The political funding reforms proposed in the Union Budget by the finance minister are a smokescreen designed to evade the real issue of bringing complete transparency in political funding through the Right to Information (RTI) Act. Citizens have been led into believing that these reform will usher greater transparency and accountability in political funding while preventing future generation of black money, which is far from the truth.
In his farewell speech, former US President Barack Obama cautioned against taking democracy for granted and emphasised that it is only the active and prolonged engagement of the citizens that will keep democracy alive. This holds true not just for the US but also for all democracies around the world.
The basic premise on which democracy operates is transparency, therefore the first step towards securing our Indian democracy is to demand transparency in the funding of political parties.
Recently, the Supreme Court turned down the plea to make it mandatory for political parties to declare their source of funds. However, political parties cannot use this as an excuse to abdicate its responsibility of bringing transparency in their finances. In a democracy like India, where even the supreme law of the country – the constitution – derives its authority from the people, political parties are supposed to be accountable to the masses whom they claim to represent. Therefore, bringing transparency into political funding must be a voluntary action even if it is not imposed by the law.
In present times, when over one-third of the current Lok Sabha MPs have faced criminal charges and more than three-fourth are multi-millionaires, the demand for transparency must be conceived as a democratic value, a tool designed to avoid any harmful influences of money in politics.
Why is RTI crucial for accountability?
Information is an antidote to corruption; it limits abuse of discretion, protects civil liberties, encourages people’s participation and brings awareness of laws and policies. This is how RTI currently brings individual and institutional accountability to our administrative machinery.
The RTI Act mandates timely response to a request for information from a public authority. Since its genesis, the RTI Act has been used to fight corruption and has exposed the deep-rooted graft in the country, such as big scams like the Adarsh Housing Society scam, 2G scam and the corruption around the Commonwealth Games.
Over the years and through its various judgments, the Supreme Court has consistently ruled in favour of the citizen’s right to know. In State of UP vs Raj Narain (1975), the apex court declared that right to freedom of speech and expression guaranteed by Article 19(1)(a) included the right to know every public act, everything that is done in a public way and by their public functionaries.
In S.P. Gupta vs UOI and Anr (1981), the Supreme Court reiterated that right to know is implicit in right of free speech and expression, and disclosure of information regarding the functioning of the government must be the rule. In People’s Union of Civil Liberties vs UOI (2004), the right to information was further elevated to the status of a human right, necessary for making governance transparent and accountable. It also emphasised that governance must be made participatory.
Political parties represent citizens of the country at various levels of the government. They voice people’s demands and needs in the administrative sphere and therefore serve as the link between citizens and the government. Thus, if RTI is not extended to political parties, the attempt to make a foolproof transparent system will be in vain.
Where do national political parties stand on RTI?
Political parties may have differences over most of the policy issues, but when it comes to opposing RTI, there seems to be an ‘unusual’ but strong consensus across party line, especially in the case of national parties. Major national parties including the BJP, the Congress and the Communist Party of India have expressed their displeasure towards the RTI on grounds such as ‘snooping and spying’ and ‘interference in internal affairs of parties’.
They have also received support from the Narendra Modi government which filed a counter affidavit before the Supreme Court in August 2015, submitting that bringing political parties under the ambit of the RTI Act would adversely affect their ‘internal working and political functioning’. This is how the entire political class has been shielding itself against any vulnerability that can be caused due to the RTI.
Therefore, despite the fact that the prime minister has referred to transparency in political and electoral funding in his speech on New Year’s Eve and also at the BJP’s national executive meet, the real action was missing from the scene.
If the government wanted, it could have changed rules overnight, the way it did during demonetisation or it could have even promulgated an ordinance to bring political parties under RTI. Nevertheless, no action has been taken by the government till date to expand the ambit of RTI to include political parties, which leads one to wonder if the fight against corruption and black money is mere rhetoric.
Instead, there have been constant attempts by the ruling party to hijack the debate over transparency in political funding by digressing to its own agenda of simultaneous elections to Lok Sabha and the legislatures, which would ultimately benefit it while jeopardising the federal structure and the multi-party democracy that India is, as pointed out by political experts.
