- GS-2: Structure, organization and functioning of the Legislature; Issues and challenges pertaining to elections
- GS-2: Government policies and interventions for development in various sectors and issues arising out of their design and implementation.
Electoral Bonds Scheme
Context: In the wake of the upcoming State elections, the Association of Democratic Reforms (ADR) has filed a petition in the Supreme Court, seeking a stay in the electoral bond.
The Supreme Court recently flagged its concern that political parties could misuse crores of rupees received as donations through electoral bonds to bankroll violent protests or even terror.
About Electoral Bonds Scheme
- Electoral Bond is a financial instrument for making donations to political parties.
- The bonds are issued in multiples of Rs. 1,000, Rs. 10,000, Rs. 1 lakh, Rs. 10 lakh and Rs. 1 crore without any maximum limit.
- State Bank of India is authorised to issue and encash these bonds, which are valid for fifteen days from the date of issuance.
- These bonds are redeemable in the designated account of a registered political party.
- The bonds are available for purchase by any person (who is a citizen of India or incorporated or established in India) for a period of ten days each in the months of January, April, July and October as may be specified by the Central Government.
- A person being an individual can buy bonds, either singly or jointly with other individuals. Donor’s name is not mentioned on the bond.
Misuse of Electoral Bonds as Pointed Out during SC case:
- Anonymity: Neither the donor (who could be an individual or a corporate) nor the political party is obligated to reveal whom the donation comes from.
- Asymmetry of information: Because the bonds are purchased through the SBI (Central PSU), the government is always in a position to know who the donor is. This asymmetry of information threatens to favour the scheme towards the political party that is ruling at the time.
- Control Over usage: The court asked the government whether there is any “control” over how these donations were used by political parties.
- Scheme facilitates kickbacks: Though the original purchase of bonds could be done using white money, somebody could anonymously re-purchase the bonds from the original buyer and drop it at a political party office. Nobody will know who purchased the bonds from the original buyer. The scheme facilitates kickbacks
- Possibility of Money Laundering: With doing away with all the safeguard that were present in Corporate donations to Political parties (through Companies Act), Indian, foreign and even shell companies can now donate to political parties without having to inform anyone of the contribution.
- Question on procedure followed: The scheme was brought in through amendments to finance bill as the government of the day did not have majority in the Rajya Sabha (that has less powers w.r.t finance bill)
- Conditions for electoral bonds: Only parties registered under the Representation of the People Act could receive donations through electoral bonds, and that they should not have secured less than 1% of the votes polled in the previous elections.
- Tackles Menace of Black Money in Politics: The Electoral Bond Scheme promotes white money into political funding (thus disincentivising black money) as it insists on cheque and digital paper trails of transactions
- Election Commission of India’s Support: ECI was not opposed to the bonds but was only concerned about the aspect of anonymity. It also urged the court not to stay the bonds and said the scheme is one step forward compared to the old system of cash funding, which was unaccountable.
- Voters can also help bring in substantial changes by demanding awareness campaigns. If voters reject candidates and parties that overspend or bribe them, democracy would move a step higher.
- Electoral bonds have raised questions on the electoral legitimacy of the government and thus the whole electoral process has become questionable. In this context, the courts should act as an umpire and enforce the ground rules of democracy.
- It is essential that if democracy is to thrive, the role of money in influencing politics ought to be limited. Thus, it is imperative that the scheme of the electoral bonds should be revised.