Finance Minister Arun Jaitley said that the electoral bonds will be made available ahead of the elections and would remain valid for a few days.
The concept of electoral bonds was introduced by Mr. Jaitley during his Budget 2017 speech in order to bring some transparency to the electoral funding process.
“These bonds have to be authorised under a scheme under the Income Tax Act,” Mr. Jaitley said on Wednesday while speaking at an event at the Nehru Memorial Museum & Library.
“It will open for a limited period of time during the elections, or maybe a little before the elections.”
“The life of a bond will be just a few days. Knowing the manner in which people have laundered money, the bond should not become a parallel currency,” the Finance Minister added.
“A bond can be purchased by any donor only by cheque or electronic payment, only at authorised banks. You can donate these bonds only to a political party. These are redeemable in only one account of that party, registered with the Election Commission.”
Mr. Jaitley in his Budget speech had also announced that the cap on cash donations to political parties would be reduced to ₹2,000 from the earlier ₹20,000.
“Over time, grass root donations slowed down and so parties had to attract bigger donations,” the Minister said.
“That’s a disturbing change that has happened,” he added.
The Election Commission felt that if donations of more than around Rs 50,000 were received, then people were splitting it up and making receipts for smaller amounts. They were saying they received numerous such small donations. So it suggested we lower the limit on cash donations.”
The advantage of the electoral bond system over donations through cheques, Mr Jaitley said, was that many donors expressed reluctance to use cheques because it becomes transparent and leads to political vendetta by rivals. The other reason that donors did not want their names to be known was that, following the donation, if they legitimately win a contract, then they open themselves up to suspicion of benefiting from a quid pro quo arrangement with the party in power.
“Our system is a multi-party democracy. You will have a cost of parties, and cost of running elections,” Mr Jaitley said. “And parties do not conduct business. So they raise donations. The question is how do they do this in a transparent manner.”
