Electoral Bonds: The Biggest Scam of Independent India (Part-1)

 The electoral bonds data released by the State Bank Of India(SBI) has created a stir in the political system of our country. The government is saying that the opposition has benefitted from these electoral bonds and the opposition says that the government's misdeeds have come out in front of the public.

1,260 companies and individuals have given electoral bonds worth Rs 16,000 crores to our political parties. But having said this, what are electoral bonds, why are they introduced, who were the people who are involved in this, why it is the biggest scam of Independent India, how do the political parties fool you, and also why no Indian political parties are stainless.  Since we are starting from the ground it's going to be a detailed blog and it might also be divided into many parts.

This is a political financing issue that decides who wins the elections. 

So before we understand what are electoral bonds, we have to understand what is the relationship between money and power in our country. This can be divided into four phases.

1st Phase: 1947-1986:

Nehru and Shastri Phase

In 1951, Congress passed the Representation of People's Act which set a limit on how much a candidate can spend in elections. These limits are still there. Initially, Congress used to collect money from its members but as the Indian Elections became expensive (population increase) they started asking for money from companies. Now the Congress party benefitted because of the License Raj System. So, due to this if you don't give money to Congress the government has the power to shut down your business. So the companies that were willing to pay the Congress, had very good relations with the party. The companies didn't pay taxes and Congress used to give licenses to run businesses.

Indira Phase

This system changed in the 1967 General Elections where Congress did get a majority but their seats fell. 

1962

1967

This was mainly because their opposition Swatantra Party and Bharatiya Jana Sangh (eventually BJP)

were more pro-business. So, the companies started to fund them more. The furious Congress under Indira Gandhi banned corporate donations. As a result, this has blocked the parties from taking that relatively honest and open way of collecting donations. So, they went on the path of the dark side- Black Money. Most parties were running due to this black money but since Congress was in power the money was more. The circulation of Black Money was more when Indira Gandhi nationalized the banks in 1971 (which means the government controlled the banks. Though it was a good move, many people forgot to account for this ). When Supreme Court at that time tried to change this Indira Gandhi opposed it. So till Indira Gandhi's tenure, there was no reform done. Even when there was the first Non-Congress Government (Morarji Desai and Chaudry Charan Singh) came in 1977 it didn't do much change as they also benefitted from this. This continued till 1986.

2nd Phase: 1986-2003-

Rajiv Phase:

Rajiv Gandhi tried to change this corrupt system and also liberalize the economy. First, he removed the ban on companies funding parties and devised a rule of companies donating up to 5% of their profits to the parties. But he didn't give any tax benefits for the companies to use this rule. 

But Ani, what is a tax benefit? Let me give you an example.

Source: Soch by Mohak Mangal

Let's say you have a company that has made 100 Cr Profit in this year. You have to pay taxes to the government according to your profit. But before that, you make a donation of 10 Cr to that political party(according to Rajiv Gandhi's Rule). This means the government should give you a taxable amount of 100-10 = 90 Cr.

 

This tax benefit was missing and this paved the way for illegal donations again. There was one more problem in this system. For the last three decades Congress won elections without breaking a sweat but from the 1980s elections became more competitive. So the Companies were scared that if they donated to Congress and said if a Non-Congress Government came to power then they would threaten the companies to donate to them. So the donations were going on under the table.

1990s Phase- Coalition Governments and the Rise of Criminals:

It was not that criminals never existed in India before the 1990s. Since Congress was in power for a long time they had a good relationship with them.

Criminals used to give muscle power to Congress during elections and Congress used to give protection to them. But when Congress was declining in the subsequent elections these criminals realized that they would not be protected hereafter. So they became politicians themselves.

In 1991 the government liberalized the economy which gave way for foreign companies. The Indian companies were scared that foreign companies would dominate the political systems. So 1990s was a golden period for black money and criminals.

You might ask one question. But Ani, was the Supreme Court sleeping all this time? Why won't it intervene in this system? The answer is Yes. The Supreme Court has been trying to shake this system since 1951 but it had very little effect and nothing much changed.

But in 1996 the Supreme Court ordered all political parties to file their annual income tax and it also said that the expenditure of the political party would also be attributed to the expenditure of the candidate. But there was no execution on the ground and this continued till 2003.

So, there were attempts at reforms but no clear implementation

3rd Phase: 2003-2017-

After 18 years Atal Bihari Vajpayee's government in 2003 came in with the first reform and said that the money donated to political parties is 100% tax deductible (which means there was a tax benefit) if and only if the money is paid in cheque (white money), not in cash.

This might look like a revolutionary reform from the up but was too fragile in the underground.

For example, the Vajpayee government said that political donations greater than Rs 20,000 can be made either through bank transfers or cheques.

Then these transactions must be informed to the Election Commission of India and they will make the records public. But to make themselves anonymous the companies or the donors would pay them in installments.

Like 1Lakh in 5 installments of 20,000 in cash.

Then NDA government passed another law that says the same thing as what the Supreme Court said in 1996.

"expenditure of the political party would also be attributed to the expenditure of the candidate".

But they also added,

"If there is a joint campaigning by the party , that expenditure will not be attributed to the spending of the political party."

So this is saying like

"Corruption is illegal but if you give me money under the table then it's fine."

Then the UPA government came and there was no change in this broken system

When the RTI Act (Right to Information Act) was introduced people tried to bring in the political parties funding it as they were public authorities(2013). But all parties denied this and said that they won't come under public authority and they are private organizations.

WHAT AN ANSWER!!

In 2013, the  UPA government came up with a scheme called the "Electoral Trust Scheme". In this scheme, a group of companies come as a trust and donate money to political parties. 

Companies donate the money to this electoral trust but they don't have to say to which political party they have donated. This ensured no transparency in the system and the circulation of the black money continued.

So these were the first three phases of the black money cycle. The fourth and final phase will be a more detailed one and will be continued in the next blog.

Until then stay tuned.