Electoral Bond Scheme “Unconstitutional”

Electoral Bond Scheme “Unconstitutional”

GS-2: Indian Polity

(UPSC/State PSC)

Important for Prelims:

Regarding Electoral Bond Scheme, Article 19(1), Section 14, Representation of the People Act, 1951, ADR Report relating to electoral donations, Election Commission of India (ECI).

Important for Main Exam:

About Electoral Bond Scheme, Reasons why Electoral Bonds are considered unconstitutional, About Electoral Bonds, Features, Pros and Cons analysis of Electoral Bonds, Way forward.

February 16, 2024

Why in news:

Recently, a constitutional bench of the Supreme Court has struck down the electoral bond scheme and declared it unconstitutional.

  • A five-judge bench comprising Chief Justice of India DY Chandrachud and Justice Sanjiv Khanna, Justice BR Gavai, Justice JB Pardiwala and Justice Manoj Mishra had reserved its verdict in the case on November 2 last year.

Causes of making the electoral bond unconstitutional:

  • In the context of the petitions, the Supreme Court said that the electoral bond scheme violates the fundamental right of citizens to information under Article 19 (1) and it enables backdoor lobbying.
  • The electoral bond scheme promotes corruption, and eliminates the level playing field for political parties in opposition. This scheme violates Article 14.
  • There may be a quid-pro-quo arrangement for financial assistance to political parties through electoral bonds.
  • Economic inequality leads to a decline in levels of political engagement due to the deep connection between wealth and politics.

Supreme Court Comments:

  • Look for alternatives: The electoral bond scheme is not the only scheme to curb black money.
  • The amendment to the Companies Act that allows widespread corporate political funding is completely unconstitutional.
  • Selective anonymity and privacy: The court said that the scheme provides “selective anonymity” and “selective privacy” as the details of the electoral bonds are available with the State Bank of India (SBI) and can also be accessed by law enforcement agencies.
  • Right to know the source of funding: The court criticized the government's argument that voters do not have the right to know the source of funding of political parties.
  • Need for a new balanced system: The court said that the central government should consider designing a new system that balances proportionality and paves the way for a level playing field.
  • Data disclosure by Election Commission: The Supreme Court directed the Election Commission of India to prepare data on electoral bond contributions by September 30, 2023.
  • The court also directed SBI to hand over details of electoral bonds encashed by political parties to the Election Commission of India (ECI).

About Electoral Bonds:

  • It is a type of financial instrument through which anyone could donate to political parties anonymously.
  • Electoral bonds were announced in the Union Budget 2017 and were implemented on January 29, 2018.
  • Objective: Electoral bond was issued to maintain transparency of donations and details of donations received by political parties in elections.

Features of Electoral Bonds:

  • It was like a promissory note, which any citizen or company of India could buy from selected branches of State Bank of India and donate anonymously to any political party of their choice.
  • No interest was charged on these. These were available in denominations of Rs 1,000, 10,000, one lakh, ten lakh and one crore rupees.
  • These could be purchased only from State Bank of India (SBI).
  • The donor had to deposit an amount equal to the value of the bond in an authorized branch of SBI. This payment could be made only through check or digital process.
  • Any person and any company could buy bonds. There was no limit on the number of times someone could buy a bond.
  • Electoral bonds had a validity period of only 15 days, during which they could be used only for donations to political parties registered under the Representation of the People Act.
  • Donations could be made through electoral bonds only to those political parties which had secured at least one percent of the votes polled in the last general election for the Lok Sabha or the Legislative Assembly.
  • Under the scheme, electoral bonds were made available for purchase for a period of 10 days in the months of January, April, July and October.
  • These were also issued during an additional period of 30 days notified by the Central Government in the year of Lok Sabha elections.

Analysis of pros and cons of electoral bonds

Arguments in favor of electoral bonds:

  • Enhanced Transparency: Promotes transparency through engagement with election officials and the public.
  • Protection of donor anonymity: Allows confidential donations by individuals and organizations.
  • Accountability Assurance: Donations are deposited into disclosed party bank accounts, ensuring accountability of fund usage.
  • Discouraging cash transactions: Requiring payments to be made through designated banks, which will reduce the use of cash.

Arguments against electoral bonds:

  • Limiting transparency: Hinders the ability of voters to know the source of funding, thereby reducing political accountability.
  • Possibility of crony-capitalism: The possibility of flow of black money and favoritism by businesses may be encouraged.
  • Non-election use: Critics argue that the name "electoral bond" is misleading, as the money can be used for any purpose, and parties have no requirement to use it for elections.
  • Unauthorized donations: Hinders tracking of contributions from prohibited sources, affecting transparency.
  • Increase in inequality: The scheme disproportionately benefits the ruling parties, as most of the bonds are purchased by corporates and received by the ruling party.

Reports related to donations received by political parties:

Key Facts:

  • According to ADR, in the period between 2016-17 and 2021-22-
  • Seven national and 24 regional political parties received total donations of ₹16,437.63 Crore which was 55.9% of the total donations received.
  • Corporate and other sources: The total contribution of donations from the corporate sector was 28.07%, while the remaining 16.03% came from other sources.
  • Significant increase in donations: For national parties, donations received through electoral bonds increased by a substantial 743% between 2017-18 and 2021-22, while corporate donations increased by a smaller margin of 48%.

About Association for Democratic Reforms (ADR):

  • ADR is an Indian non-governmental organization based in New Delhi, established in the year 1999.

Way forward:

  • There is a need for the government to explore strategic options to reduce dependence on private donations and curb the influence of unaccounted money in politics.
  • The provisions of election funding should be reconsidered and amended to ensure full disclosure and transparency by the government.
  • The government should ensure that the money being collected by political parties is taken through proper channels as clean money without any compulsion of transaction.
  • Breaking the vicious cycle of corruption and decline in the quality of democratic politics requires bold reforms as well as effective regulation of political financing.

Source: Indian Express

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Mains Exam Question:

Write your views in favor and against India's electoral bond system for political funding.