The Election Commission of India (ECI) has told the Supreme Court that electoral bonds, contrary to government claims, wreck transparency in political funding.
Coupled with the removal of cap on foreign funding, they invite foreign corporate powers to impact Indian politics, it said in an affidavit filed in the apex court.
Besides detailing how donations received through electoral bonds would cause a “serious impact” on transparency in funding of political parties, The ECI ripped apart amendments made to various key statutes through the two consecutive Finance Acts of 2016 and 2017.
It said these amendments would pump in black money for political funding through shell companies and allow “unchecked foreign funding of political parties in India which could lead to Indian politics being influenced by foreign companies.”
The commission said it had warned the Ministry of Law and Justice about these amendments way back in May 2017. It annexed the letters written to the Law Ministry, along with its 37-page affidavit filed in the Supreme Court on March 25, 2019.
“The Election Commission of India has time and again voiced the importance of declaration of donations received by political parties and also about the manner in which those funds are expended by them for better transparency and accountability in the election process,” it submitted.
The affidavit was circulated on Wednesday by petitioner Association of Democratic Reforms.
It said the amendments virtually derailed ECI guidelines of August 29, 2014, requiring political parties to file reports on contributions received, their audited annual accounts and election expenditure statements.
The Finance Act of 2017 amends various laws, including the Representation of the People (RP)Act of 1951, the Income Tax Act and the Companies Act. The Finance Act of 2016 makes changes in the Foreign Contribution (Regulation) Act of 2010.
The amendment to the RP Act allows political parties to skip recording donations received by them through electoral bonds in their contribution reports to the ECI. “This is a retrogade step as far as transparency of donations is concerned,” ECI said. The ECI has no way to ascertain whether the donations were received illegally by the political party from government companies or foreign sources.
On the other hand, a government affidavit on March 14, 2019 in the apex court claimed that electoral bonds were introduced to promote transparency in political funding and donations.
The government had described the electoral bonds scheme, introduced on January 2 last year, as an “electoral reform” in a country moving towards a “cashless-digital economy”.
The ECI said the amendment introduced by the government in the Income Tax Act allows anonymous donations. Donors to political parties need not provide their names, address or PAN if they have contributed less than Rs. 20,000. Now, “many political parties have been reporting a major portion of the donations received as being less than the prescribed limit of Rs. 20,000...” the ECI affidavit told the Supreme Court.
The ECI extends its critique to the Finance Act of 2016, highlighting how it had amended the FCRA 2010 to “allow donations to be received from foreign companies having majority stake in Indian companies...”
The affidavit extensively quotes from the May 26, 2017 letter the ECI wrote to the Ministry of Law. The letter, annexed with the affidavit, mentions how the amendment in the Companies Act “opens up the possibility of shell companies being set up for the sole purpose of making donations to political parties...”
The Supreme Court has listed the case for hearing on April 2. The hearing is based on a petition filed by Association of Democratic Reforms on the issue of electoral bonds, unlimited corporate funding and transparency in political funding.
