The Supreme Court declined to stay the electoral bond scheme of the government.
Also, a fresh window for purchase of bonds is set to open, coinciding with the Delhi Assembly election.
What is Electoral Bond Scheme?
An electoral bond is like a promissory note that can be bought by any Indian citizen or company incorporated in India from select branches of State Bank of India.
An individual or party will be allowed to purchase these bonds digitally or through cheque after disclosing their identity through know your customer (KYC) norms
The citizen or corporate can then donate the same to any eligible political party of his/her choice.
The bonds are similar to bank notes that are payable to the bearer on demand and are free of interest. It has to be redeemed by Political parties within 15 days only in their specified account.
The electoral bonds were introduced with the Finance Bill (2017). On January 29, 2018 the NDA government notified the Electoral Bond Scheme 2018.
Electoral bonds: Conditions
Any party that is registered and has secured at least one per cent of the votes polled in the most recent General elections or Assembly elections is eligible to receive electoral bonds
The electoral bonds will not bear the name of the donor. Thus, the political party might not be aware of the donor’s identity.
Why were electoral bonds introduced in India?
The government said that electoral bonds would keep a tab on the use of black money for funding elections. In the absence of electoral bonds, donors would have no option but to donate by cash after siphoning off money from their businesses
Electoral bonds were being introduced to ensure that all the donations made to a party would be accounted for in the balance sheets without exposing the donor details to the public
Restrictions that were done away with after the introduction of the electoral bond scheme
Earlier, no foreign company could donate to any political party under the Companies Act.
A firm could donate a maximum of 7.5 per cent of its average three year net profit as political donations according to Section 182 of the Companies Act
Also, companies had to disclose details of their political donations in their annual statement of accounts.
Criticisms of EBS
Legalising Political Corruption: Since neither the purchaser of the bond nor the political party receiving the donation is required to disclose the donor’s identity, the shareholders of a corporation will remain unaware of the company’s contribution. Voters, too, will have no idea of how, and through whom, a political party has been funded.
Possibility of Money Laundering: Since the identity of the donor has been kept anonymous, it could lead to an influx of black money. With doing away with all the safeguard that were present in Corporate donations to Political parties (through Companies Act), Indian, foreign and even shell companies can now donate to political parties without having to inform anyone of the contribution.
Large Corporations and not common man is utilizing this route: Nearly 91.76% (Rs 5,624 crore) of the total number of bonds purchased during the 12 phases were in the denomination Rs 1 crore. Thus, there is possibility of unholy nexus developing between Corporates and Political parties for favourable policies which comes at the cost of public welfare
Against Smaller Regional Parties: 80.5% of the total Electoral Bonds redeemed between March 2018 and October 2019 were encashed in New Delhi (while maximum value of bonds was purchased in Mumbai) where national parties’ headquarters are located
New sale windows during State elections: The government’s scheme was meant for Lok Sabha elections, but the sale window for bonds had been opened before State Assembly elections repeatedly, which is beneficial for Central ruling party.
Non Transparency: The SBI has refused to divulge the names of those who purchased the electoral bonds under the RTI Act. The scheme infringes the citizens’ fundamental ‘Right to Know’ by withholding crucial information regarding electoral funding