The Supreme Court’s February 15 verdict on electoral bonds (EBs) had held the deletion of a provision contained in Section 182 (1) of the Companies Act, 2013, which enabled unlimited corporate contributions to political parties as “violative of Article 14 of the Indian constitution”.
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The provision had restricted corporate donations to a cap of 7.5% of the donor companies’ average net profits in the three preceding financial years. The Finance Act, 2017, had deleted the provision.
Based on an analysis, the electoral bond data relating to 385 companies that had donated bonds totalling ₹5,362.2 crore to the ruling BJP, the highest recipient of electoral bond donations, 55 firms were found to have made donations that exceeded the original 7.5% cap in 2022-23 and 2023-24.
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The total amount donated above the rescinded 7.5% cap figure stood at ₹1,377.9 crore, which was more than 69% of their aggregate donation of ₹1,993 crore. The BJP alone received close to 71%, or ₹1,414 crore, of the total donations.
The analysis by The Hindu and an independent research team was based on bond data and publicly available financials for 221 of the 385 firms, for which information was available from the Centre for Monitoring Indian Economy’s Prowess IQ Database.
Specifically, the EB donation data of these firms from 2019-20 to 2023-24 was matched against their financial data from 2016-17 to 2022-23. The findings are as follows:
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Fifty-five of these companies were found to have made donations which exceeded the 7.5% cap in two years (2022-23 and 2023-24) alone. The total amount donated above this cap stood at Rs. 1,377.9 crore, which was more than 69% of their aggregate donation of Rs. 1,993 crore. The BJP alone received close to 71% of the total donations (Rs. 1,414 crore). The Congress received 10% (Rs. 199.5 crore); the Trinamool, 5.6% (Rs. 113.5 crore); and the BRS got 5.2% (Rs. 105 crore).
Also read |33 loss-making firms donated electoral bonds worth ₹582 crore, 75% went to BJP | Data
Thirty-three companies made an aggregate donation of Rs. 1,225.7 crore in FY 2023-24 through electoral bonds. Of this, Rs. 933.8 crore (76.2%) was above the 7.5% cap amount of the preceding three-year average net profits of these companies. Of the aggregate donation of Rs. 1,225.7 crore of these 33 companies in FY 2023-24, Rs. 829.5 crore (over 67%) went to the BJP.
Twenty-eight companies made an aggregate donation of Rs. 767.3 crore in FY 2022-23 in electoral bonds, out of which Rs. 444.1 crore, i.e., 57.8%, was above the 7.5% cap amount of the preceding three-year average net profits of these companies. Out of the aggregate donation of Rs. 767.3 crore of these 28 companies in FY 2022-23, Rs. 585.3 crore, i.e., more than 76.2%, went to the BJP.
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Five companies in 2023-24 and eight companies in 2022-23 which made political contributions through electoral bonds beyond the 7.5% cap had negative or zero net profits, which raises questions on their source of funds and indicates possible money laundering. Companies with negative profits could not have made donations under Section 182(1) of the Companies Act, 2013.
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Six out of 33 companies whose contribution through electoral bonds surpassed the 7.5% cap did not report their profits for all the three preceding years. We have taken averages of their reported years only.
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If the analysis is extended to previous years up to 2018-19, the amount donated beyond the 7.5% cap will increase significantly.
Also Read: Sordid scheme: On the electoral bond scheme, electoral financing
In a letter addressed to the Union Ministry of Law and Justice dated May 26, 2017, the Director (Election Expenditure) of the Election Commission of India had objected to the amendment to the Section 182(1), saying: “Certain amendments have been proposed in Section 182 of the Companies Act…[and] the limit of 7.5% of the average net profits in the preceding three financial years on contributions by companies has been removed...This opens up the possibility of shell companies being set up for the sole purpose of making donations to political parties, with no other business of consequence having disbursable profits.” These warnings on the setting up of shell companies and possible money laundering, which the data now indicate, were ignored by the Union Finance Ministry, which implemented the electoral bonds scheme in January 2018.
Source: Election Comission of India, CMIE Prowess IQ Database
Watch our Data video:Electoral bonds banned: Which party benefitted the most while it existed?
