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Showing posts with label funding. Show all posts
Showing posts with label funding. Show all posts
Tuesday, March 5, 2024
Wednesday, February 28, 2024
On Electoral bonds, black and elections | Arun Kumar
Black economy persists with or without electoral bonds
India’s democratic model needs an overhaul so that elections are not an expensive affair. Only that can create a more just, transparent and efficient system, argues Prof. Arun Kumar.
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THE electoral bonds scheme has been declared unconstitutional. Various legislative and administrative amendments, implemented to facilitate the scheme, have also been declared unconstitutional. This is a victory for those opposing this scheme.
The government’s argument that the scheme was needed to help reduce the use of black money in elections has not been accepted on grounds of proportionality. The right to privacy of the donors has been held to be less important than the citizens’ right to information about the candidate for whom they were voting.
This is a rare judgment in the last few years that has gone against the establishment’s view. Judgments such as those on Aadhar, demonetisation and Article 370 sided with the establishment’s view even though the court did raise probing questions during the hearings.
Be that as it may, the electoral bonds case was of little consequence for the ruling establishment, even though it has huge significance for transparency and for conducting fair elections.
The government’s argument that the scheme was needed to help reduce the use of black money in elections has not been accepted on grounds of proportionality.
The court has ordered the revelation of names of the recipients and donors— which entity paid and which party received.
Since a vast majority of the bonds were of denomination ₹1 crore and above, these were bought by the rich to donate to their preferred party. The suspicion has been that these payments were bribes in white, to get favours.
There were donations to the opposition parties also but that is an investment in the future, in case a party comes to power. Even if it does not come to power, donations could ensure that the opposition raises inconvenient questions of the government.
The Order to reveal the names is likely to be resisted. An appeal against this could be filed. Attempts will be made to connect donations to the ruling party with favours granted. Donations to the opposition parties that are in power in one state or the other can also be so branded.
But, the ruling party at the Union level is the one that can grant big favours and it has received the vast majority of the bonds. How does all this link up to black money?
Elections and black money
In India, huge sums of money are spent on fighting elections. These are way above the election expenditure limits set by the Election Commission of India (ECI), hence illegal.
If these are declared by the candidates, their election will be annulled. So all expenses above the election expenditure limit have to be funded illegally— by black funds.
Election expenditure limits are now ₹95 lakh and ₹70 lakh for a parliamentary constituency and ₹40 lakh and ₹28 lakh for assembly elections. Actual election expenditures are unofficially reported to be around ₹40 crore for a parliamentary constituency and ₹6 crore for an assembly constituency. The actual numbers for a parliamentary and assembly election are respectively 40 and 15 times the allowed limit.
The court has ordered the revelation of names of the recipients and donors— which entity paid and which party received.
The reason for the high expense by candidates is the need for high-power campaigns to overwhelm the citizens to stand a chance to win. Expenses are on maintaining vote banks, bribing voters in cash and kind, hiring workers and musclemen, paying for crowds for rallies and meetings, spending on cutouts and posters, paying media for coverage, etc., and disrupting the opponents’ campaign. These are all substitutes for a lack of adequate attention to constituencies.
Effectively, the expenditure of large sums in elections reflects the weakness of Indian democracy. The public votes for reasons other than the hard work and honesty of candidates.
Instead, candidates have to entice the voters with bribes of various kinds. Also, India is largely feudal, so the public is guided either by those in authority or by emotional issues and not by individual self-interest.
Finally, issues have become complex and the public’s understanding is minimal, which also prevents questioning of authorities. Many can be heard saying, ‘Voting for a losing candidate is wasting the vote.’
The consideration is not a better representation but who appears to be more likely to win irrespective of what they stand for.
Electoral bonds and black money
Electoral bonds were donated to a political party and not a candidate. So the money went to the party. Since there is no limit on expenditure by a political party, it can get all it needs in white and spend it.
If a part of the donation was given to the candidates then the expenditure would be reduced to come under the ceiling set by the law. So the parties did not need to give the money raised through electoral bonds to the candidates and instead could spend it entirely on a general campaign, organised centrally.
The use of black funds in elections reinforces illegality in society and thereby undermines representation and democracy.
If all the money raised via the bonds was to be given to the candidates, then only ₹95 lakh per candidate could be given for a parliamentary constituency. So, for a parliamentary election, the party would at most need ₹513 crore. But the ruling party has been getting more than a thousand crore rupees per annum since 2019.
Obviously, the money received was used for other purposes, such as setting up offices, running them, logistics and social media cells.
Political parties also engineer defections, topple opposition governments and so on. This cannot be done via legitimate money and requires black money which is donated in cash by the backers of the party.
