WHILE India boasts of being one of the most vibrant democracies with a highly transparent electoral system, followed by a smooth takeover of power; where political party funding is concerned it is one of the most regressive countries in the modern world.

Political parties including the ruling Bharatiya Janata Party (BJP) and the opposition Congress — along with their respective followers and backers — have steadfastly refused to bring in legislation to regularise electoral funding.

In fact, just a few months ago, the Lok Sabha, the lower house of Parliament, quietly passed a bill that exempts political parties from scrutiny of funds that they have received from abroad for the past four decades.

The lower house passed an amendment to the Foreign Contribution (Regulation) Act, 2010 (FCRA), overturning a key aspect that banned overseas corporations from funding Indian political parties.

Ironically, even the Congress and other opposition parties, who were vociferously opposed to the passing of the Finance Bill 2018 in parliament, did not appear to be unduly concerned with the government moving the amendment to the Foreign Contribution Act.

The Representation of People’s Act had barred political parties from accepting foreign funds. However, the government in its Finance Bill 2016 amended the rules making it easier for parties to accept funds from donors abroad — a company with less than 50 per cent shares held by a foreign entity is now longer considered a foreign source. And with one amendment passed unopposed, it did away with the possibility of scrutinising political funding since 1976.

Not surprisingly, political analysts saw the move as a determined bid by the two large parties — the BJP and the Congress — to overcome a Delhi high court judgement of 2014 that had found both the parties violating the FCRA.

And interestingly, both parties withdrew their appeals in the Supreme Court against the Delhi high court’s order after parliament passed the bill.

But the Association of Democratic Reforms (ADR), a non-profit body, earlier this month filed a plea in the Supreme Court challenging the retrospective amendments to the FCRA, accusing the government of trying to protect the Congress and BJP who have allegedly received political donations from some unknown non-resident Indians (NRI).

India’s parliament, which is ever alert to violations of different rules and regulations by corporates, institutions and others, has however, adopted a low-key approach towards political violations.

In fact, the only time parliament ever saw the issue being taken up seriously was more than half a century earlier when Atal Behari Vajpayee had, as a very junior MP, moved a private member’s bill in the Rajya Sabha, the upper house, seeking to amend the Companies Act and to prevent corporates from making political donations.

Mr Vajpayee had vehemently argued for the passing of his bill, referring to the immorality of the plea that corporates did not need to get shareholders’ approval for donating funds.

All political parties in India accept funds from corporates.

The ADR recently released a comprehensive list of corporate donations made to five national parties between 2012-13 and 2015-16.

The BJP, which came to power in 2014, toppled the Congress to emerge as the most funded party. It got nearly three-fourths of the total funding of almost a billion rupees from corporate donors between 2012-13 and 2015-16.

The BJP has toppled the Congress to emerge as the most funded party. It got nearly three-fourths of the total funding of almost a billion rupees from corporate donors between 2012-13 and 2015-16

Corporate funding of political parties also shot up from less than Rs4 billion between 2004-05 and 2011-12 to almost Rs10bn between 2012-13 and 2015-16.

Corporate funding also accounted for the bulk of electoral funding; in the case of the BJP, it added up to 85pc of total donations and 92pc for the Congress.

ADR’s latest report for 2016-17 indicates the BJP cornered nearly 90pc of the corporate donations of Rs3.25bn to 10 political parties.

Both the BJP and the Congress also have hefty total incomes; the Congress got nearly Rs40bn between 2004-05 and 2014-15, while the BJP got about Rs33bn. The CPM (Communist-Marxist) had total income of Rs9bn.

A recent book brought out by Oxford University Press — Costs of Democracy: Political Finance in India — comprises seven papers by experts and reveals the subject of political funding in India in depth.

Leading politicians continue to speak out about the lack of transparency in political funding, but beyond such talk there is not much action. Finance Minister Arun Jaitley, for instance, in his budget speech last year, lamented that despite 70 years of Independence, the country had not come out with a transparent method of political funding.

Most Indian corporates are also shy of revealing their funding of political parties. They prefer donating funds to specific trusts — with their names not being revealed — in a big way.

Last year, a report noted that seven electoral trusts had donated almost Rs4.5bn between 2013 and 2016 to parties, accounting for a third of the disclosed funding.

The bodies included ones such as the Satya Electoral Trust, the General Electoral Trust, the Samaj Electoral Trust and the Janpragati Electoral Trust.

With both the leading parties in India doing their best to brush aside all queries into their funding by businesses, it is unlikely that there will be transparency in corporate funding in India over the next few years.

Of course, the effect of corporate funding in elections around the world still remains unknown.

In the US, for instance, a report in Kellogg Insight — brought out by the Kellogg School of Management at Northwestern University — last year had noted that corporate donations do not necessarily buy meaningful political favours, as evident by the lack of any sharp surge in the price of stocks of companies whose preferred candidates won the elections.

Published in Dawn, The Business and Finance Weekly, July 23rd, 2018

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