Election Funding

Funding	Election funding is central to political corruption in India, Corruption causes Reduced accountability Distorts representation And Introduces asymmetry in policy making and governance
Issues	ADR: 75% of the political funding coming from unknown sources from 2004 to 2015. Exempted from income tax, leads to hoarding of black money Lack of action against bribe, ECI want 58B to RPA to take action against bribing voters. Unlimited corporate donations, limit of 7.5% lifted, could give rise to shell companies Amendment to FCRA have opened possibility of foreign funding. Despite Sec 29 of RPA, parties don't submit annual audit reports. Funding of parties is under regulated and of  candidate is over regulated leading to Corruption, crony capitalism etc candidate uses unaccounted cash and thus tries to repay them after election. Candidate: Ceiling of election expenditure of candidates No transparency
Implications:	Quid pro Quo: leads to nexus between corporates and political parties Hampers law formation which are distorted in favour of any one political party Criminalization of politics when black money becomes sources Free and fair election cannot happen if money power is used.
Provisions	Under IT Act: Parties do not need to even maintain records of the source of donations below 20k and now 2k. RPA: provides immunities for opacity in electoral financing process
Public funding	Ceiling on cash contribution: 2000 has loopholes, it just need to find names of more people Electoral bonds Criticism anonymity corporate will use Filing return if they want tax exemption absence of extreme penal provision thus compliance may be low
Electoral Bonds	SC asked the political parties to disclose the
Background	Announced in 2017-18 in attempt to cleanse the system of political funding in the country About Electoral bond: A Interest free financial instrument for making anonymous donations to political parties Purchase: A citizen of India or body incorporated Bond denomination: 1000, 10,000, 1lakh, etc Period: Available for 10 days in Jan, April, July, Oct Lifespan: Redeemable in designated account of a registered political party within 15 days Eligible: Who have 1% vote in election and are registered File returns on quantum of money received through bonds SBI sole authority Cannot be used as collateral for loans Against: Brings opacity in political funding. Out of perview of Sec 29C of RPA which mandates disclosure Bonds also exempted from IT act Possibility of corporate misuse, with removal of 7.5% cap Favors ruling party, 95% of all funding to ruling party in 2017-18 ECI arguments: Doesn't allow ECI to check violation of provisions in th RPA Amendment in FCRA allows foreign funding GOI Arguments Limits the use of cash in political funding Curbs black money: Payment for electoral bond only accepted through DD, cheque and online Buyers have to fulfill KYC Limiting the time for which the bond is valid Protects donor from political victimizaton Eliminate fraudulent political parties. Measures: Switch to complete digital transactions Donations above a certain limit be made public Parties under ambit of RTI National electoral fund where donors contribute and funds are distributed.
corporate funding	Regulation: Companies Act 2013: Cap on funding was there but now removed (7.5%), shell companies be formed Now companies do not have to disclose the name of the parties to which they are donating(earlier they have to show) Electoral trust A for profit or non-profit company under section 8 of a company's act. For orderly receipt of voluntary contribution from any entity and for the distribution for the same for respective political party. Cannot take cash, Foreign citizen not allowed. Benefits: To bring transparency and sanity in political party funding: works on the principle of anonymity Tax benefits for the contributors. Political neutrality of the Private  Legitimate funding Example: Tata (Progressive Electoral Trust), Birla CBDT grants approval for the functioning of Electoral trust Solution: put cap on funding by big corporate houses as well as receipts of political parties donations to be made public as done in US Parties under RTI independent audit of parties with report in public domain
foreign Funding	Negative move amendment to FCRA to dilute the definition of foreign entities
State funding	Black money is in politics due to lack of white money For arguments: Transparency inside party and in candidates finance Limit the influence of wealthy people to insulate them from business nexus, quid pro quo Inner party democracy, more representation to women and weaker section control of circulation of black money and corrution Who: Dinesh goswami committee on electoral reforms in 1990 and  Inderjit gupta committee 1996 2nd ARC Law Commission NCRWC. Concerns: Tax payers forced fund parties whom they don't support. old and large parties have undue advantage and maintains status quo Increases distance between  political parties and ordinary citizens Tends to become organs of state rather than civil society Candidates running for election just to get monetary benefits Possibility of using state funding as supplement and not substitute how to get a procedure for just distribution against political equality, level playing field etc EC: It will not deter the black money in the election State funding of the Political parties based on post election performance this will lead to transparency and inner party democracy The accounts can be monitored by the CAG According to a survey 71 nations have the provision of state funding.
New Delhi Declaration on Political finance regulation in South Asia	Need of Regulating money ; Increasing cost of contesting election: Against political equality, political freedom Against democracy Corruption and Black money Women representation(Financial dependence) Crony capitalism Holistic approach and comprehensive coverage  Approach for: Maintaining reasonable level of spending Public funding Regulation of private and foreign contribution Prevention of abuse of state resources Public disclosure of political finance Regulatory authority Compliance and enforcement
way forward	digital funding

FREEBIES	TN: TV, Mixer, Scooter Positive SC: It cannot be termed as Corruption Although it Shakes the roots of free and fair election to a large degree And directed the ECI to prepare guidelines on preparation of Manifestos and include in MCC. RPA Sec 123: The prohibition on individual candidates from making such offers Direction of EC: Section 8 of MCC Directed all the parties to avoid making promises which makes the election impure and can influence the voters unduly. Another directive stating that- the rationale behind any such promises must be mentioned along with the ways and means to meet the financial requirements of such. It also said that action can be taken only in case of registering any official complaints Against Constitution : nothing should be in Manifesto
Cause	MCC is not enforceable No legal mechanism to regulate manifesto RPA : it does not amount to bribery.
Impacts	Election Free and fair election, level playing field However other view is that there is no correlation. "Competitive Populism" Economy Wastage of People's money Can affect the investment in the critical areas. Fiscal constraints Diversion of resources People's welfare Even these are not targeted to the poor Very less corruption at ground levels But shifts the burden on parties and diverts the attention from main issues Governance Lack of serious measures to judge the performance of the Government
Way forward	Legislation for rules governing election manifestos

Cash for Vote:	Use of Money by the parties for earning votes by: Using well-oiled machinery like use of Ambulance etc  Administrative machinery and Development funds No or little punishment to the culprits Opaque funding pattern of the parties No audits/monitor of the account books of the political parties
Recent	Postponement of voting in two assembly constituencies in TN by the EC on allegation of rampant bribery and distribution of cash, Vellore constituency. Raj Nagar bypoll: Suspension of election by EC
Mechanism to control expenditure	Under IT act 1961: Political parties have to maintain the accounts and submit audited account statements to EC every year. Donation/Expenditure > 20,000 only to be accepted through cheques, now 2K No limits on the party but limits on the expenditure of individual candidates are fixed. Monitoring:  Expenditure observer, Assistance EO, Flying squad, Target approach etc to check Action: Penal action against corrupt practices under RPA Under EC rules: can de-recognize any party etc Raj Nagar bypoll: EC must ban the accused candidate under the provisions of RPA. It must set the precedent
Solution	RTI Ceiling on expenditure Funding : transparency audit Governance: strengthening local administrative machinery  Skilled/experts in the force under EC Law enforcement effective and stringent punishment  Law commission: 170th report Ceiling on the expenditure of the political parties Political parties should submit complete account statements one year prior to election