Who will pay for clean politics?

The CIC’s recent ruling presents an opportunity to debate state funding of parties

Written by Rajeev Gowda | Published: July 5, 2013 5:22 am

The CIC’s recent ruling presents an opportunity to debate state funding of parties

Speculation is rife that the government may introduce an ordinance to override the Central Information Commissioner’s (CIC) ruling,which brings national political parties under the purview of the Right to Information Act. It is worth considering whether the CIC’s ruling can be transformed from a setback into an opportunity. Can the CIC’s arguments provide parties a way to tackle their fundamental fundraising dilemmas?

The ruling hinges on the argument that political parties should be considered “public authorities” because they play a variety of key roles in India’s democracy. If political parties are so critical to keeping India’s democracy alive,it seems ridiculous that our system does not provide them with sufficient resources to discharge their functions freely and fully.

To have a thriving democracy,we need competitive elections and vibrant political parties. Such activities entail significant costs,regardless of whether one is in office or in the opposition. How parties go about raising resources to meet such expenses has a significant impact on governance and political culture.

India has not faced up to the challenges of funding political activity. As E. Sridharan and I have argued (bit.ly/GowdaSridharan2012),our country has instead created counterproductive party financing and election expenditure laws. Raising money is not easy. People contribute for both public-spirited and self-interested reasons. Contributions often pour in,in the heat and dust of election campaigns,when record-keeping is difficult. Many corporations and citizens ignore the provisions that allow legal and tax deductible contributions to political parties,and prefer to donate cash and remain anonymous due to concerns about retaliation for supporting one party over the other. The application of the RTI,without accompanying electoral reforms,will adversely affect such contributions,or will further discourage parties from reporting them.

Political parties often need cash because India’s farcically low election expenditure limits drive political expenditures underground and the game becomes about circumventing impractical regulations. To remain competitive,some parties have slowly become dependent on those with black money who know how to hide and spend it. This can result in a vicious cycle where crooked and criminal politicians drive out cleaner competitors,corrupt the system by engineering scams and create an extortionary regime to facilitate fundraising.

The CIC’s ruling opens a window to extricate our democracy from these counterproductive laws. If political parties are so vital to India’s democratic functioning that they can be considered public authorities,then it is only logical that the state should fund them in a befitting manner. If people want good governance and clean politics,but are unwilling to pay for it,then it is the government’s job to provide people with what they desire,by effectively harnessing the taxes they pay. How can such state funding of elections be implemented? What would its effect be? What would it cost us?

One proposal has been put forward by the scholar and political activist Yogendra Yadav: The government should reimburse any party that receives more than 2 per cent of the votes polled,Rs 100 per vote. This should be deposited in the bank account of the party’s local,constituency-level unit and can be used during and in-between elections for legitimate political activities. Yadav argues that this will strengthen grassroot units of parties and enable them to nurture clean candidates. For the 2014 Lok Sabha poll,such a scheme would cost the exchequer approximately Rs 6,000 crore,assuming a 75 per cent voter turnout.

A counterargument could be that such funding will only add to the escalating costs of elections. That is certainly possible during the transition. However,state funding will strengthen less wealthy but more worthy activists when they demand party tickets. Since parties are under public pressure to field cleaner candidates,the balance of power will inexorably tilt away from those with dubious credentials. Further,parties should only be able to receive state funding if they meet some criteria of transparency and accountability — this will spur them to improve their internal processes including record-keeping and disclosure. When a party receives substantial state funding,adherence to the RTI becomes both appropriate and feasible.

Universally,election costs are the root cause of corruption and democracies continually try to address this challenge. Western European countries typically have a combination of public subsidies and small-sum,grassroots financing. For example,Germany provides parties matching grants,to the extent of the amount they raise from private sources. It does not limit contributions or expenditure,and requires disclosure of only large donors. Over time,this has resulted in parties raising private funds mostly through small contributions and membership dues. The US limits individual contributions but not election expenditure,the opposite of India. While reporting and disclosure requirements are strict,campaign expenditures have skyrocketed,partly because of a dependence on costly TV advertisements.

The urgent task before us is to devise our own unique combination of innovative methods and incentives,to strengthen our political parties and democratic institutions. State funding of parties and elections can be the brahmastra that can end corruption and clean up India’s democracy. The CIC’s ruling provides an unexpected opening to set things right.

The writer is professor at IIM,Bangalore,and a member of the Congress party’s team of official spokespersons. Views are personal

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