The government’s proposal to impose curbs on political funding may have marked a first in terms of a government move to usher in transparency in political funding, it has done little to impress activists who have heralding the cause of electoral reforms for some time now. 

The government, in its Budget presentation in Parliament on Wednesday imposed a Rs 2,000 upper limit for cash donations political parties can receive, down from the Rs 20,000 limit that existed earlier. Other measures with regard to political funding included introduction of electoral bonds and subjecting political parties to Income Tax Returns within the stipulated time. 

Activists, however, are far from impressed. In a stinging indictment of the government’s move, independent political watchdog Association for Democratic Reforms (ADR) questioned the government’s seriousness on bringing political transparency in the system.

The non-governmental organization which works in the area of electoral and political reforms even termed as flawed the proposal to limit cash donations.

“While promising transparency and accountability in political funding, the Budget does not answer questions on how it would be implemented at the ground level nor has it promised implementation of related reforms proposed by the Election Commission and the Law Commission of India,” the statement said. 

“The Budget fails to address the issue of transparency, disclosure and penalties of political parties,” it added. 

The watchdog noted that the Budget does not promise scrutiny of income declared by political parties from various sources and the corresponding measures of penalisation without which the reforms will remain incomplete.  

“Unless scrutiny of accounts of political parties is taken up by a body approved by Comptroller and Auditor General (CAG) or ECI, the parties’ declared income is unlikely to reflect their true income,” it observed.

The Budget, it said, does not propose that the details of all donors who donate above Rs 2000 be made available to the Income Tax department and/or an external body auditing the accounts of political parties.  

“Even if the donors make donations by cheque/ DD or electronic transfer, unless their complete information is available for audit scrutiny, the sources of donations below Rs 20,000 to political parties will continue to stay hidden.” 

Questioning the seriousness of the government, the watchdog said that the political parties were entitled to receive donations in cheque or digital mode even before it was proposed in the Budget. 

Presenting the Union Budget for next fiscal, Finance Minister Arun Jaitley had yesterday proposed cutting down the cash donations from Rs 20,000 to Rs 2,000 received by political parties.  

Jaitley said that the government has accepted the Election Commission's recommendation to bring in transparency in political funding and political parties can take donations from donors through cheque and digital payments. 

On Finance Minister Arun Jaitley’s suggestion to amendment the Reserve Bank of India Act to enable issuance of electoral bonds to be purchased by donors to be redeemed in the account of a registered political party, the National Election Watch said, “It is has been proposed that these bonds would only be available on issuance of cheques or via digital mode of payments, the government is yet to frame a scheme in this regard.”  

“It is hoped that the amendment to the RBI Act and the corresponding scheme of government will take into account the necessity to abolish anonymous donations and provide details of all donors who opt to donate via electoral bonds,” it said.

Jaitley had also proposed to amend the Reserve Bank of India Act for issuing electoral bonds that can be bought through cheques and will be redeemable in the registered account of a political party. "This reform will bring greater reform in political funding while preventing future generation of black money," he said. 

"Even after 70 years of Independence, there is no transparency in political funding. Most donations are received in cash, and the donors too hesitate to disclose their identity," Jaitley noted. 

Till now, most political parties showed their donations received in cash in chunks of below Rs 20,000, as they were not bound to disclose the identity of donors giving up to Rs 20,000. 

According to an analysis by Association for Democratic Reforms (ADR), it was observed that in the past 5 financial years, between FY 2010-11 and 2014-15, the BJP defaulted in the submission of its audit report with the ECI by an average of 182 days while the Congress defaulted by 166 days on average. 

Sharad Pawar’s NCP defaulted in filling its audit report for an average of 87 days while Samajwadi Party defaulted by 42 days.