In the meanwhile, national political parties have been claiming that they are transparent because their finances are already in the public domain, as under the law they have been submitting their income tax returns to the IT department and their contributions report – which only includes donations above Rs 20,000 – to the Election Commission of India.
However, an analysis of these reports and of the election expenditure statements from FY 2004-05 to FY2014-15, as done by Association for Democratic Reforms (ADR), shows why political parties, especially the national parties, need to be urgently brought under the RTI.
While the common man is being harassed and asked to account for every penny, it is distressing to see how the funding for national political parties have gone unaccounted inspite of having declared an astounding total income of Rs 9278.3 crore between FY 2004-05 and FY2014-15.
However, there is a disparity between the incomes of the Congress, the BJP and the other national parties, with only these two reporting 78.19% of the total income worth Rs 7254.72 crore. If we take an average, six national parties alone have collectively declared an income of Rs 843.48 crore every year since 2004-05. In addition to this, they are exempted from paying income tax under the law as long as they file their income tax return every assessment year. In such a case, they enjoy 100% tax exemption from all sources of income.
With so much money at their disposal, why has there not been any scrutiny? On the contrary, the government potentially facilitated the movement of black money into the accounts of political parties by allowing them to deposit unlimited amount of old currency notes of Rs 500 and Rs 1000 between November 8 and December 30.
Political parties rely heavily on ‘voluntary contributions/donations’ for fighting elections and running their daily operations. They receive huge sums of money in the form of voluntary contributions and donations from corporate, trusts and individuals. Between FY 2004-05 and 2014-15, national political parties have received the highest amount worth Rs 4,453 crore from voluntary contributions/donations, which forms 48% of the total income of national political parties.
Of this, national parties have provided some details of donors for Rs 1,405 crore donations, which forms only 31.55% of the total income of political parties through voluntary contributions/donations. For the rest 68.45% amounting to Rs 3048 crore, they have evaded declaring any details, thereby exploiting the existing rule under section 29C of the Representation of the People Act, 1951 which exempts them from declaring any donations below Rs 20,000.
The second highest source of income is ‘sale of coupon’ from which parties have received Rs 3161 crore, which forms 34% of the total income of national political parties. Sale of coupon is a system adopted by political parties for collecting funds by issuing coupons in lieu of receipts to donors for cash contributions. Moreover, these are cash donations which makes it all the more difficult to establish the identity of the donor. This implies that a lot of cash donations received remain unaccounted for in the books of accounts, as only those amounts would be recorded for which a receipt has been issued.
Unknown sources have surpassed known sources of funding
The unknown sources are the income that are declared in the IT returns but without giving a source of income for donations below Rs 20,000. For 11 years, between FY2004-05 and FY2014-15, national political parties have received 71% of their total income which is worth Rs 6612.42 crore from sources that cannot be traced and are therefore unknown. On an average, this comes to Rs 601.13 crore each year for six national parties collectively.
Corporates donating to national parties
Corporates have increased their control over the political arena by funding political parties and their election campaigns. This is how the corporations that are essentially unaccountable to the general public influence many of the major political-economic decisions in the country. Why else would corporations/business houses donate thousands of crores to multiple political parties at the same time? What will they gain out of it? Is this not a quid pro quo arrangement between corporates and national parties?
Currently corporate and business houses can donate to political parties in two ways, either by directly making a donation to the party or through electoral trusts.
An analysis of contribution reports from FY 2004-05 to FY 2014-15 shows that six national parties have declared receiving 88% of their total donations in excess of Rs 20,000 worth Rs 1009.23 crore from corporate or business houses. Out of this, 94% has been received by two biggest national parties, BJP (Rs 741.78 crore) and Congress (Rs 210.17 crore).
Creating electoral trusts is just another way of disguising corporate influence because the contributions received by the trusts from companies and individuals cannot be linked to contributions distributed by the trust to political parties. This is because trusts aggregate contributions collected from donors to create a pool and then distribute it to selected political parties, therefore no one will ever be able to track whose money is going to whom.
