Source: 
Economic Times
https://economictimes.indiatimes.com/news/india/electoral-bonds-why-are-they-banned-how-will-it-affect-bjp/articleshow/107744578.cms?from=mdr
Author: 
Bloomberg
Date: 
16.02.2024
City: 

Poll bonds: India’s Supreme Court has banned the use of anonymous electoral bonds by political parties for fundraising. This decision affects funding across party lines but is seen as a setback for the ruling BJP, which benefited the most from the scheme.

India’s Supreme Court has ruled that political parties can no longer raise funds using anonymous donation instruments called electoral bonds. These bonds were not actual tradable instruments but allowed for contributions to be made by individuals or companies to a political party through a banking channel. The controversial element — which led to the court case — was a government decision to keep the donors anonymous.

What did the court decide?

The court decided that contributions made for political funding cannot be anonymous and the electoral bonds are no longer a valid mode for donating to political parties. Voters, said the court, have the right to information that is necessary for them to cast their vote. Giving anonymity to donors making large contributions goes against that fundamental right. Large corporate donors could get quid pro quo benefits from their anonymous contributions, including closer access to legislators and favorable policy decisions. By removing disclosure requirements the scheme could adversely impact India’s electoral democracy. The court went on to rule that the absolute non-disclosure of funding needs to be done away with. The scheme is arbitrary and against India’s constitutional principles and needs to be struck down, country’s top judge D. Y. Chandrachud said, while pronouncing the order on behalf of the five-judge bench.

What are electoral bonds?

Electoral bonds are paper instruments issued by the government-owned State Bank of India to facilitate political donations through a banking channel. These instruments are issued in the denominations ranging between 1,000 and 10 million rupees and sold at least four times each year. An individual or a company could buy these bonds in favor of the political party they want to donate to by paying the corresponding value to the bank. The donor’s identity was not disclosed through this mechanism. Parties could then cash the bonds issued in their favor as and when required. The issuing bank, in theory, was the only entity which had the details of all donors. The scheme drew criticism, however, on grounds that the given the bank is run by the government, the ruling party could also have access to this data.

What does this mean for political funding?

This decision is significant and timely and is expected to make India’s elections relatively more transparent. All parties are required to disclose the identity of donors who make contributions worth more than 20,000 rupees ($240.92) in cash. This mandatory disclosure was done away with if the donation was made through electoral bonds. That led to this instrument becoming a significant mode for contributions. With the court directing that non-disclosure of funding source cannot be permitted under the law, the funding process is expected to, or at least hoped to, become more transparent. To be sure, there are no curbs on the absolute amount of political funding and can still be carried out through other means.

How does this affect Narendra Modi’s Bharatiya Janata Party?

While the court verdict impacts funding across party lines in Indian politics, it can be seen as a blow to the ruling party particularly. After the scheme was introduced in 2018, it emerged as the preferred mode for big corporations to anonymously donate to political parties. The biggest beneficiary of the scheme was the BJP, which mopped up nearly 13 billion rupees in funding through electoral bonds in FY 2022-23. In contrast, its main rival the opposition Indian National Congress, got 1.7 billion rupees, according to audited annual accounts reports submitted to the country’s election commission. While the court’s decision may not have an immediate impact on the party’s fiscal situation, it is an indictment of a scheme championed by the BJP — and a blow to its anti-corruption credentials, which it has touted to great electoral effect over the past decade.

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