Electoral Funding: Centre yet to Act on Concerns Expressed by EC Two Years Ago

The poll panel wrote in 2017 that amendments to various acts would "have a serious impact on the transparency aspect of political finance and funding of political parties”.

New Delhi: Despite nearly two years having passed since the Election Commission, in a letter to the law ministry, raised several concerns regarding the introduction of electoral bonds, the Centre has not acted on the issue.

With the Election Commission announcing the schedule for the Lok Sabha polls, a transparency campaigner has reminded the Chief Election Commissioner about this oversight.

In a letter to CEC Sunil Arora, RTI activist Commodore Lokesh K. Batra wrote that the Centre was yet to react to the serious apprehensions expressed by the EC on the issue of electoral funding, bringing up how the Commission raised specific concerns in respect to the amendments made in the Finance Act, 2017.

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

‘Amendments would set back transparency in political donations’

Through its letter, the poll panel raised concerns about electoral bonds. Reacting to the four-point action plan proposed by the Narendra Modi government to “cleanse the system of funding of political parties” in its 2017 Budget, the EC wrote that 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”.

The Commission 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 would compromise transparency, the EC had warned.

Law ministry acknowledged EC’s concerns

The views of the Commission were shared by the law ministry then. Documents obtained by Batra through an RTI 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.”

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

“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.”

Incidentally, the issue was also brought before the Supreme Court. The petition was filed by Association for Democratic Rights in 2017.

Finance ministry tried to ignore issue

According to the communication accessed by the RTI activist, it was the finance ministry which tried to pull wool over the entire issue by simply denying any knowledge of the EC’s concerns.

Batra said this happened despite the law ministry noting that the Commission’s concerns “appear to be genuine” and its terming the four amendments through the Union budget a “retrograde step”.

For its part, the law ministry also sent three letters to the expenditure department under the finance ministry to highlight the issue but the MoF did not respond to any of them.

MoF division also agreed with EC’s views

Documents obtained through RTI also showed how deliberate attempts were made by the Narendra Modi government to ignore the EC’s concerns. They point out that 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.

But, despite these observations, the ministry of finance chose to not respond in the matter. The Ministry in December 2018 even submitted in Rajya Sabha that “the government has not received any concerns from the Election Commission on the issue of electoral bearer bonds.”