It is a matter worth pondering over, otherwise why would corporates/business houses donate to political parties through electoral trusts when they have the option of donating directly? Why do all big corporate giants in the country – Bharti group, TATA group, Aditya Birla group, KK Birla group, Murugappa group, Reliance group, Bajaj group, Vedanta group, Mahindra group, Kotak group, Lodha group, MP Birla group etc – have their own electoral trusts? Why do names of electoral trusts do not indicate the name of the company/group of companies which set up the trusts?
There are no rules governing the functioning of Electoral Trusts which were established before 2013. As a result, details of donors to six electoral trusts that had donated a total amount of Rs 112.5 crore to the national parties between FY 2004-05 and FY 2012-13, remain unknown, thereby leading to speculation about whether donations to these trusts was only a means of getting tax exemption or a way to convert black money stashed in tax havens to white money in India.
These trusts include General Electoral Trust, Electoral Trust, Harmony Electoral Trust, Corporate Electoral Trust, Bharti Electoral Trust and Satya Electoral Trust.
When the central government amended the income-tax Rules, 1962 in January 2013 to insert Rule 17CA as approved by the Central Bureau of Direct Taxes, and simultaneously notified the Electoral Trusts Scheme, 2013, why were these rules not applied retrospectively to include the six electoral trusts established earlier?
Around 40% of the total donations that are in the public domain are either from anonymous sources or have incomplete details. An analysis of ADR’s reports shows that between FY 2010-11 and FY 2015-16, Rs 3.79 crore have been received from anonymous donations where either no name is mentioned or what is mentioned is cannot be comprehended or it is donated by state unit of that particular party (most often in the case of CPI).
Rs 392.74 crore have been received through donations with no address or any other detail of the donor. This forms 34% of the total donations declared by national political parties above Rs 20,000. Rs 456 crore have been received through donations with no PAN details, this forms 40% of the total donations declared by national political parties above Rs 20,000.
The Foreign Contribution (Regulation) Act (FCRA), 1976, prohibited political parties from accepting contributions from foreign companies or companies in India controlled by foreign companies. Nevertheless, in violation of the law, a total of Rs 29.26 crore was in total accepted by BJP and Congress from such companies between FY 2003-04 and FY2011-12.
When Delhi high court gave a landmark judgment in 2014 declaring both BJP and Congress guilty of violating FCRA norms, that were pertaining violations only until 2009. The finance minister retrospectively amended the FCRA to redefine Vedanta, in an attempt to nullify the illegality that the BJP and Congress committed when they took money from it.
In fact, both Congress and BJP separately appealed against this Delhi high court order in the Supreme Court, which, while accepting the appeal, refused to grant stay over the Delhi high court’s order. On November 29, 2016, the special leave petitions filed by the BJP and Congress were dismissed as withdrawn by the Supreme Court.
Therefore, the Ministry of Home Affairs, which is the administering authority of FCRA, should abide by the Delhi high court’s ruling and take action against these parties within six months as the court’s March 2014 order is now legally binding and final.
During the Lok Sabha elections in 2004, 2009 and 2014, the six national parties – Congress, BJP, BSP, NCP, CPI, and CPM – declared a total income from funds collected to be Rs 2237.28 crore, but details of all donors who made these contributions remains unavailable, irrespective of the medium they might have donated in. This is because parties are not bound to furnish any such information under the law. Hence, casting a shadow of doubt on the sources of these funds and raising the spectre of black money.
The total election expenditure incurred by the six national political parties increased by a staggering Rs 1039 crore from Rs 269.42 crore in 2004 to Rs 875.81 crore in 2009 and Rs 1308.75 crore during 2014.
Need for an overhaul
It is evident that national political parties have for long been resisting the RTI to conceal obscurities in their sources of funding. This has also proved how the existing laws have miserably failed in bringing complete transparency in the funding of political parties, creating the need for an overhaul in the mechanism for political funding.
This would require nothing less revolutionary than the RTI given the current patterns of funding which reveal extraordinary control and influence being exercised by big corporates and business houses, ultimately, posing a fundamental question on the autonomy of national political parties in representing people and shaping policies.
Vaishali Rawat and Hemant Singh are researchers with the Association for Democratic Reforms.