Funding for political parties

In a curious clarification on Friday, Revenue Secretary Hasmukh Adhia announced that political parties depositing old Rs 500 and Rs 1,000 notes in their accounts would be exempt from Income Tax scrutiny, provided the donations were below Rs 20,000 per person. It is well known that political funding is one of the primary conduits for unaccounted wealth. 

“It is not the existence of unaccounted money that allows or encourages its use in elections,” wrote Jagdeep S. Chokar, founder-trustee, Association for Democratic Reforms (ADR), in a recent column for a media publication. “It is the use of unaccounted money in elections that is the real cause, or at least the abettor, of the generation of unaccounted money in the country.” 

The actual surgical strike on black money would centre on wholesale electoral reforms. 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 Association of Democratic Reforms, 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. Recent data shows that over 85 per cent of the total donations made to political parties are from unknown sources. 

The demand for greater transparency in funding for political parties has been raised many times. In the preceding decades, governments have set up numerous committees to recommend electoral reforms. For example, the Tarkunde Committee Report of 1975 and the Indrajit Gupta Committee Report of 1998 produced a comprehensive set of proposals regarding methods of financing elections and other key reforms.  One of the recommendations included state or public funding of elections, something which Prime Minister Narendra Modi recently suggested. 

In 1998, the Election Commission had raised the lack of transparency involved in the process of collecting funds for political parties and how they spend that amount. Accounts of parties should be audited by auditors approved by the CAG only, and the audited accounts should be made public, the electoral body had recommended, among other measures. Fast forward six years, and the then Chief Election Commissioner (CEC), T S Krishna Murthy wrote a letter to the UPA government, in which he sought greater “transparency in the matter of collection of funds by the political parties and also about the manner in which they expend those funds”. 

On the specific provision of allowing political parties only to declare contributions received by them over Rs 20,000, Murthy argued that it was “not sufficient for ensuring transparency and accountability in the financial management of political parties”. Even the Law Commission of India, in its report last year on electoral reforms, recommended that it should be made mandatory for political parties also to disclose contributions less than Rs 20,000 if such contributions exceed Rs 20 crore or 20 per cent of the party’s total contributions. Unfortunately, the NDA government is yet to make any progress on taking these proposals further forward. 

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 judgment three years ago, 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. 

In its submission to the apex court, the NDA government argued that political parties should not be brought under the purview of the Right to Information (RTI) Act. The rationale given is two-prong. One, if political parties are brought under the ambit of RTI, it would hamper their functioning since it is vulnerable to misuse by other rival parties to score political points. Moreover, political parties are already covered under the Representation of the People Act (RPA) and Income Tax Act. These laws are more than enough to guarantee transparency regarding the financial conduct of political parties. This is a convenient assertion to make, considering these provisions have failed to ensure transparency and accountability due to loopholes and absence of a mechanism to verify the accuracy of disclosures. Second, the Centre said, “political parties are not established or constituted by or under the Constitution or by any other law made by Parliament”. 

“Political parties are constituted by their registration under the RPA, and this cannot be construed as akin to the establishment of a body or institution by an appropriate government as held by the CIC,” it added. The argument that political parties are private bodies has already been shot down by the CIC, which pointed to indirect government funding in the form of tax concessions and grant of land, bungalows and other benefits at concessional rates. “All national and regional political parties must disclose for public scrutiny complete details of their income, expenditure, donations and funding including details of donors making contributions to these political parties and their electoral trusts,” says RTI activist Subhash Chandra Agrawal, who had moved the apex court for the implementation of the CIC order. 

“Great harm is being caused to public interest due to lack of transparency in the political system and the political parties, as the electoral system is generating huge black money and large sums of money are being spent on every election.” The usual excuse often made by governments on the issue of greater transparency in political funding is that there exists no political consensus. The BJP enjoys a simple majority in the Lok Sabha, and under the force of public pressure, they can even convince Opposition members in the Rajya Sabha need to take greater steps.