How budget proposals will help clean up political funding


New Delhi: A slew of measures on electoral funding reforms announced by finance minister Arun Jaitley in the budget on Wednesday are aimed at cleaning up political funding—long considered to be the biggest source of black money.

Not only did the government accept the Election Commission’s (EC) recommendation of capping anonymous donation to Rs2,000, down from Rs20,000, it also introduced the first-of-its-kind “electoral bonds” as a means of donating to political parties. The budget also said that political parties will be entitled to receive donations by cheque or digitally.

The announcement will bring more transparency on who the donor and donee is, and is in line with the EC’s view that curbs on anonymous donations would help keep a check on parties that are formed only with “an eye on availing the benefits of income tax exemption” available to political entities.

“There are many bogus political parties which have been registered with the Election Commission and accept donations but never contest election. These parties had become avenues of dumping ill-gotten money and a check on their financial transactions will definitely help the government achieve its goal of eliminating corruption and black money from the system,” said A.K. Verma, a Kanpur-based political analyst.

The flow of unaccounted cash during elections is huge. For instance, as of 28 January, in Uttar Pradesh, where seven-phase polling is yet to start, a total of Rs87.67crore in cash has been seized by the EC with the help of income tax and police departments.

The need for transparency in political funding has been at the centre of the debate on electoral reforms. In its 255th report released in March last year, the Law Commission proposed changes to the Representation of the People Act (RPA) and spoke of the need to regulate not just political parties, but also the companies that give donations to them. The report suggested that details of donors making contributions below Rs20,000 to political parties must be declared if the total amount received through such sums was above Rs20 crore or 20% of the their entire collection, whichever was less.

Speaking of the government’s commitment on bringing more transparency in political funding, Jaitley, while presenting the budget, said: “Continuing with the task of fulfilling the people’s expectations, our agenda for the next year is ‘Transform, Energise and Clean India’, that is TEC India. Clean India would entail cleaning the country from the evils of corruption, black money and non-transparent political funding.”

Experts feel this is the first step towards cleaning up political funding, and more measures would need to be taken.

“In India, any party can get registered and can then receive unaccounted wealth in the form of political funding. By reducing the funding cap, the government has tried to put a check on this inflow of cash. However, it remains to be seen if parties also reveal the source of this funding as the government has not put into place any mechanism to ensure transparency in the transaction,” said Maj Gen (retd) Anil Verma, head of New Delhi-based think tank Association for Democratic Reforms.