Electoral Bonds are a financial instrument introduced in India in 2018 as a method of making political donations. These bonds are the instrument that can be purchased from specified branches of State Bank of India (SBI) by any citizen or a corporate entity incorporated in India. The bonds can then be donated to registered political parties.
Here are some key points about Electoral Bonds in India:
Issuer: Electoral Bonds are issued by the Reserve Bank of India (RBI) on behalf of the Government of India.
Denominations: The bonds are available in denominations ranging from Rs. 1,000 to Rs. 1 crore.
Validity: The bonds have a validity period of 15 days, during which they can be used to make donations to registered political parties.
Eligibility: Any citizen of India or a corporate entity incorporated in India can purchase these bonds.
Anonymity: One of the controversial aspects of electoral bonds is the anonymity they provide to the donors. The identity of the donor is kept confidential, which has raised concerns about transparency in political funding.
Usage: Electoral Bonds can only be encashed by registered political parties in their designated bank accounts within the specified validity period.
Transparency: The government claims that electoral bonds were introduced to bring transparency to political funding by reducing the use of cash in political donations. However, critics argue that the anonymity feature undermines the transparency objective.
Concerns: There have been concerns raised by various quarters, including the Election Commission of India and transparency advocacy groups, about the potential misuse of electoral bonds and the lack of transparency in the funding of political parties.
- Bearer Bond: No information regarding the buyer or Payee is mentioned in this Bond. It is like a Promissory note.
- Identity of the buyer: Identity of the buyer is anonymous except by SBI. Ruling party can misuse it’s power and can gather the information regarding the buyer of the electoral bond.
Argument in favour:
In Favour:
Transparency Enhancement:
- Electoral bonds aim to streamline the political funding process by introducing a formal mechanism for financial contributions to political parties.
Encouraging Legitimate Transactions:
- The introduction of electoral bonds provides a legal and transparent channel for individuals and corporations to make political donations, reducing the reliance on unofficial or illicit means.
Inclusivity of Citizens:
- By allowing any citizen or corporate entity incorporated in India to purchase electoral bonds, the system promotes broader people participation in the political funding process.
Reducing Cash Transactions:
- The use of electoral bonds is designed to minimize cash transactions in political donations, contributing to a cleaner and more accountable financial ecosystem in political funding.
Eliminating Previous Restrictions:
- Electoral bonds have replaced previous restrictions on corporate donations, allowing for more flexibility in funding and potentially encouraging a wider range of entities to participate in supporting political causes.
Ease of Contribution:
- The availability of electoral bonds in various denominations, ranging from Rs. 1,000 to Rs. 1 crore, facilitates ease of contribution, accommodating donors with varying financial capacities.
Anonymity for Donors:
- While controversial, the anonymity feature in electoral bonds can be seen as a way to protect the privacy and security of donors, encouraging individuals and entities to participate in the funding process without fear of reprisal or undue scrutiny.
Encouraging Civic Engagement:
- By simplifying the donation process and ensuring a legal and transparent avenue for contributions, electoral bonds can potentially boost civic engagement, as individuals and entities may feel more confident in supporting political causes.
Aligning with Digitalization:
- The introduction of electoral bonds aligns with the broader trend of digitalization, offering a modern and efficient method for financial transactions in the political domain.
Strengthening Democratic Practices:
- The overarching goal of electoral bonds is to strengthen democratic practices by formalizing and regulating the funding process, fostering trust among citizens in the political system.
Arguments Against Electoral Bond Scheme
Against:
1. Black Money Through Shell Companies:
Electoral bonds in India have been criticized for their potential to facilitate the flow of black money through shell companies. Critics argue that the lack of transparency in the donation process allows for the misuse of these financial instruments, enabling individuals and entities to make contributions without revealing the true source of funds.
2. Ruling Party Advantage:
The system of electoral bonds has raised concerns about a potential advantage for the ruling party. Critics contend that the ruling party could exploit the lack of donor transparency to gather information about the buyers of electoral bonds. This information could be misused to gain insights into the financial support received by opposition parties, potentially impacting the democratic balance.
3. Misuse by the Ruling Party:
There is a risk that the ruling party could misuse its position by exploiting the anonymity of electoral bonds. By obtaining information about the buyers of these bonds, the ruling party could gain insights into the financial preferences and affiliations of donors, potentially influencing political decisions and compromising the fairness of the electoral process.
4. Previous Restrictions on Corporate Donations:
Prior to the introduction of electoral bonds, companies were subject to a limit on political donations. They could only contribute up to 7.5% of their profits from the last three financial years. The shift to electoral bonds has altered this landscape, raising concerns about the potential for increased corporate influence on political parties and the electoral process.
Why Supreme Court Declared it is Unconstitutional
- Against Right to Information under Article 19(1)(a).
Electoral bonds have been criticized for conflicting with the Right to Information (RTI) under Article 19(1)(a) due to their lack of transparency. The anonymity provided to donors undermines citizens’ right to know about political funding sources, curtailing the free flow of information crucial for informed decision-making. Critics argue that the covert nature of electoral bonds runs counter to the principles of openness and accountability enshrined in the RTI Act. This opacity in political financing inhibits the public’s ability to scrutinize and comprehend the financial dealings of political entities, thereby challenging the essence of the fundamental right to information.
2. Companies failed to deliver it’s duty toward shareholder:
In this scheme, companies don’t need to disclose information regard political funding as it is exempted under this act. It lack transparency, shareholder must have right to know where it’s company is spending. If any type of political donation is given then how much it is given but all these aspects are ignored under this scheme.
3. Loss making companies can also give political funding:
Earlier, there is a limit of 7.5% profit of last three years that can be given for political funding but under this scheme, there is no such limit. Even a loss making company can also participate in political funding which is not justifiable. Also, a company has more graver influence on the political process than contributions by Individual. It can lead to quid pro quo.
These are the major reasons why Supreme Court of India strike down electoral bond scheme and declared it as unconstitutional.
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