THE CONTEXT: Recently, the Supreme Court struck down the Electoral Bond (EB) scheme of political funding, declaring it to be “unconstitutional” because it completely anonymized contributions made to political parties. It is being welcomed especially because it is anchored in the citizen’s right to know.

ELECTORAL BONDS:

• These are bearer banking instruments that do not carry the name of the buyer or payee, go for sale in 10-day windows in the beginning of every quarter in January, April, July and October besides an additional 30-day period specified by the central government during the Lok Sabha election years.
• It was introduced in 2018 and are available for purchase at any SBI branch in multiples of ₹1,000, ₹10,000, ₹1 lakh, ₹10 lakh and ₹1 crore and can be bought through a KYC-compliant account.
• There is no limit on the number of electoral bonds that a person or company can purchase. Donations made under this scheme by corporate and even foreign entities through Indian subsidiaries enjoy 100% tax exemption while identities of the donors are kept confidential both by the bank as well as the recipient political parties. The public sector bank is obligated under the scheme to disclose the details only pursuant to a court order or a requisition by law enforcement agencies.

THE SUPREME JUDGEMENT ON ELECTORAL BONDS

• The five bench SC judgment headed by Chief Justice D Y Chandrachud is based on petitions filed by Association for Democratic Reforms (ADR), non-profit Common Cause, Congress leader Jaya Thakur, and the CPI (M), among others.
• The petitioners had argued that either the scheme must go on account of violating people’s right to know and affecting free and fair elections, or the court must direct for full disclosure of the purchasers and donors of EBs.

POINTS MADE IN THE JUDGEMENT:

• The judgement ruled that amendments made in the Representation of the People Act, Income Tax Act, and Companies Act through the 2017 Finance Act violated the constitutional right of the electors.
• Violates Article 14: Permitting unlimited corporate contributions to political parties was violative of Article 14 (right to equality) as it highlighted that it authorized unconstrained influence of companies in the electoral process.
• Violates free and fair election: This is violative of the principle of free and fair elections and political equality captured in the value of one person-one vote.
• Violate Article 19(1)(a): The electoral bond scheme is violative of Article 19(1)(a) as it infringes upon the right to information of the voter by anonymizing contributions through electoral bonds.
• Nexus between money and politics: Contradicting the government statement that donor anonymity was necessary to shield contributors from potential retribution, the judgement noted that that financial contributions to a political party would lead to a close nexus between money and politics.
• Fails proportionality test: The judgment underscored that voters’ right to know supersedes anonymity in political party funding, and that the EB scheme fails to meet the balancing prong of the proportionality test.
• Violates the right to information: The scheme hides the source of funding of political parties from the public, which is a fundamental right under Article 19(1)(a). The scheme also enables black money, foreign funding, and corporate influence in politics, which harm the public interest and the sovereignty of the nation.
• Violates the principle of equality: The scheme discriminates between different political parties based on their vote share, giving an unfair advantage to the ruling party and the major opposition parties, while excluding the smaller and regional parties. The scheme also creates a disparity between the donors and the voters, as the former can sway the policies and decisions of the political parties, while the latter are kept in the dark.
• Violates the constitutional scheme of electoral reforms: The scheme goes against the constitutional aim of curbing corruption and criminalization of politics. The scheme is also contrary to the recommendations of various committees and commissions that have called for more transparency and disclosure in political funding.

SIGNIFICANCE OF JUDGEMENT:

• Transparency and accountability of political funding: The judgment will ensure that the public will have access to the information about the source and amount of funding received by the political parties through electoral bonds. This will enable the public to scrutinize and hold the political parties accountable for their performance and conduct.
• Reduce the influence of money: The judgment will curb the influence of money and corporate power in politics, as the donors will no longer be able to hide their identity and agenda behind the veil of anonymity.
• Level playing field for all political parties: The judgment will level the playing field for all political parties, as they will no longer be discriminated against based on their vote share or popularity. This will enable the smaller and regional parties to compete with the ruling party and the major opposition parties on an equal footing and offer a genuine choice to the voters.
• Democratic setup: “The voters’ right to know and access to information is too important in a democratic set-up so as to curtail and deny ‘essential’ information on the pretext of privacy and the desire to check the flow of unaccounted for money to the political parties. While secret ballots are integral to fostering free and fair elections, transparency not secrecy in funding of political parties is a prerequisite for free and fair elections. The confidentiality of the voting booth does not extend to anonymity in contributions to political parties.
• Undo corruption: The bench held that the information about funding of political parties is essential for the effective exercise of the choice of voting to identify corruption and governance information. It ordered full disclosure of donors and recipients of EBs issued since April 2019 on the website of the Election Commission of India (ECI) by March 13, 2024. It directed the State Bank of India the only designated EB-issuing bank to stop the issuance of EBs, adding the bank will submit details of EBs purchased since April 12, 2019, till date to the poll body by March 6.

