Abu Dhabi, UAESunday 16 June 2019

India's new law to record political donations will not improve transparency

Instead of making cash donations to political parties, donors will buy electoral bonds from India's biggest state-owned banks, thus creating a record of who is giving money to whom and how much

India has introduced a new type of electoral funding designed to improve the transparency of party funding and political donations.

Instead of the current practice of making cash donations to political parties, donors will buy electoral bonds from India's biggest state-owned banks, thus creating a record of who is donating money to whom and how much - which India's finance minister Arun Jaitley insists will make political funding more transparent.

But critics of the scheme argue that electoral bonds will make no difference, and that the public as well as India’s state-run election commission still have no way of discovering the source of most of the money that flows into various party coffers.

Political financing in India is famously opaque. In its last report on political funding, published in 2014, Global Integrity, a non-profit organisation based in Washington DC ranked India 42nd out of 54 countries surveyed on various transparency metrics. India scored 31 out of 100 on these metrics, placing it one rank above Bolivia but six ranks below neighbouring Pakistan.

Mr Jaitley announced the details of the bond scheme on January 2. Donors to political parties can buy bonds, in denominations ranging from 1,000 rupees (|Dh57.70) to 10 million rupees (Dh577,000), from branches of the government-owned State Bank of India.

Once parties receive these bonds as donations, they can cash them with the same bank, creating — in theory — a recorded paper trail of donors and the amount they donated. Since last February, individual cash donations to political parties have already been limited to 2,000 rupees, down from the previous limit of 20,000 rupees.

Defending the bond scheme In a Facebook post on Sunday Mr Jaitley said parties accepted copious amounts of “unclean” or “black” money—cash from donors who had not declared these funds to tax authorities. “The electoral bond scheme…envisages total clean money and substantial transparency coming into the system,” he said.

But the scheme does permit anonymous donations. The bonds do not bear the names of donors, and parties do not have to disclose these names in their filings to India’s election commission.Nor do corporations that have donated money have to specify the parties they have favoured in their annual reports.

This anonymity has been a persistent problem in Indian political financing, said Anil Verma, head of the New Delhi-based non-profit Association for Democratic Reforms (ADR), which campaigns for transparency in electoral politics.

By law, parties have thus far been required to report the sources of donations exceeding 2,000 rupees (or 20,000 rupees before February 2017). In practice, Global Integrity’s 2014 report found, parties frequently fail to report these donations.

Reports filed with the election commission are sparse and incomplete, and the commission does not audit party finances. Successive governments have also allowed political parties to remain exempt from India’s Right to Information law, which members of the public could use to discover the details of party financing.

“So with these bonds, you and I don’t know who is donating money, and the election commission also doesn’t know,” Mr Verma said. “Who does know? The State Bank of India and therefore the government that is in power.”

For the government to possess such knowledge, he said, opened up possibilities for harassing opposition parties and their donors. “Who will twist whose tail here? I think that’s quite obvious.”

The bond scheme also fails to address another crucial problem: the tendency of parties to find rich candidates to stand for election, so that they might spend their own money on their campaigns. In its analyses of various campaigns, ADR has repeatedly that the spending in these "self-funded" campaigns frequently exceeds the limit set by the election commission.

“It looks like every political party knows these bonds will do very little to change funding patterns,” Mr Verma said. “This is why, apart from maybe some weak statements from the Congress in the opposition, no party has said anything at all.”

Updated: January 9, 2018 09:16 PM