The sources of funds of at least 45 companies that donated electoral bonds to various political parties (and whose financials could be matched with data from the CMIE Prowess IQ Database) are found to be suspect based on a joint analysis by The Hindu and an independent research team. These 45 companies are subdivided into four categories (A, B, C & D).
Thirty-three companies donated an aggregate sum of ₹576.2 crore in EBs, out of which ₹434.2 crore (nearly 75%) was encashed by the BJP. These companies had negative or near zero profit after tax in aggregate over seven years, from 2016-17 to 2022-23. The aggregate net losses of these 33 companies were over ₹1 lakh crore. 16 out of these 33 companies (category A) paid zero or negative direct taxes in aggregate. That these loss-making companies made such substantial donations indicates they could be acting as fronts for other firms or have misreported their profits and losses — raising the possibility of money laundering.
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Six companies donated a total of ₹646 crore, out of which ₹601 crore (93%) was encashed by the BJP. They had positive net profits in aggregate from 2016-17 to 2022-23, but the amounts donated through EBs exceeded their aggregate net profit significantly. These companies (category B) could also have acted as fronts for other companies or have misreported their profits and losses.
Three companies donated an aggregate sum of ₹193.8 crore, out of which ₹28.3 crore (around 15%) was encashed by the BJP. Of the rest, the Congress received ₹91.6 crore (47%), the Trinamool - ₹45.9 crore & 24%, BRS and BJD - ₹10 crore, close to 5% each, and the AAP - ₹7 crore & 3.6%. These three companies had positive net profits but reported negative direct taxes in aggregate from 2016-17 to 2022-23. Such companies (category C) could have engaged in tax evasion.
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Three companies (category D) donated a total of ₹16.4 crore in EBs, out of which ₹4.9 crore (around 30%) was encashed by the BJP and the rest by the Congress (58%), Akali Dal and JD(U), 6.1% each. These three companies had no reported data on net profits or direct taxes paid for the entire seven-year period which raises the question of whether the donors were shell companies that were involved in money laundering.
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Internal communications between the RBI and the Finance Ministry brought to light the central bank’s doubts regarding the EB scheme since its inception. In a letter to a Finance Ministry official dated January 30, 2017, the Chief General Manager of the RBI wrote: “Even the intended purpose of transparency may not be achievable, as the original buyer of the instrument need not be the actual contributor to a political party. The bonds are bearer bonds and are transferable by delivery. Hence, who finally and actually contributes the bond to the political party will not be known. While the person/entity buying the bearer bond will be as per Know Your Customer (KYC) parameters, the identities of the intervening persons/entities will not be known. Thus, the principles and the spirit of the Prevention of Money Laundering Act (PMLA) 2002 get affected.”
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The then revenue secretary Hasmukh Adhia, wrote in response: “[The] RBI has not understood the proposed mechanism of having pre-paid instruments to keep the identity of the donor secret while ensuring that donation is made only out of fully tax paid money of a person.”
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The Finance Ministry went ahead with the introduction of the electoral bonds scheme in January 2018, authorising the SBI to issue and encash the bearer bonds. The scheme continued till January 2024 before the Supreme Court ruled that it was unconstitutional.
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Data from these 45 EB donor companies seem to vindicate RBI’s concerns about money laundering and tax evasion.
Source: Election Comission of India, CMIE
