Future of Electoral Bonds: Now a piece of paper?

Arun Jaitley, who served as the Finance Minister in 2017-18, strongly supported the electoral bonds scheme. He believed that electoral bonds offered a practical solution to expand political funding in India.

He was adamant that nobody, including the ruling party, should be able to identify the buyers of the bonds or link them to the political parties they donated to. He thought this was crucial to encourage companies and individuals to contribute to political funding.

On 15 February, the Supreme Court declared the electoral bonds scheme unconstitutional, along with the related amendments in the laws. This effectively made electoral bonds a thing of the past. The State Bank of India (SBI) further compromised the anonymity of bond buyers by revealing the unique alpha-numeric codes embedded in the bonds for security purposes on 21 March.

Interestingly, the government, which introduced the electoral bonds, did little to defend them. Home Minister Amit Shah expressed concerns about the potential return of black money to electoral funding but took no concrete action.

Why did the government fail to protect the electoral bonds scheme? Why didn’t it ensure the preservation of its crucial feature, especially for bonds bought and donated before the scheme was declared unconstitutional? Did the government disappoint the donors who trusted the scheme?

The Genesis of Electoral Bonds The electoral bonds scheme was announced in the 2017-18 Budget on 1 February 2017. The Finance Bill, 2017 introduced significant changes in various acts like the Companies Act, the Income Tax Act, the RBI (Reserve Bank of India) Act, and the Representation of People Act to establish the framework of the scheme. Despite some opposition, the Parliament passed the Finance Bill to legalize electoral bonds.

However, when I assumed the role of Secretary of Economic Affairs in July 2017, six months later, electoral bonds were still not operational. The RBI had concerns, and the Election Commission of India (ECI) had objections. Many political parties and civil society organizations opposed the bonds.

After extensive efforts, we managed to address the concerns of the RBI and the ECI, and electoral bonds became operational in January 2018. It took over a year to implement the scheme. You can find more details about the challenges faced in my book “We Also Make Policy.”

Arun Jaitley spearheaded the design and implementation of the electoral bonds scheme, with considerable support from the government.

Electoral Bonds Facilitated Rs 16,200 Crore in Political Funding India already had a transparent political contribution scheme under the Companies Act, but it was rarely used. Most donations were made in cash, leading to opacity in political funding.

To address this, the government made three significant changes to political funding:

Firstly, electoral bonds were designed without any identification number to ensure anonymity between donors and political parties.

Secondly, the government removed the cap on corporate donations and allowed loss-making companies to contribute, aiming to broaden the donor base.

Thirdly, political parties were required to receive bond proceeds in their KYC-enabled bank accounts, recording all donations without disclosing the donor’s identity.

These features made electoral bonds a major source of political funding, with over Rs. 16,200 crore contributed in six years, far surpassing previous funding from corporations.

The Government’s Actions and Inactions The government failed to defend the electoral bonds scheme, contrary to Arun Jaitley’s fervor. Furthermore, it couldn’t safeguard the anonymity of bond buyers.

Firstly, the existence of an alpha-numeric code in the bonds compromised anonymity. The SBI, entrusted with managing the bonds, recorded these codes, contrary to the scheme’s intent.

Secondly, the Supreme Court ordered the disclosure of bond denomination, date, and amount but didn’t mandate revealing the alpha-numeric codes. The SBI, instead of promptly providing the required data, sought an extension until June 2024, raising suspicions.

The SBI proposed to match bond buyers with depositing political parties if given more time. Did the government tacitly approve this delay tactic?

Moreover, the Supreme Court invalidated all three crucial features of the electoral bonds, dealing a severe blow to the scheme.

The Government Abandoned the Electoral Bonds Scheme While Arun Jaitley would have vigorously defended the scheme, the current government remained passive. It neglected to protect bond buyers from retrospective disclosures, failing to file a review petition or bring an ordinance.

Consequently, the SBI faced criticism, and the government essentially abandoned the electoral bonds scheme, unfairly affecting companies complying with the law.

What’s Next? It appears unlikely that the government will take any corrective measures now. The opportunity to safeguard electoral bond donors has passed.

One disparity remains: the alpha-numeric numbers of bonds purchased and deposited between March 2018 and 11 April 2019 are yet to be disclosed. The government can instruct the SBI to release this data to ensure transparency across all electoral bonds issued over the scheme’s six-year lifespan.

How Indian People will Face Problem due to electroal bonds?

Electoral bonds, while introduced with the intention of bringing transparency to political funding, have raised concerns among Indian citizens, primarily due to the following reasons:

1. Lack of Transparency: Electoral bonds were meant to address the issue of undisclosed political donations, but they ended up creating more opacity. The anonymity provided by these bonds raises questions about the source of political funding, leaving citizens in the dark about who is financing political parties.
2. Potential for Corruption: The anonymity of electoral bonds opens the door to corruption. Without knowing the identity of donors, there is a risk that political parties may be influenced by undisclosed interests, compromising the democratic process.
3. Uneven Playing Field: Electoral bonds disproportionately benefit wealthy donors and corporations, as they can contribute large sums of money without public scrutiny. This creates an uneven playing field in politics, where the voices of ordinary citizens may be drowned out by the influence of big money.
4. Lack of Accountability: With no obligation for political parties to disclose the identity of donors, there is little accountability in the electoral process. Citizens are left wondering whose interests political parties are serving, making it difficult to hold them accountable for their actions.

So, electoral bonds undermine the principles of transparency, accountability, and fairness in Indian democracy, posing a challenge to the democratic rights and values of the Indian people.

So, What Indian People can do to resolve above Issues?

To address the issues arising from electoral bonds and uphold the principles of transparency and accountability in Indian democracy, citizens can take several actions:

1. Advocate for Reforms: Citizens can advocate for reforms in political funding laws to promote transparency and accountability. This may include calling for stricter disclosure requirements for political donations and advocating for the abolition or reform of the electoral bonds scheme.
2. Demand Transparency: Indian citizens have the right to demand transparency from political parties regarding their sources of funding. They can pressure political parties to voluntarily disclose their donors and the amounts they contribute, even if not legally required to do so.
3. Support Civil Society Initiatives: Citizens can support civil society organizations and movements that work towards political reform and campaign finance transparency. These organizations often play a crucial role in raising awareness about issues related to electoral integrity and advocating for change.
4. Exercise Voting Rights Wisely: Citizens can use their voting rights wisely by supporting political candidates and parties that prioritize transparency and accountability in political funding. By electing representatives who are committed to reforming the electoral system, citizens can contribute to bringing about positive change.
5. Participate in Public Discourse: Engaging in public discourse and raising awareness about the implications of electoral bonds and other issues related to political funding is essential. Citizens can write to media outlets, participate in discussions on social media, and organize public forums to highlight these issues and mobilize support for reform efforts.
6. Legal Challenges: Citizens can explore legal avenues to challenge the electoral bonds scheme and other aspects of political funding that they believe undermine democratic principles. This may involve filing public interest litigation or supporting legal challenges brought by advocacy groups and civil society organizations.

Hence, citizens play a crucial role in ensuring the integrity of India’s democratic process by actively engaging in efforts to promote transparency, accountability, and fairness in political funding.