New Delhi

Somehow, even those who lay great store regarding important anniversaries have simply forgotten a resonant and significant one: forty-five years ago, in 1969, prime minister Indira Gandhi convinced Parliament to amend the Companies Act and impose a total ban on corporate giving to political parties. The ban signified an attempt at eliminating the most important legal source of election funds.

There of course was one major lacunae in the proposal which negated the earnestness behind the move. The proposal did not provide for an alternative financing mechanism, and far from abolishing the link between business and politics, it effectively pushed campaign finance underground, an affliction that exists to the present day. As a recent analysis has pointed out, it’s an open secret that the opaque funding of elections represents the single-biggest driver of political corruption and criminality in India.

As early as 1964, the government-appointed Santhanam Committee warned of the corrosive effects of collusion between businessmen and politicians. Indira Gandhi was perhaps alarmed by the swell of corporate support for right-wing opposition parties like the Swatantra Party and the Jana Sangh, as well as the threat the business-friendly Congress veterans who comprised the Syndicate posed to her leadership within the Congress, yearned to cut them down to size.

The truth of the matter is that no government has had the courage to substitute private sources of party funds with state-funding of elections or party expenses. Black money has become institutionalised.

The ban, according to the American political scientist Stanley Kochanek ushered in an era of “briefcase politics.” It spurred the rise of individuals and organisations, especially those with criminal backgrounds, who had access to unaccounted money and were thus sought after by parties for their ability to discreetly aggregate and distribute cash. In the initial decades of the republic, the Congress had contracted with all manner of lawbreakers and mercenaries to quietly manage elections. Now, such characters were openly embraced by all almost every party.

Two decades later (in 1985) recognising the folly of the ban, the Congress government of Rajiv Gandhi once again legalised corporate giving, but corporate contributions remained under the table. By this stage, the exchange of political favours for illicit cash had become so deeply entrenched that re-legalisation garnered little support. Companies had little incentive to be transparent as it could prompt retribution from politicians or parties that had not received funds. Parties remained opposed because the prevailing system minimised accountability to funders or party members.

The Association for Democratic Reforms (ADR) reports that 75 per cent of the income of India’s six major parties comes from undocumented sources. Around half of these funds came in a period of four months around elections, largely in cash (for the Congress, this figure stood around 90 per cent). But party resources are a drop in the bucket because candidates are expected to foot the vast majority of their campaign expenditures. Ironically, while politicians of all stripes complain about unrealistically low campaign spending limits, candidates also routinely report spending just over half what they are legally entitled to (in reality, campaign spending exceeds the prescribed limit by several orders of magnitude).

Furthermore, despite claims that 2014 marked India’s “good governance” election, a record number of MPs with criminal records (34 per cent) now grace the halls of the Lok Sabha. Twenty-one per cent of these lawmakers face serious charges like murder, attempted murder, and kidnapping. The historical and empirical evidence is clear that the electoral success of “muscle” is due, at least in part, to the advantages of money.

If the ruling dispensation is serious about doing something really effective in this regard, many reckon that it can begin by introducing rules and transparency to limit discretion in heavily state-regulated domains such as land, natural resources, real estate and mining. In the absence of that, no amount of political finance regulation is likely to have much impact. The Election Commission requires new statutory authorities, such as the power to mandate complete transparency for political contributions. Right now, parties need not declare the source of any donation less than Rs 20,000, ceding a party like the BSP the ability to not disclose the identity of a single donor in the past eight years.

Finally, there is the oft-discussed issue of public funding of elections. Until parties adopt strict rules on transparency and intra-party democracy, public subsidies are likely to do more harm than good.

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