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Greater transparency for parties

Reports indicate that the Election Commission of India (EC) will soon write 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.

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. 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. As per a recent ADR analysis, 51 per cent of the funds collected by national parties during 2014-2015 comprised of smaller donations of up to Rs 20,000. Other data goes on to show that over 70 per cent of the total donations made to political parties are from "unknown sources". 

What’s worse, these donations are declared in income tax returns, without any details of the source. Such “unknown sources” include ‘sale of coupons’, ‘miscellaneous income’, ‘voluntary contributions’, etc. Information on such voluntary contributions is also not available in the public domain. In the public discourse surrounding the generation of black money, the current system of political funding seems to be the elephant in the room. Political funding is one of the primary conduits for unaccounted wealth. 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.
 Earlier this week, Prime Minister Narendra Modi said the Bharatiya Janata Party welcomes the poll body’s recommendations, but nothing more has been forthcoming since. Many citizens of this country are aware of the lack of transparency in political funding, which has skewed electoral outcomes and even shaped the policy priorities of the government. The influence exerted on political parties by large corporate houses through shady means of financing has been well documented. 

Attempts to introduce greater transparency to this process have faced resistance from both political parties and large corporate houses. “In 1998, the Tatas introduced a corpus fund to finance political parties, presided over by a board of neutral citizens who could decide how the money would be distributed,” says a recent editorial in Scroll.in. “The scheme “failed spectacularly”, observers have commented, because most political donations were made in black money.” The specific provision of allowing political parties only to declare contributions received by them over Rs 20,000 is clearly 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. All it takes for the ruling party is the political will to make the necessary amendments to our laws governing political funding. Instead of greater transparency, the Centre has sought to build bigger walls to protect political parties from greater scrutiny. 

Earlier this year, the Centre introduced amendments to the Foreign Contributions (Regulation) Act, 2010, with retrospective effect, letting the BJP and Congress off the hook from a recent Delhi High Court decision that held them guilty of violating the law on foreign funding.


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. 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 a step 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
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