Electoral funding norms for corporates eased

Changes introduced by government in amendments to the Finance Bill of 2017 cleared on Wednesday by Lok Sabha.

FILE - In this Nov. 10, 2016, file photo, discontinued Indian currency notes of 1,000 denomination are seen after they were exchanged at a bank in Bangalore, India, in a government effort to crack down on corruption by banning high-denomination currency notes. A survey by the anti-graft group Transparency International shows that bribery and other forms of corruption are hindering poverty alleviation and hurting public health by channeling resources away from those who need them. The survey, released Tuesday, March 7, 2017, estimated that more than 900 million people in the region had paid bribes in the past year to obtain basic public services like schooling and health care. (AP Photo/Aijaz Rahi, File)

In significant changes in electoral funding norms, corporate donations to political parties will no longer face any ceiling linked to firms’ profitability and companies will no longer be obliged to inform their shareholders which party’s coffers they contribute to.

These changes were introduced by the government in the amendments to the Finance Bill of 2017 cleared on Wednesday by the Lok Sabha.

As of now, companies can only contribute up to 7.5% of their average net profits in the past three financial years to political parties. Moreover, they are required to disclose the amount of contributions made and the names of the political parties to which they were made, in their profit and loss accounts.

The government has included an amendment to the Companies Act of 2013 to do away with the 7.5% of net profits limit set on donations and the requirement for a company to disclose the name of political parties to which they donate.

A clause has also been inserted in the Companies law to make it mandatory for all corporate donations to political parties to be made by a cheque, electronic means, a bank draft or any other instrument notified by the government.

Electoral bonds

Such an instrument would include electoral bonds, announced by Finance Minister Arun Jaitley in his Budget speech, that are to be issued by specified banks to promote cashless modes of donations to political parties. The Centre has also reduced the maximum limit for cash donations to parties to ₹2,000 a person.

Leading industry bodies such as CII and FICCI did not respond on the implications of these changed norms.