Electoral bonds make political donations transparent

The Union government has brushed aside before the Supreme Court the Election Commission's “concerns” on use of black money through electoral bonds, by calling it as a “pioneer step” in ensuring greater transparency and accountability in political funding.

“Donations received through electoral bond by a domestic company, having a majority stake is permitted, subject to compliance of the KYC norms (which require disclosing source of funds to buy bonds and accounting thereof in account books)... this maintains audit trail in comparison to earlier opaque system of cash donations,” the Ministry of Finance said.

In an affidavit, the government said the non-disclosure of identity of the donor is core objective of the scheme of electoral bond in order to safeguard the donor from political victimisation.

Therefore, any donation received by the political party through an electoral bond is kept out of the ambit of reporting under the Contribution report as prescribed under Section 29C of the Representation of People Act, 1951. However, the records of the purchasers are always available in the banking channel and may be retrieved as and when required by the enforcement agencies.

“The electoral bonds can be encashed only by an eligible political party by depositing the same in the designated bank account which means that a political party can open only one PAN India single bank account for crediting proceeds of the electoral bonds. The amount can be ascertained through the account statement,” it said.

The government further said in any event, non-maintenance of identity of the donor of electoral bond by the political parties was “driven by well-thought out policy considerations”.

It pointed out that the amount of cash donation limit has been reduced from Rs 20,000 to Rs 2,000, for which details of the name, PAN number etc were not maintained and constituted major portion of the political donation.

Earlier, there was no limit on the amount of contribution or donation, which were made in cash to political parties. Since the major portion was in cash, the existing provision allowed the source of funding to remain unaccounted and unexplained.

With the introduction of the electoral bond, any donation exceeding Rs 2,000 has to be made by using formal banking system.

The apex court is seized with a batch of petitions filed by NGO 'Association for Democratic Reforms' and CPM, challenging the validity of the amendments into the Reserve Bank of India Act, the Representation of the People (RP) Act, the Income Tax Act, the Companies Act and the Foreign Contribution Regulation Act (FCRA) by the Finance Acts of 2016 and 2017, that allowed use of electoral bonds.