Finance Ministry 'Misled' Parliament About Electoral Bonds

The Election Commission had shared concerns with the law ministry, which raised them repeatedly with the ministry of finance.

New Delhi: On December 18 in the Rajya Sabha, the finance ministry declared that “the government has not received any concerns from the Election Commission on the issue of electoral bearer bonds.”

P. Radhakrishnan, a minister of state for finance, was replying to an unstarred question from Mohammad Nadimul Haque on “electoral bonds purchased”. He said that electoral bonds worth Rs 1,056.73 crore had been purchased by November 2018. Out of the collected amount, political parties had encashed Rs 1,045.53 crore.

Transparency activists now say that this answer was misleading. Commodore (Retd.) Lokesh K. Batra has obtained details of communications between the Election Commission and the Centre on the issue.

EC wrote to law ministry last May

The Wire reported earlier this year on how the Election Commission raised concerns about electoral bonds through a letter from its then director (election expenditure) Vikram Batra to a secretary of the law ministry on May 26, 2017. The EC provided details of the letter in response to an RTI application by Vihar Durve from Pune.

Reacting to the four-point action plan proposed by the Modi government to “cleanse the system of funding of political parties” in the 2017 Budget, the EC said certain amendments to the Income Tax Act, the Representation of the People Act, 1951 and the Companies Act, 2013 “will have a serious impact on the transparency aspect of political finance and funding of political parties”.

Also read: Jaitley’s Electoral Bonds Are Proof That Political Parties Are Sovereign in India and Not the People

In the letter, the poll panel also noted how the amendments to the three laws would set back transparency in political donations. The proposed amendments would open the possibility of shell companies being created only to make political donations. Allowing firms to not show political contributions in its profit and loss statement will compromise transparency, the EC warned.

Law ministry flagged EC’s concerns

Documents obtained by Batra revealed that on July 3, 2017, the Ministry of Law and Justice issued an office memorandum marked to the Department of Economic Affairs, flagging the concerns raised by the EC.

The Legislative Department of the ministry wrote: “The Election Commission has stated that the removal of the cap on the contribution to political parties… would open up the possibility of shell companies being set up for the sole purpose of making donation to political parties with not other business of consequences, having disbursable profits.”

EC wanted ‘corrective measures’

“Likewise,” the department wrote, “Election Commission is of the view that abolition of the stipulation for declaring political contribution in the profit and loss of the companies would compromise transparency… the Election Commission has, therefore, made a case for taking corrective measures on these aspects.”

Also read: Centre Overlooked EC’s Concerns on Changes to Laws on Political Funding

The issue of electoral bonds increasing opaqueness in funding of political parties was also raised in the Supreme Court in October 2017 by the Association for Democratic Rights.

Three letters from law ministry to finance

The finance ministry denied knowledge of the EC’s concerns – despite the law ministry’s memos that these concerns “appear to be genuine”, terming the four amendments a “retrograde step”.

Moreover, the law ministry sent not one but three letters to the Expenditure Department under the finance ministry to highlighting the issue but the MoF did not respond to any of them.

MoF division also agreed with EC’s views

More intriguing, the Financial Sector Reforms and Legislation Division of the MoF agreed with the EC’s view that the new laws were ‘retrograde’ and should be withdrawn. “The FSRL Division agrees with views of the Election Commission and has no specific comments to offer,” it wrote.

Even so, the MoF has now chosen to deny ever hearing of the EC’s concerns.