The Supreme Court’s pending plea challenges the opacity of Electoral Bonds

In a democracy, transparency is paramount, especially when it comes to political funding. India, as the world’s largest democracy, has been striving for transparency in electoral finance. The introduction of electoral bonds in 2017 aimed to address this issue. However, since their inception, these bonds have stirred controversy and drawn criticism from various quarters. The need for openness in electoral bonds has become a pressing concern, as two prominent NGOs challenge the scheme in the Supreme Court. This article delves into the electoral bond system, its rationale, criticisms, and the ongoing legal battle, emphasizing the urgency for transparency in political funding.

Electoral bonds are financial instruments that enable individuals, corporations, and entities to make anonymous donations to political parties in India. To ensure legitimacy, only registered political parties that secured at least 1% of votes in the previous general election are eligible to receive electoral bonds. These bonds are available in denominations of Rs 1,000, Rs 10,000, Rs 1 lakh, Rs 10 lakh, and Rs 1 crore and can be purchased from authorized branches of the State Bank of India (SBI) through non-cash methods like cheques or digital transactions. The donors remain anonymous, and political parties can encash the bonds within 15 days of receipt to fund their electoral campaigns.

Electoral bonds were introduced in an effort to enhance transparency in political funding in India. It aimed to reduce the prevalence of anonymous cash donations, a common practice among political parties. The two main changes were reducing the cash donation limit from Rs 20,000 to Rs 2,000 and introducing electoral bonds to facilitate legitimate funding. The anonymity provided by these bonds was intended to protect donors from potential victimization while ensuring transparency in the process.

Despite their initial goals, electoral bonds have attracted a considerable amount of criticism. Critics argue that the anonymity of these bonds mainly benefits the ruling party, as the government-owned SBI, which sells the bonds, can access information about the donors. This could potentially lead to extortion or victimization, providing an unfair advantage to the party in power. More than 75% of all electoral bonds have gone to the ruling party at the Centre.

Furthermore, the high denominations of the bonds have been questioned. While they were meant to enable common people to fund political parties of their choice, more than 90% of bonds purchased have been in the highest denomination, Rs 1 crore. The removal of caps on corporate donations and changes to the Companies Act have opened doors for unlimited funding by corporations, including loss-making or shell companies. Additionally, Section 13A of the IT Act exempts companies contributing through electoral bonds from keeping records of such donations, resulting in complete financial opacity.

The amendments to the Foreign Contribution Regulation Act (FCRA) have exempted foreign funds received by political parties, creating potential risks of foreign interference. Furthermore, the opaque nature of electoral bonds has intensified concerns of money laundering and bribery in political funding.

A Public Interest Litigation (PIL) was filed by the Association for Democratic Reforms (ADR) in 2017, raising concerns about corruption, subversion of democracy, and lack of transparency in political party accounts due to illicit and foreign funding. The Supreme Court directed political parties to submit details of funds received through electoral bonds to the Election Commission in response to ADR’s affidavit. In January 2021, the Supreme Court refused to grant an interim stay on the electoral bond scheme, but it agreed to hear a petition challenging political party funding through these bonds.

The Supreme Court’s decision to hear petitions challenging the electoral bond scheme is significant. It underscores the need for transparency and accountability in political funding, which is crucial to safeguarding India’s democratic values. The controversy surrounding electoral bonds raises questions about the functioning of India’s apex institutions.

While electoral bonds were introduced with the promise of transparency, they have, in reality, entrenched opacity and raised concerns about potential corruption and misuse. The Supreme Court’s upcoming hearing will play a pivotal role in determining the future of electoral bonds and the transparency of political funding in India.

In a democracy, the transparency of political finance is essential for maintaining the integrity of electoral processes. Electoral bonds, as they currently stand, have failed to provide the level of transparency needed to ensure fair and equitable political funding. The ongoing legal battle will shed light on the direction India’s electoral financing system takes, and whether it truly embraces the principles of openness and accountability that are vital to democracy.

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