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First step in poll finance reform: Bonds for donors, cash cap down to Rs 2000

Finance Ministry accepted the recommendation of the Election Commission (EC) which had proposed to the government to prohibit “anonymous contributions above or equal to the amount of Rs 2,000”.

Written by Maneesh Chhibber , Ritika Chopra , Manoj C G | New Delhi |
Updated: February 2, 2017 12:59:18 pm
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Moving to tackle opacity in collection of funds by political parties, Finance Minister Arun Jaitley, in his Budget speech, proposed to bring down anonymous or unnamed cash donations by individuals to political parties from the current Rs 20,000 to Rs 2,000.

In doing so, the Finance Ministry accepted the recommendation of the Election Commission (EC) which had proposed to the government to prohibit “anonymous contributions above or equal to the amount of Rs 2,000”.

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While there is no constitutional or statutory prohibition on receipt of anonymous donations by political parties, under Section 29C of the Representation of the People Act, 1951, political parties have to declare all donations above Rs 20,000.

Once the Budget is passed and necessary amendments are carried out in the relevant provisions of law, all political parties will have to mandatorily maintain names and addresses of donors who contribute amounts above Rs 2,000.

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Jaitley also announced introduction of an electoral bonds scheme, under which donations would be allowed to be made to political parties by purchasing electoral bonds from authorised banks. He said the government will soon frame a scheme in this regard and an amendment will be carried out in the Reserve Bank of India Act.

“In accordance with the suggestion made by the Election Commission, the maximum amount of cash donation that a political party can receive will be Rs 2,000 from one person. Political parties will be entitled to receive donations by cheque or digital mode from their donors,” Jaitley said.

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Applauding the move, which he described as a “good beginning”, former Chief Election Commissioner S Y Quraishi told The Indian Express, “It is a positive move and also an acknowledgment that political funding is an issue that needs to be addressed. As the Budget also says, this is the first step and not the final one. I hope this will be taken to the logical conclusion.”

Asked what in his opinion was the final step, Quraishi said, “I feel there should be an electoral fund to which everybody, including corporates, who wish to donate, can donate through cheque or any electronic means and money from this fund can be then distributed among political parties depending upon their performance in elections. As for other expenses of parties, they should be allowed to accept only cheque or digital payments, nothing anonymous.”

But Jagdeep S Chhokar, founder-trustee of election watchdog Association for Democratic Rights (ADR), is not enthused by the announcement.

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“It won’t lead to any transparency in donations. Rather than Rs 19,999 as is happening now, political parties will claim that they received majority of donations below Rs 2,000. They should have to disclose source of every paisa. Today, when every small trader is expected to keep record of source of every rupee earned by him, why do we have different rules for political parties? Since the government is focussing so much on digital financial transactions, why can’t there be a rule that political parties also receive and make all payments digitally? I don’t understand the logic behind this limit of Rs 2,000,” Chhokar said.

According to data released by ADR last week, over 70 per cent of funds received by seven national and 50 regional parties, as per filings to the Election Commission (EC) between 2004-05 and 2014-15, came from unknown sources. According to the figures, while the total income of national and regional parties was over Rs 11,367 crore, as much as Rs 7,832 crore came from unknown sources.

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Between 2004-15, the Congress received the highest amount of over Rs 3,982 crore, of which a whopping 83 per cent came from unknown sources. The ruling BJP received over Rs 3,272 crore of which 65 per cent came from unknown sources while the CPM, which got Rs 893 crore, had 53 per cent from unknown sources.

The BSP, which declared having collected funds to the tune of Rs 764 crore during this period, claimed to have received every rupee from unknown sources. The SP got Rs 766 crore or 94 per cent of the total funds of Rs 819 crore from unknown sources.

Following the November 8 demonetisation announcement, there has been a clamour for ushering in transparency in the manner in which parties collect funds.

Speaking at a rally in Kanpur in December, Prime Minister Narendra Modi had urged the EC to create pressure on political parties to be more transparent on the donations they receive. Modi said he had asked Opposition members ahead of the Parliament session to debate on the issue of donations.

After Jaitley’s announcement Wednesday, the Congress and CPM said the government should go for partial or full state funding of political parties in elections instead of announcing such moves and playing to the gallery.

Congress vice president Rahul Gandhi said the party would support any move that would cleanse political funding. His party colleague Anand Sharma said: “If they indeed wanted to carry out a reform in political funding, they should have created a national corpus, an electoral fund. The government should have, in consultation with the Election Commission, drawn up a criteria to ascertain which all parties will be national parties on the basis of the votes they get and which all parties will be state parties. And how much percentage of funds they will get from the national corpus as electoral funding. The government has the money. If they wanted to do it honestly, the real electoral reform would have been if they had created a national electoral trust and fund.”

CPM general secretary Sitaram Yechury said the first step should have been banning of corporate funding of political parties.

“If you want to check political funding and the abuse of it and bring in transparency, you should have banned corporate donations to political parties… we will fully support a law like corporate social responsibility… let every corporate donate a certain percentage… call it the Democracy Fund and let it be managed by the Election Commission or Government of India and start a process of state-funding of elections,” he said.

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