THE WAY FORWARD:

• State funding: The Indrajit Gupta Committee on State Funding of Elections has supported partial state funding of recognised political parties. State funding has proved its effectiveness in a number of countries like Germany, Japan, Canada, Sweden etc.
• Stringent legislations: There is a need for effective regulation of political financing along with bold reforms to break the vicious cycle of corruption and erosion of quality of democratic polity. It is crucial to plug the loopholes in the current laws to make the entire governance machinery more accountable and transparent.
• Strengthening Election commission: There is a need to strengthen the role of Election Commission by enabling suitable laws and creating healthy political environment. The EC should increase its own capacity in terms of empowering staff and developing infrastructural and logistical strength.
• Political party auditing: Venkatachaliah Committee Report (2002) recommended strict regulatory frameworks for auditing and disclosure of party income and expenditure along with state funding.

THE CONCLUSION:

The Supreme Court’s judgment on scrapping of electoral bonds is a historic and landmark verdict that upholds the constitutional rights and values of the citizens and the democracy. This decision will enhance the transparency and accountability of political funding and reduce the influence of money and corporate power in politics and will create level playing field for all political parties.

UPSC PREVIOUS YEAR QUESTION

Q. Whether electoral bonds are effective in ensuring fair, just and open elections? Discuss the various concerns regarding electoral bonds. (2022)

MAINS PRACTICE QUESTION

Q. Court striking down the electoral bond scheme is a landmark moment as it affirms principles of transparency and probity, and the people’s right to know. Comment.

Source: https://indianexpress.com/article/opinion/editorials/express-view-on-scs-electoral-bonds-judgment-a-vital-verdict-9164121/

THE CONTEXT: A fundamental purpose of democracy is to establish processes to negotiate differences among a diverse population that coexist. India’s leadership has put it above other countries in the international scenario but facing certain challenges. In this context, with the upcoming elections near the corner, India needs to set an example for the world to reset and bring back good faith in its politics.

ISSUES:

• Behaviour of ruling regime: The ruling regime has recently behaved impatiently in the Parliament even for democratic formalities. It has wielded state power in wholly undemocratic ways to neutralise the Opposition and clampdown on dissent.
• Stand of opposition: There is a section of the Opposition, especially civil society, which has pursued a strategy of embarrassing the government. It is not just that there is ideological opposition to the government but it is very clear that this section refuses to acknowledge the very legitimacy of the government.
• Erosion of faith: Decline of good faith in politics has resulted in a mindless rivalry where only the most partisan can prosper as opposed to those motivated by the public interest. This status quo, if left unaddressed, would be tragic for country.
• Issue of anti-defection law: There is another concern of anti-defection law which subverts representative democracy by constraining legislators to party leadership’s order. There has not been enough discussion on the effects of the anti-defection law on inner party democracy and issue-based mobilisation across parties.
• Lack of intra party transparency: It is a common knowledge that power in all political parties has concentrated in the hands of a few individuals. While political parties are notionally democratic, in-house elections lack transparency.

