DR Ambedkar IAS Academy

Have electoral bonds reduced anonymous cash donations?

The Supreme Court on Friday adjourned to April 10 the hearing of a number of petitions challenging the legality of the Electoral Bond Scheme. The Election Commission of India, in an affidavit filed in the court, said the electoral bonds had made political funding opaque and would have “serious repercussions on transparency of political funding” owing to its anonymous nature.

What is the Electoral Bond Scheme?

The scheme was launched last year by Union Finance Minister Arun Jaitley in an attempt to “cleanse the system of political funding in the country.” A donor may buy an electoral bond at specified banks and branches using electronic modes of payment and after having completed the KYC (know your customer) requirements. The political party will have to deposit the encashed money in a bank account it has informed the Election Commission about.

Where are they available?

The electoral bonds are available at specified branches of the State Bank of India (SBI) for 10 days each in the months designated by the government from time to time. The bonds may be bought for any value, in multiples of ₹1,000, ₹10,000, ₹1 lakh, ₹10 lakh or ₹1 crore.

What was the system earlier?

The rules for declaring sources of funding for political parties are outlined in Section 29C of the Representation of the People Act, 1951. Prior to 2017, the Act said all registered parties had to declare all donations made to them of over ₹20,000. The problem, according to political analysts and watchdog bodies, was that large donations were anonymous.

What is the controversy?

The bone of contention over the electoral bond scheme is that while the government has consistently said the scheme will increase transparency in electoral funding, it has ignored the reservations of several political parties and even the Election Commission.

The argument put forth by the Election Commission is that it allows political parties not to disclose the source of these bonds. The parties do not have to disclose where their money comes from, as long as the mode of funding is through electoral bonds. This provision, to exempt parties from declaring the sources of the electoral bonds they receive, was done through an amendment to the Representation of the People Act by the Finance Act, 2017.

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