Also read: Electoral bonds: A landmark judgment in the direction of free and fair elections
This money cannot be shown on the balance sheet of the parties and cannot be caught in an audit of the accounts of the party or the candidates. The ECI cannot catch it.
Businesses in India know how to manipulate incomes and expenditures outside their balance sheets to generate black incomes. Under- and over-invoicing and hawala are used for these purposes.
These methods keep one step ahead of the changes the tax authorities make in the laws and rules with the help of income tax lawyers and chartered accountants. Such methods are also available to political parties and candidates for their financial accounting so that they do not get caught using black funds.
So, apart from the funds made available by the electoral bonds, the parties and the individual candidates continued to use black funds. Thus, the non-availability of funds from electoral bonds will hardly change the funding pattern of the parties and there will be no impact on individual candidates.
In brief, funds received via the electoral bonds were: a) In addition to the money received in black and, b) The amount received was small compared to the total requirement.
What to do?
The use of black funds in elections reinforces illegality in society and thereby undermines representation and democracy. Parties and individual candidates who accept large sums of black money are indebted to the donors and do their bidding when they get into power.
Currently existing parties and candidates are unlikely to change, so new parties are needed that have dedicated workers.
This is the implicit and explicit understanding between the two parties. A nexus forms. Outwardly, parties and candidates make a show of wanting to curb the use of illegal funds but that is not the reality.
Also read: Electoral bonds: No solution to illegal political funding
Democracy gets diminished when people vote for the corrupt who largely appear at the time of elections and make promises that they do not deliver on once in power.
People do not get genuine representation from their representatives who serve the interests of a few powerful entities. But people are helpless since the candidates put up by the parties for elections are all similar— they are beholden to the vested interests and do their bidding once they come to power.
Politics will be cleaned up if the public does not get swayed by emotionalism, sectarianism, etc., and voted on objective factors impacting them.
Currently existing parties and candidates are unlikely to change, so new parties are needed that have dedicated workers. Citizens have to become politically savvy to look after their long-term interests.
Since this would undermine the current ruling parties, they will create impediments to the emergence of new parties and honest candidates. The entire State machinery is available to them to coerce and harass and defeat their opponents.
Conclusion
In brief, it is not that in a robust democracy, elections need to be expensive. It is in the imperfect democracy that prevails in India where accountability is weak that elections become expensive.
In such a situation, an instrumentality such as the electoral bonds adds to non-transparency without impacting the black economy or the use of black funds in elections.
Actually, to survive, the black economy needs to control politics so that dishonest parties and candidates come to power.
Monday, January 30, 2023
Electoral bonds: No solution to illegal political funding | Arun Kumar (Jan 30, 2023, The Leaflet)
Electoral bonds: No solution to illegal political funding
How do donations via electoral bonds funded by legal or illegal money help curb undue influence on policy makers? Electoral bonds provide an additional of such funds.
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THE Union Government initiated the Electoral Bonds scheme, which was announced in the Union Budget 2017–18, on January 2, 2018. The aim was “to cleanse the system of political funding in the country”. While many other issues are also germane, the moot question is will this goal be achieved.
These are bearer bonds that private entities can buy from a designated bank (presently the State Bank of India) and donate them to a political party. They are supposedly an anonymous way of donating funds to political parties, since the identity of the donor is not disclosed. The bonds become available around the time of elections, presumably to provide ‘legitimate’ funds to political parties.
Data shows that most of the funds go to the ruling party and help them consolidate their hold over power.
The scheme
To maintain anonymity of donations, the income tax department cannot investigate the donations, the Election Commission cannot ask for their details, and the public will not know who is donating. The then Election Commission was not in favour of such non-transparency. The Reserve Bank of India did not approve of such a scheme. In fact, neither of the two were consulted prior to the announcement of the scheme. In the Parliament, the Finance Minister had mentioned that people wanted anonymity but when asked through the Right to Information Act who these people were, there was no response.
Given the opacity of the bonds (for the public), a quid pro quo is possible between the ruling party and the donor for favours bestowed. In effect, it can be a bribe in white.
While the public and the Election Commission cannot find out who is donating to whom, the party in power can access this information. The bank issuing the bonds has a record of the entity donating and the party encashing the bond. Given that the bank managements are largely under the control of the Union Ministry of Finance, the information can be accessed by the ruling party.
Further, given the opacity of the bonds (for the public), a quid pro quo is possible between the ruling party and the donor for favours bestowed. In effect, it can be a bribe in white. Since there will be no investigation, the donated money could be illegal.
Given these asymmetries and the opacity, public spirited entities went to court against the scheme in 2018. Since then, the matter has been sub judice. The Supreme Court, in its wisdom, has refused to grant an interim stay on the scheme.
