Early this week, social reformer Anna Hazare sent a stern letter to Prime Minster Narendra Modi for non-implementation of the Lokpal at the centre and Lokayuktas in the states. The letter also criticised the PM for hurriedly bringing in amendments in the Finance Act of 2016 under the garb of a Money Bill, which makes some significant changes. The limit of 7.5% for corporates donations to political parties has been removed. With this amendment corporates are free to donate any amount of money and are not liable to declare the recipient of their donations.

 

Earlier this week, the Supreme Court has issued notices to the central government and the Election Commission on India based on a petition filed by the Association of Democratic Reforms (ADR) and Centre for Public Interest Litigation (CPIL) regarding amendments to several Acts rendering political funding opaque. These have the effect of nullifying the impact of transparency provisions even if political parties come under the Right to Information (RTI) umbrella.

 

Like Anna Hazare the petitioner’s counsel Prashant Bhushan also questioned amendments in the Finance Act of 2016 and 2017, which were passed as Money Bill. The petitioners have prayed to the Supreme Court to declare several such amendments “as being unconstitutional, illegal and void”.

 

The PIL states: “The petitioners submit that the amendments in question have opened the floodgates to unlimited corporate donations to political parties and anonymous financing by Indian as well as foreign companies which can have serious repercussions on the Indian democracy. The said amendments have removed the caps on campaign donations by companies and have legalised anonymous donations.”

Some of the amendments that have far-reaching consequences for the good health of our democracy have been mentioned in the petition as follows:

 

Amendment in The Finance Act 2016 & 2017: “The Finance Act of 2017 has introduced the use of electoral bonds which is exempt from disclosure under the Representation of Peoples Act, 1951, opening doors to unchecked, unknown funding to political parties.” 

 

“The Finance Act, 2016 has also amended the Foreign Contribution Regulation Act (FCRA), 2010, to allow foreign companies with subsidiaries in India to fund political parties in India, effectively, exposing the Indian politics and democracy to international lobbyists who may want to further their agenda. These Amendments pose a serious danger to the autonomy of the country and are bound to adversely affect electoral transparency, encourage corrupt practices in politics and have made the unholy nexus between politics and corporate houses more opaque and treacherous and is bound to be misused by special interest groups and corporate lobbyists.”

 

Cap of 7.5% for political funding removed: “The Finance Act, 2017, which was enacted as a money bill has introduced a system of electoral bonds to be issued by any scheduled bank for the purpose of electoral funding. The Act has also removed the previous limit of 7.5 per cent of the company’s average three-year net profit for political donations with the result that a company can make donations of any amount to political parties out of their capital or reserves irrespective of whether they are profit making or not. Also, a company is no longer required to name the parties to which such contributions are made. That the new amendments are a mala fide attempt to bypass the approval of the Rajya Sabha, which holds an important place in the Constitutional and democratic framework of law-making.”

 

Inclusion of Electoral Bonds: The Finance Act, 2017 has amended the said Section so as to provide the inclusion of electoral bonds. These amendments will take effect from 1st April, 2018 and will, accordingly, apply in relation to assessment year2018-2019 and subsequent years.

 

Any scheduled bank can issue electoral bonds:  That Sections 133 and 134, Chapter VI, Part III “Amendments to the Reserve Bank of India Act, 1934 of the Finance Act, 2017 has ended Section 31 of the Reserve Bank of India Act, 1934 relating to issue of demand bills and notes. It is proposed to insert a new sub-Section (3) to the said Section so as to provide that the Central Government may authorise any scheduled bank to issue electoral bond as referred to in the proposed clause (d) of the first proviso to Section 13A of the Income-tax Act. This amendment came into force from 1st April, 2017.

 

So what are the consequences of these amendments? 

 

The PIL states, “The result of this would be that now corporate funding will increase manifold as there is no limit to how much the companies can donate. Even loss-making companies now qualify to make donations of any amount to political parties out of their capital or reserves. Further, it opens up the possibility of companies being brought into existence by unscrupulous elements primarily for routing funds to political parties through anonymous and opaque instruments like electoral bonds. This has increased the opacity of funding of political parties, and the danger of quid pro quo and opacity of any benefits are passed on to such companies or their group companies by the elected government.”

 

(Vinita Deshmukh is consulting editor of Moneylife, an RTI activist and convener of the Pune Metro Jagruti Abhiyaan. She is the recipient of prestigious awards like the Statesman Award for Rural Reporting, which she won twice in 1998 and 2005, and the Chameli Devi Jain award for outstanding media person for her investigation series on Dow Chemicals. She co-authored the book, “To The Last Bullet - The Inspiring Story of A Braveheart - Ashok Kamte”, with Vinita Kamte, and is the author of “The Mighty Fall”.)