Arun Jaitley.
Credit: PTI Photo
New Delhi: Years before the Supreme Court struck down as 'unconstitutional' an opaque political funding tool that allowed individuals and companies to donate money to political parties anonymously and without any limits, the then finance minister Arun Jaitley - the prime mover of electoral bonds - had termed them legitimate and transparent.
A five-judge Constitution bench headed by Chief Justice D Y Chandrachud ruled that voters had the right to information that's necessary for them to cast their vote, and asked State Bank of India (SBI), which is the designated bank for issuing these bonds, to disclose details of each electoral bond encashed by political parties.
The electoral bond scheme was announced by the then finance minister Arun Jaitley in his Budget speech of 2017-18, pitching it as an alternative to cash donations made to political parties as part of efforts to bring transparency to political funding.
There was a need to "cleanse the system of political funding in India", he had said, while limiting the cash donations to Rs 2,000 from one entity and proposed the electoral bond scheme.
Even though opposition parties had then cried foul over the opacity of the scheme, the government went ahead and notified the scheme on January 2, 2018. This was done by amending Reserve Bank of India (RBI) Act, paving way for SBI to issue such bonds.
The sale of the first batch of electoral bonds happened in March 2018. In the last six years, SBI has issued 30 tranches of electoral bonds worth Rs 16,518 crore.
The electoral bond scheme "envisages total clean money and substantial transparency coming into the system of political funding," he had said in January 2018.
"A donor can purchase electoral bonds from a specified bank only by a banking instrument. He would have to disclose in his accounts the amount of political bonds that he has purchased. The life of the bond would be only 15 days. A bond can only be encashed in a pre-declared account of a political party. Every political party in its returns will have to disclose the amount of donations it has received through electoral bonds to the Election Commission."
How Arun Jaitley defended Electoral Bond Scheme:
Jaitley had in 2018 staunchly defended the electoral bond scheme saying if donors are forced to disclose their names, the system of political funding through cash and black money will return.
"If you ask people to disclose that (identity of a donor) also, then I am afraid the cash system will be back," Jaitley had said in April 2019, adding people find fault with the scheme but not come up with any alternative to check the use of black money in the electoral process.
The scheme would bring about greater transparency and accountability in political funding, while preventing future generation of black money. The scheme will ensure clean tax-paid money coming into the system of political funding through proper banking channels.
History of political funding reforms:
As part of political funding reforms, Arun Jaitley as Law Minister in the Atal Bihari Vajpayee government, had moved a Bill legitimising donations by cheque, provided the same are declared to income-tax and the Election Commission.
To incentivise these donations, the government provided that the amount donated to political parties would be deductible expenditure for the purpose of calculating Income Tax liability of the donor.
Subsequently, Pranab Mukherjee, as a finance minister during the UPA-II, brought out a second reform in the year 2010.
"Blessed with great wisdom and depth, he realised that merely providing for cheque donations won’t bring a change. Donors fear the consequences of their revealed identities being linked to a political party to whom they donated," Jaitley had written in a blog dated April 7, 2019.
According to Jaitley, Mukherjee had "masked" the identity by creating a pass-through electoral trust in 2010. A donor could donate to a registered electoral trust which in turn would donate to a political party.
In the 2017-18 Budget, Jaitley said even 70 years after Independence, the country has not been able to evolve a transparent method of funding political parties which is vital to the system of free and fair elections. Political parties continue to receive most of their funds through anonymous donations which are shown in cash.
Concerned over black money finding its way into political funding, Jaitley proposed the electoral bonds scheme.