the ECI sent its letter raising concern to the law ministry. Under the ECI chief AK Joti, the then director (election expenditure) Vikram Batra wrote to a secretary of the law ministry. According to a report by The Wire, when a Pune resident filed an RTI in this matter, the EC provided a detailed response including the letter.

Reportedly, after receiving a letter of concern from the Election Commission, the Law Ministry apprised the Finance Ministry about it saying the concerns “appear to be genuine”.

Despite this, if the Finance Ministry is in denial over receiving Election Commission’s concerns then one wonders whether there is communication issue in the department or neglect on the part of officials? Either way, the incident shows the government in a poor light especially when it has been boasting about its “good governance”.