Unlimited and anonymous funding for political parties: Why Jaitley's 'clarification' is worrying

In the brave new world post-demonetization, some of the words which have been thrown around liberally are accountability, transparency and tracking down black money. One would have presumed that political parties, especially BJP, to be at the forefront to ensure that there is increased transparency about funding. The informed voter should have the information about which special interest groups are pumping money into political parties’ kitties, potentially influencing critical policy decisions. However, the last-minute amendments brought to the Finance Bill, which was subsequently passed by the Lower House, suggests such notions were wishful thinking.

According to PRS legislative, the changes related to political funding ensure that the cap on a company donating to a political party has been done away with. Also, companies can donate money anonymously, and it doesn’t need to reflect in their account.

Here’s the explanation from PRS:

Currently, a company may contribute up to 7.5% of the average of its net profits in the last three financial years, to political parties. The company is required to disclose the amount of contributions made to political parties in its profit and loss account, along with the name of the political parties to which such contribution was made. The amendments to the Finance Bill, 2017 propose to remove:

 (i) the limit of 7.5% of net profit of the last three financial years, for contributions that a company may make to political parties,

(ii) the requirement of a company to disclose the name of the political parties to which a contribution has been made

In addition, contributions to political parties will have to be made only through a cheque, bank draft, electronic means, or any other scheme notified by the government to make contributions to political parties.

Note that Finance Bill, 2017 contains provisions to introduce electoral bonds to make contributions to political parties. Electoral bonds will be bonds issued by notified banks, for an amount paid through cheque or electronic means.

Now, this has led to opposition and many political experts raising questions about further erosion of transparency in political donation as the entire process can now be kept anonymous.

With a tweak to FCRA norms making it legal to get foreign funding last year, the dangers of India’s political agenda being directed by special interest groups look very real, with no real checks and balances in the horizon.

However, Jaitley in his reply to Opposition’s queries regarding Finance Bill made no real attempts to answer such lingering doubts.

He said that several changes in the past have only yielded limited results. Listing out the ways of political funding, FM said,

1.Cheque (Limited success, donors are reluctant)

2. Small donations up to Rs 2000 by cash

3. Online collection of tax by political parties

4. Electoral bonds

The FM tried to assure that ruling party will not benefit from these changes and these have been made to ensure clean money enters politics. Regarding the proposal of starting electoral bonds, Jaitley said political parties are welcome to give suggestions. The FM reiterated his statement post budget that for electoral bonds every recognised party will have one pre-determined account notified with EC, from where the money can be redeemed.

Again, the contribution will be received anonymously. But as there will be a paper trail, FM stressed that it ensures clean money for both donor and recipient. However, the finance minister in a moment of rare candour, amidst all his glib lawyer talk and fence-sitting, admitted that these changes would only ensure ‘transparency to an extent’ as we will know how much money have parties received through bonds.

FM indulged in patting his own back saying that the ruling party is ‘large-hearted’ as the new arrangement ensures donors will give to parties of their choice without any consequence of disclosure of identity. Jaitley also said that the amendments made are to expand the constituency of donors as a mark of good public policy.

Now the Finance Minister's entire argument hinges on the assumption that black money is only funnelled through cash and everything that goes through the digital route is 'clean'. That’s a problematic assumption to make in the first place. Also, only when political parties agree to come under RTI, will the tax filed by them be up for public scrutiny. Till then, all these steps are unlikely to inspire any public confidence.

In US, a Supreme Court judgement in 2010 paved the way for super PACs to come into the political arena, where anonymous political funding can pump enormous amount of money for or against a campaign. Expressing disappointment with the verdict, President Obama said it as a ‘threat to democracy’ and victory for big business. He even went on to say, "I don't think American elections should be bankrolled by America's most powerful interests."

The super PACs led to funding of the Tea Party movement, which hurt the Democrats. Ultimately the Democrats too fell in line and both Obama in 2012, and Hillary in 2016 took help of super PACs. But can such a model work in India with small parties vying for space with larger behemoths? What corporate interest will be served to donate money for those who are fighting for the downtrodden, protesting environment laws being ambushed for financial gains, against repealing AFSPA? For corporate India, the bottom-line is profit and they will make donations to only those, who can influence their interests positively. That often means the most dominant party (i.e BJP currently) and maybe the main opposition parties in states and centre.

But smaller parties are unlikely to get a piece of the pie. At a time when Parliament is looking for electoral reforms, mulling state funding as a possible option, the government has made its stance very clear.

From PAN cards to phone numbers, it wants every minute detail of citizens tucked in their database, but will offer very little transparency about their own finances in return. According to a 2015 NIPFP report, 75% of political funding is through opaque sources. That percentage is only likely to increase now.