THE WAY FORWARD:

• Acknowledge the behaviour on both sides: There are a range of behaviours by the government but also those opposed to the government which need to be acknowledged from the both sides. There is no need for more explanation on the government’s misuse of state power, which includes defections, imprisonment, and intimidation.
• Role of individuals: Individuals of all ideological inclinations, who value civility and moderation in the politics, can play a crucial role. Many of these individuals wield influence within politically relevant institutions, either officially or through their networks. This group can play a pivotal role in restoring basic democratic principles in our public life by exerting influence.
• Reform with party system: Though partisanship is an important driver of multi-party democracy but constant demands for a blind, aggressive allegiance will only make partisanship and cynicism worse. Instead, party members must use their influence to restrain their own party’s excesses and reorient focus towards substantive issues.
• Address anti defection: There is a need to develop consensus of individuals across party lines on getting rid of the anti-defection law to limit potential instability in political parties. Also, dispersal of power to party’s elected representatives can create avenues for internal negotiations as well as horizontal issue-based mobilisation.
• Media’s role needs scrutiny: The mass media plays a pivotal role in opinion-making and instead of informing the electorate, the media often contributes to polarisation. It is in the interest of every citizen to promote responsible journalism and rebuild trust in the media. Individuals with influence over their party or media institutions can help create an environment to support a more public-interest media.

THE CONCLUSION:

India, like many other liberal democracies, is at a similar crossroads of ideological diversities. Therefore, concerned citizens across the ideological divide needs to come together to restore trust in our political institutions and preserve our democratic framework.

UPSC PREVIOUS YEAR QUESTIONS

Q. Parliament’s power to amend the constitution is limited power and it cannot be enlarged into absolute power”. In light of this statement, explain whether parliament under article 368 of the constitution can destroy the basic structure of the constitution by expanding its amending power? (2019)

MAINS PRACTICE QUESTIONS

Q. Faith in India’s political institutions seems at its lowest with the erosion of its credibility. Critically examine the statement and suggest ways to restore trust in politics.

SOURCE: https://www.thehindu.com/opinion/op-ed/bringing-back-faith-in-indias-politics/article67710670.ece

RELEVANCE TO UPSC SYLLABUS: GS 2: POLITY AND GOVERNANCE: ELECTORAL BONDS; POLITICAL FUNDING; PROBITY IN GOVERNANCE; ELECTORAL REFORMS

THE CONTEXT

The Constitution Bench headed by the Chief Justice of India, recently reserved its judgment on petitions challenging the validity of the electoral bonds scheme. The proceedings focused on arguments pertaining to the voters’ right to information vis-a-vis the right to confidentiality of donors. Transparency in election funding has become the central issue here.

POSITIVES OF STATE FUNDING OF ELECTIONS

Transparency: Public funding of elections can certainly bring transparency in the poll process with proper mechanism laid out. It would certainly be better than the existing system where candidates and political parties spend from their own pocket, and a lot of black money goes into election campaigning.

Level playing field: State funding of elections ensures that some influential people or groups don’t have undue influence over electoral processes. It enables a level playing field for the promotion of healthy competition by ensuring equality between large, well-known political parties and small parties and independent candidates.

Citizen centric decision: State funding of election will abstain political parties from the influence of crony capitalism and It can break up the corporate-political connection. If political parties are not financially influenced by the huge corporate sector, citizen-centric decisions will be encouraged.

Viable to economy: State funding of elections can cut down the huge expenditure spent on elections as only funds accounted by state funding will be used. Indrajit Gupta Committee Report, which is most often quoted in support of public funding of elections, it says state funding should be done only in kind and not in cash. However, it says State funding is viable only if parties are internally democratic in their functioning, transparent in their financial affairs.

ISSUES IN STATE FUNDING OF ELECTIONS

Unclear mechanism: There is no clear mechanism of how state funding of elections can work to maximize its potential. Also, for it being success there is need to bring in other electoral reforms in place.

Functioning of political parties:  Political parties nowadays mostly function as corporates. Their business is to win elections and make money to be able to win the next elections. So, this functioning of political parties as corporate entities or as family-run corporate entities is the fundamental problem which needs to be addressed.

Diversion of expenditure: The state expenditure on many essential public goods such as primary health care and public health engineering is already very small. Given this situation, the public resources have to be channeled towards and not diverted from such essential services, and that too to finance something that already gets abundantly financed.

Not prevent from additional financing: The state funding of elections will not prevent parties from lobbying and getting undisclosed supplementary private funding, with associated implications. Also, public funding may influence many people to enter politics solely to receive state subsidies rather than run for office and engage in development work.

