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New political donation norms hurt transparency, courts may step in: ex-CEC

Earlier, the Companies Act, 2013 capped political donations from companies at 7.5 per cent of their average net profits in the last three financial years.

Written by Sandeep Singh | New Delhi | Updated: March 29, 2017 7:24:36 am

The government’s decision to remove the cap on donations by companies to political parties and to do away with the disclosure requirement relating to naming the political party to which the donation was made, goes against its own stated objective of bringing in “Transparency in Electoral Funding”, according to former chiefs of the Election Commission. While there is concern that this may nurture crony capitalism, there is also a sense that it will deprive voters from accessing information on which companies are funding which political parties. “This move is not consistent with the government’s stance on making political funding more transparent. There is a possibility that corporates may indulge in politics big time as they can give 100 per cent of their profit to a party and indulge in crony capitalism and run the government,” former Chief Election Commissioner S Y Quraishi said.

H S Brahma, former CEC, also stated that the two changes will take away transparency from the system. “What will be the transparency if the companies are not required to disclose the party to whom they donated (a) large sum of money…. Individuals having money power will see their influence growing,” said Brahma. Even a “Background Paper on Political Finance and Law Commission Recommendations” by the Election Commission of India in 2015 raises concern over having opaqueness in the system. Quoting the Law Commission’s 255th report, the paper says, “There should be an upper cap on donations by a donor to a political party in a year. Otherwise, the same problem will persist in spite of state funding and a few wealthy people will donate large sum to the parties. Similarly, there should be reporting of such donation to the public and to enforcement agencies.”

In the paper, the Election Commission had warned that “Big Money” in politics as a major concern. “If wealthy individuals and corporates pay to the political party or the candidate in order to make them listen to them, this undermines the core principles of democracy and transfers the economic inequality to political inequality,” it said in the background paper.

While Quraishi feels that the names of political parties should be disclosed by companies, he said that the judiciary may step in. “I have a feeling that judiciary may enter in this matter. Just as people have a right to know the criminal history of the candidates, there may be a PIL seeking the right to know where their political party is getting its funding from,” he said. India Inc has argued for secrecy, saying that otherwise there could be a situation where a company donating to one party may receive hostile treatment from other parties if they come to power. This, however, is not a norm globally as corporates in the United States and other developed economies are required to disclose the amount and the political party they funded during elections.

Naushad Forbes, president, CII, and co-chairman of Forbes Marshall, said: “It is a step forward to legitimise and bring political donation in the formal economy. But certainly, we would like to see more transparency in the long-run.” He said a bigger concern for him would be to see loss-making companies donating to political parties. “(That) is a bigger corporate governance issue and I would be concerned as a shareholder of such a company.”

The removal of cap on political contributions by companies follows the Budget announcement of introduction of electoral bonds. In his Budget speech last month, along with limiting the cash donation from a person to a political party at Rs 2,000, Finance Minister Arun Jaitley had announced the proposal to issue electoral bonds through which a donor could buy bonds from authorised banks against cheque and digital payments.

As per the Finance Bill amendments, the previous limit of 7.5 per cent of average 3-year net profit for political donations is gone and companies are no longer required to name the political parties to which such contributions were made, though they will be required to disclose the amount of contribution. Earlier, the Companies Act, 2013 capped political donations from companies at 7.5 per cent of their average net profits in the last three financial years. They were also required to disclose the name of the parties to which such contribution was made.

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