Political parties and our Republic

One of India's leading lights, Babasaheb Ambedkar, articulated that India's real Independence was achieved when the Constitution came into force on January 26, 1950. It is a day of great significance, as the nation chose to govern itself by the due process of law enshrined in the Constitution. The document guarantees equal rights to all citizens, establishes the foundation for the empowerment of all sections of society and presents a vision for the social and economic advancement of the nation. As India celebrates its 68th Republic Day, it is imperative to understand where the country stands today. The political class, as representatives of the people, is entrusted with the responsibility of defending these ideals. For the past seven decades, however, our political parties haven't done enough. The task of carrying out their responsibilities once elected to office has been compromised due to the manner in which they function. At the heart of this malaise is the lack of transparency and accountability in funding for political parties. In the time of demonetisation, when the present government is ostensibly seeking to root out the scourge of ill-gotten wealth, colloquially known as 'black money', this issue has naturally received much attention. It's no secret that political parties are one of the primary conduits for black money in this country. The pernicious impact of black money on development has been well-documented.

Since November 8, when the demonetisation measure was rolled out as an attempt to cleanse the system of black money, the government has done little to address the issue of political funding. In a recent report released by an electoral watchdog, the Association for Democratic Reforms (ADR) stated that political parties received Rs 7,833 crore, or 69 per cent of their total income, from undisclosed sources in 11 years till 2015. The Congress (83 per cent of its total income) and the Bharatiya Janata Party (65 per cent of its total income) got maximum funds from undisclosed sources. The total funds received by national and regional parties between financial years 2004-2005 and 2014-2015 were Rs 11,367.34 crore. In that period, income from such sources went up by 313 per cent for national parties. Regional parties have fared no better, and income generated by regional parties from such sources increased by 652 per cent during the 11-year period. As per the current rules, political parties in India are supposed to file annual income and expenditure statements with the Election Commission. All contributions above Rs 20,000, with the names, addresses and PAN numbers of the donors, have to be submitted to the EC. Analysis by the ADR, however, show that most parties circumvent this rule by attributing significant portions of their income to contributions less than Rs 20,000, with PAN numbers, addresses and names often missing. "Such unknown sources include 'sale of coupons', 'Aajiwan Sahayog Nidhi', 'relief fund', 'miscellaneous income', 'voluntary contributions', 'contribution from meetings/ morchas' etc.," says the ADR report. "The details of donors of such voluntary contributions are not available in the public domain."

There is a clear link between corruption and black money generation, and how political parties are funded. For example, it is no secret that massive corporates, who take on major industrial projects, borrow heavily from the banks and a good slice of this money goes to political parties as poll funds. As veteran journalist MK Venu notes in a recent column for a digital Indian publication: "It is standard practice for companies taking loans from public sector banks to show inflated value of equipment imports from abroad and use this mechanism to create a corpus of cash in foreign tax havens. These funds come back to India from time to time to finance political parties." At present, the Indian banking system, especially those units in the public sector, has been weighed down by bad loans due to heavy borrowing from major corporate houses invested in massive infrastructure projects and basic commodities like steel. Is it any surprise that both the UPA and current NDA government have done little to address these concerns and bring the defaulters to book? With the banks grappling with huge non-performing assets (NPAs), the cost of lending has shot up, reducing the average entrepreneur's access to much-needed capital. Little has been to address the generation of such unaccounted wealth, and instead, the present government has decided to target the average man's pockets seemingly without a semblance of due process. One answer to stem the flow black money would be make funding of political parties entirely transparent and above board.

Reports indicate that the Election Commission of India (EC) had recently written to the Central Board of Direct Taxes (CBDT), informing its decision to delist 200-odd political parties that have not contested polls since 2005 and existed merely on paper. As part of the recommendations made in a document titled "Proposed Electoral Reforms", which was published this month on the EC's website, the poll body argues that these parties are mere conduits for money laundering operations and should not be entitled to tax benefits extended to political parties.

The government should amend Section 29A of the Representation of Peoples Act (RPA) to definitively empower the Election Commission to deregister parties that blatantly operate as tax havens. Among the other recommendations, the EC has also sought to cap anonymous cash contributions at Rs 2,000, from the current Rs 20,000 and allow exemption from tax only to parties that win seats in elections. Another means of imposing greater scrutiny on political parties is to bring them under the ambit of the Right to Information Act.

In a landmark 2013 judgment, the Central Information Commission (CIC) ruled that all six national political parties come within the ambit of the RTI. "It would be odd to argue that transparency is good for all state organs but not so good for political parties, which, in reality, control all the vital organs of the state," the CIC had said in its order. As per the order, the CIC clearly stipulated that the BJP, Congress, CPI(M), CPI, NCP and BSP are public authorities, as the central government has substantially financed them. Both the previous UPA government and the current ruling dispensation have argued against this position. Despite their apparent aversion to greater transparency, all political parties, national or not, must disclose their income, expenditure, donations and funding, including details of their donors. Political parties must get out of their default pattern of financing and make sure that the electoral system does not become a victim of black money generation. Going further, all political parties should stop accepting cash.

With the rising popularity of the cashless or less cash narrative, political parties should only work towards receive funds via digital payments or through cheques. Finally, the government must amend Section125A of the RPA, which deals with the filing of false affidavits by candidates fighting elections. Within 30 days of an election, candidates have to file affidavits disclosing their personal assets and liabilities at the time of nomination and expenditure statements. However, the law does not empower the poll body to impose severe penalties on those who file false or misleading affidavits. Specific amendments to Section 125A would enable the Commission to impose harsh penalties.

On Republic Day, it would seem only fair that political parties, which have been entrusted with representing the people, clean up their act and establish a workable framework for clean politics. The 'war against black money' narrative means nothing without wholesale electoral reforms.