RECOMMENDATIONS ON STATE FUNDING FOR ELECTIONS

The Indrajit Gupta Committee on State Election Funding (1998)

• To create a level playing field for parties with limited resources, the Indrajit Gupta Committee recommended state funding of elections in 1998.
• The Committee advised placing two restrictions on state funding.
• Firstly, only national and state parties with a symbol should receive state funding. Independent candidates should not.
• Secondly, only recognized political parties and their candidates should get short-term state funding in kind in the form of specific infrastructure.
• The Committee noted that at the time of the report, the nation’s economic climate was only conducive to partial, not complete, public funding of elections.

Law Commission Report on Electoral Law Reform (1999)

• According to the Law Commission of India’s 1999 report, state funding of elections is “desirable” as long as political parties are not allowed to accept money from other sources.
• Additionally, it strongly recommended that the appropriate regulatory framework should be put in place.
• The Commission agreed with the Indrajit Gupta Committee that, given the economic situation of the nation at the time, only partial public assistance was practicable.

The National Commission to Review the Working of the Constitution, 2002

• It did not endorse state funding of elections.
• But it agreed with the 1999 Law Commission report that there is a need for an appropriate framework for the regulation of political parties.
• It needs to be implemented before the state funding is taken into consideration.

Second Administrative Reforms Commission (2008)

• The Second Administrative Reforms Commission’s “Ethics in Governance” report from 2008 advocated partial state funding of elections to cut down on “illegitimate and excessive funding” of election costs.

GLOBAL COMPARISON

• There are some 34 countries where state funding of elections is available in some form or the other. But there are different models. In some countries only parties get the fund, candidates do not. There are countries where it’s the other way round.
• The highest proportion of state funding of elections is in Norway, which is about 74% of the total expenses on the election.
• In most countries where there is public funding of elections, there are also strict transparency requirements. In the U.S., there is a rule that if the presidential candidate raises X amount of money, they are eligible to receive an equal amount of money from the government.
• But this is subject to certain conditions. In the last two or three presidential elections, no candidate has accepted government money. They have said that they do not want to accept these conditions and that they are able to raise enough money on our own.

THE WAY FORWARD

Evolving an efficient mechanism: For effective implementation of state funding of election an efficient mechanism needs to be devised. It can be done by proper stakeholder consultation of all the parties concerned. For example,  Part-public funding of election campaigns is a practice in some countries. e.g. United States and Britain. There is a need to evolve our own version.

Realistic campaign spending: In India, the main reason for the prevalence of black money in election spending is the unrealistically low limits set by the Election Commission of India on campaign spending by political parties and candidates. More realistic campaign spending limits should be set where Election Commission could determine the actual expenditure and ask the parties to show the source of income.

Strict monitoring: The strict monitoring of expenditure by political parties and their functionaries at every level, starting with the panchayat, polling booth area and municipal ward should be done. For example, every party should disclose its expenditure every month at every level.  This should be open to challenge by rival parties, media, etc.

Involvement of political parties: Political parties need to be part of the decision-making process. Political parties have to be made accountable to the public. They have to be democratic institutions if they are to deserve public money.

THE CONCLUSION

There is an ongoing debate on transparency in political funding, as there is unnecessary expenditure by political parties in elections. In this regard, the idea of state funding of elections is a concept long debated to reduce corruption by funding elections with government money as opposed to individual campaign contributions. It has potential to bring new and growing parties in par with the established parties, thus ensuring fair elections.

PREVIOUS YEAR QUESTIONS

1. The Indian party system is passing through a phase of transition which looks to be full of contradictions and paradoxes.” Discuss. (2016)
2. To enhance the quality of democracy in India, the Election Commission of India has proposed electoral reforms in 2016. What are the suggested reforms and how far are they significant to make democracy successful? (2017)

 MAINS PRACTICE QUESTIONS

1. State funding of elections can be the best way to achieve transparency in political funding. Comment.

 Refer to the main focus article for more:

https://blog.lukmaanias.com/2023/11/10/regulating-political-funding-rules-around-the-world-indias-challenges/

 SOURCE: https://www.thehindu.com/opinion/op-ed/should-elections-be-state-funded/article67540233.ece