PMO Told Finance Ministry to Break Rules, Sell Electoral Bonds Before Assembly Polls: Report

While first calling this an "exception", the finance ministry reportedly went ahead and made this the norm in the run-up to key state elections.

New Delhi: The Prime Minister’s Office under Narendra Modi reportedly ordered for rules about electoral bonds – which the Centre itself had notified just two months earlier – to be broken in March 2018, ahead of assembly elections in six states.

The broken rules, Nitin Sethi reports for HuffPost India, were first called an ‘exception’ but quickly turned into the norm. The report is based on government documents obtained under the Right to Information Act by transparency activist Commodore Lokesh Batra (retired).

Electoral bonds have been widely criticised – including by the Election Commission and Reserve Bank of India – as they make political funding far more opaque. Corporations or individuals can now give unlimited amounts of money to political parties without there being any official record of where the money came from.

Also read: Electoral Bonds Worth Rs 6,128 Crore Sold in 20 Months, More Than Half of it in Two Months Before LS Polls

When the government notified the rules for electoral bonds in January 2018, it specified four 10-day periods in January, April, July and October each year during which the State Bank of India could issue electoral bonds. In a general election year, an extra 30-day period was also allowed for. This limitation was meant to safeguard against money laundering – which the Modi government has been claiming is one of its focal points.

HuffPost India has now revealed that on two separate occasions, the PMO asked the Ministry of Finance to break these rules and allow the unscheduled sale of electoral bonds in the run-up to assembly elections. The assembly elections in question were to Karnataka, Chhattisgarh, Madhya Pradesh, Mizoram, Rajasthan and Telangana.

While the Bharatiya Janata Party was the biggest beneficiary, by a large margin, of electoral bonds in the first tranche, data is not yet available on how much money the party received through these bonds before the assembly elections in question.

Also read: Supreme Court’s Interim Order on Electoral Bonds Inconsistent with Two Laws

The first round of bond sales in 2018 was scheduled for April, but SBI opened it in March instead. The second window was opened in April that year.

According to HuffPost India, the government was unsatisfied with the sales from those two tranches (totalling Rs 336.90 crore). Ahead of the Karnataka elections in May 2018, the PMO asked the finance ministry – without explicitly mentioning Karnataka – to open a special extra 10-day window.

An officer in the finance ministry realised that this would mean breaking the rules – and so, he suggested that the rules be changed, HuffPost India reports. “Para 8 (2) of the notification regarding Electoral Bearer Bonds issued on January 2, 2018 however, refers to the elections only for the House of People (Lok Sabha),” the portal quotes an April 3, 2018 internal file noting by Vijay Kumar, deputy director in the Department of Economic Affairs, as saying. “This would imply that additional issuance of Electoral Bearer Bonds cannot be meant for state assembly election.”

His suggestion that this rule be changed to include state assembly elections was rejected by secretary for economic affairs S.C. Garg. “This special issue was meant only for Lok Sabha. If we were to open a special window for assembly elections as well, there will be several special windows, sometime, in a year. No need for amendment,” Garg wrote on April 4, 2018, according to Sethi.

In a later letter to his superiors, on April 11, 2018, Kumar specified that it was the PMO that wanted the extra window, which went against the regulations. Once the PMO was mentioned, Sethi reports, Garg and others no longer had any reservations. Garg wrote to then finance minister Arun Jaitley the same day, saying that while the rules said something different, the ministry should “as an exception, open an additional window for the period of May 1-10, 2018”.

Unsurprisingly, Jaitley signed off on this.

Also read: Why Jaitley’s Defence of Electoral Bonds Doesn’t Hold Water

HuffPost India reports that this was not a one-time occurrence – the “exception” became the habit ahead of key assembly elections. Another special window was opened in November 2018, on the recommendation of Vijay Kumar. He used the previous “exception” as a precedent:

“In view of the forthcoming State assembly elections in five states and as per the directions, additional 10-day special window for issuance of Electoral Bonds is proposed, on the analogy adopted at the previous occasion of issuance of electoral bonds through special window during May 1-10, 2018 by the government in view of state assembly elections in Karnataka with the approval of the finance minister.”

Again, Garg and Jaitley signed off the extra window, and this time without any further back-and-forth.

According to HuffPost India, the PMO did not respond to a request for comment, while the finance ministry said all the decisions were taken “in good faith”.