After a landslide victory in the Delhi assembly elections, the Aam Aadmi Party has received a notice from the Income Tax department over allegations of dubious funding. Last week, the AAP’s breakaway group AAP Volunteer Action Manch group had accused the party of receiving Rs 2 crore last year through four “dubious” companies. These allegations had become the centre of the Bharatiya Janata Party’s attack against AAP during its Delhi assembly election campaign. Four donations to the tune of Rs 50 lakh each were made by four companies, with dubious antecedents, to the Aam Aadmi Party earlier last year. An investigation by a leading national daily found that three out of the four companies comprised of a sewing factory, a post office and a closed grocery story. During the election campaign, no less than Union Finance Minister Arun Jaitley labelled the donations as, “round tripping of black money into the political system”. The above allegations had come to haunt AAP, a party that has constantly presented the image of clean politics in an arena that is dirty by any standards. The party has welcomed the investigation, although it also demanded a similar probe into the campaign finance for all political parties. In its defence, leaders from AAP have said that they accepted these donations by cheque, with key details disclosed on its website, although it has expressed its inability to probe the financial background of all its donors.
These events have once again brought forth the conundrum that faces election campaign finance in India. As per the 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 large portions of their income to contributions less than Rs 20,000, with PAN numbers, addresses and names often missing. According to the ADR, 73.5 per cent of the BJP’s funds between 2004 and 2011, amounting to Rs 952 crore, came from unknown sources either because the amounts were listed below Rs 20,000 or information about its major donors were incomplete. For fairness, however, the Income Tax department must also investigate the BJP’s finances.
Allegations against AAP and other political parties, however, highlight a larger problem. Financing election campaigns in most democracies is a very expensive proposition. According to one estimate made by the Centre for Media Studies, elections in both the State and Centre, cost $4.9 billion. This conundrum over election finance has been accentuated by limiting the amount of money a candidate can spend in an election. It is widely understood by many political commentators that the divergence between the limits set by law and what the candidates actually spend is huge, despite the EC’s substantial effort at monitoring poll funds. Unrealistic constraints on spending or unbridled contributions by companies and individuals, however, will both lead to cronyism and corruption. What adds to the problem in India, however, is the plethora of laws that makes it difficult for even honest companies to contribute, besides a media that does not consistently report on poll funding.