Black money in elections
To fight Indian elections, whether for local bodies or state or national legislatures, much illegal funds are used. In a survey of 14 successful Parliamentarians in the 1998 Lok Sabha Elections, this author found that the average expenditure was eight times the allowed expenditure. This multiple has increased over time. The Parliamentarians interviewed added that the donors expected favours from them if they won.
Since any expenditure above the election expenditure limit is illegal, it has to be surreptitious. It cannot enter into the book of accounts, and has to be from illegal sources/black incomes. The Election Commission’s checking during elections has made little dent.
The quid pro quo results in subversion of policies and marginalisation of the common voters, who usually receive a bribe to vote for certain candidates. However, what the voters get at the time of elections is peanuts compared to their loss when policies are subverted against them. In contrast, the vested interests funding the candidates make a multiple of their illegal donation. It is the best investment for businesses since they get favourable policies, contracts, and protection from prosecution for wrong doing, among other things.
Clearly, the welfare of the nation and the common people requires freeing the politicians running the government from the influence of the black economy. How do donations via electoral bonds funded by legal or illegal money help curb undue influence on policy makers? The bonds provide an additional of such funds.
Why the bonds?
Can the use of Electoral Bonds serve the larger purpose of curbing black income generation in the country? A couple of lakh crore rupees are used in various elections in a five year cycle – about Rs. 40,000 crores per annum. Of the current Gross Domestic Product (GDP) of about Rs. 270 lakh crores, it comes to 0.15 per cent. The electoral bonds of a few thousand crore rupees issued annually are an even smaller percentage, both of the GDP and of the black economy. Since electoral bonds are only an addition, they cannot be the solution to the problem of use of black incomes in elections.
Election expenditures over and above the election limits have to be via illegal funds. The electoral bonds can neither be used to fill this need nor do they accrue to the individual candidates, so the need for illegal funds does not disappear.
Auditing of accounts of political parties can hardly stop the use of black incomes in elections. Companies’ accounts are audited, yet they generate black incomes through various means. Political parties also adopt the same devices to hide the actual sums surreptitiously received. Thus, even if the electoral bonds are based on legitimate funds, they cannot prevent the use of illegal funds raised by political parties.
Crucially, election expenditure limits are applied to the candidates and not political parties. The Electoral bonds can only be donated to political parties and not individual candidates. So, the individual candidate’s huge expenditures over and above the election expenditure limit has to be met through illegal funds. The winning candidates will have to continue to honour the quid pro quo and illegality will persist – bonds or no bonds.
Also read: Electoral Bonds: How compromised is our democracy
What makes Indian elections expensive?
The rich who donate substantial sums to politicians and parties do so in black since they do not want their name to be up front. They donate to all parties but don’t want the ruling party to know this. The political parties also do not want the public to know which businessmen are obliging them since in a poor country that could tarnish their image. Why do candidates need so much money to fight elections?
Electoral democracy has come to India when feudal consciousness persists. People vote for a variety of reasons, and not just on the basis of the candidate’s performance in the constituency. Often, people vote for candidates of their caste and community, however corrupt they may be. They expect this person to do their right or wrong work. Nowadays, work, whether right or wrong, requires pull. Often, bullies get elected because they can deliver. People say that they do not want to waste their vote, irrespective of the performance or the honesty of the candidates.
Seldom do NGO leaders who help people in myriad ways win elections. At times, candidates who do not even belong to a constituency win because of their equations within the constituency. Clearly, the public is looking for something other than performance when voting.
Candidates try to demonstrate to the people in their constituency that they have clout and can deliver. To show clout, big rallies, road shows, posters, cut-outs, flooding of social media, maintenance of vote banks, and so on are required. Cash and gifts are distributed just before Election Day. All these require a lot of funds.
Delhi Chief Minister Arvind Kejriwal has advised people to take gifts from political parties, but vote for his Aam Aadmi Party’s supposedly honest candidates, but this did not succeed because of the prevailing feudal consciousness: ‘namak khaya hai’.
Electoral bonds cannot achieve their ostensible goal
Indian elections have become expensive since feudal consciousness prevails in society and voting is seldom based on the performance of candidates. So, elections become expensive. Election expenditures over and above the election limits have to be via illegal funds. The electoral bonds can neither be used to fill this need nor do they accrue to the individual candidates, so the need for illegal funds does not disappear.
For political parties, the bonds give additional funds over and above what they collect illegally. Auditing of party accounts cannot help since that is only of the declared funds. Thus, the electoral bonds scheme cannot succeed in cleansing political funding.
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