Now is the time for reforms

The Supreme Court’s judgement on February 15, 2024, scrapping the scheme of electoral bonds presented a great opportunity for opposition parties to make it a serious issue during the ongoing parliamentary election campaign. Although some political leaders initially criticised the ruling party at the Centre for benefiting from the scheme, the matter quickly lost momentum.

Once the details of donors and recipients became public, no political party wanted to make it a serious poll issue. Delving deeper might expose all political parties, as they fear their own quid pro quo arrangements being revealed. Historically, political parties tend to unite whenever facing issues that could collectively harm them. It is widely understood that donations to political parties often come with expectations of returns, potentially serving as investments for donors seeking short-term returns.

Interestingly, a plea has already been filed in the Supreme Court seeking a review of the February 15 judgement. The petitioner has contended that the Court entertained the petition (against the scheme) and struck down the law and the scheme without noticing that in doing so it is acting as an appellate authority over parliament, substituting its wisdom on a matter that falls in the exclusive province of legislative and executive policy.

It is unlikely that the next government will wait for the Supreme Court’s decision on the review petition. From all the indications available in the media, it is apparent that the next government at the Centre as well as all political parties would be eager to have the new policy on funding in place at the earliest.

The judgement of the Supreme Court and public sentiment clearly indicate a need for political parties to have transparency in their functioning and that the use of unaccounted money needs to be curbed. There is also an increasing understanding among the public that donors generally have some vested interest in making donations to any political party. This is perhaps the first time that the common man has become aware of the way political parties function and raise their resources. I hope the central government will take note of public opinion while framing a new policy for funding political parties and will take a comprehensive view of the various issues related to the functioning of political parties, which are crucial to the functioning of democracy in our country. The central government should not miss this opportunity and should link funding with the reforms of political parties.

Here are a few suggestions for the consideration of the government for reforms among the political parties and their funding.
1. Political parties must be recognised as public bodies under the Constitution, and they should be covered under the Right to Information Act.
2. The Constitution must create an institutional arrangement (the National Commission for Political Parties), similar to the Election Commission of India (ECI), for regulating all aspects of political parties, and the ECI should be tasked with the conduct of elections only.
3. No political party should be registered if its name indicates a non-secular nature.
4. Political parties must be run on secular and democratic principles, and their elected office-bearers must have limited tenures for each elected office.
5. Their accounts should be audited annually, and the same should be made public.

Let me also make a few suggestions regarding the funding of the political parties:

1. There should be complete transparency about the donors and recipients.
2. All donations should be made through banking channels only. Donors, banks, and political parties must notify the National Commission for Political Parties of each transaction within a reasonable time. Donors must also mention details of their current relationships with the state and central government departments, including at the proposal stages, if any. All such donations shall have no tax liability on the part of the political parties, and the donors should be eligible to get a 100% rebate on their income for tax purposes.
3. Political parties should not be allowed to receive any donations in cash, particularly when digital transactions are the new normal now. However, if it needs to be continued for some more time, then political parties that receive cash donations must pay income tax at 40% plus cesses. Donations received in cash beyond Rs 10 crores in a year must be taxed at the rate of 60% plus cesses.
4. The filing of income tax returns by political parties should be mandatory, whether there is any tax liability or not.
5. No donor should be permitted to donate more than 20% of their average net profits during the previous three years in any year to all kinds of recipients, including political parties. Donors to political parties must also submit details of all their donations made during a year to all recipients in a year to the National Commission for Political Parties.
6. Donors from sectors such as agriculture, which are not required to pay income tax, may also give donations only through banking channels, and the government may fix norms for donations separately based on their holdings.
7. The National Commission should have the power to get the accounts of any political party audited by the CAG, if necessary.
I think it is time that political parties raise most of their funds through legitimate channels like collecting annual membership fees from certain categories of their members and through fund-raising events, etc.
Lastly, I suggest that the central government seek comments from the general public by notifying them of the proposed policy for funding the political parties before finalising it. This may minimise the chances of people going to court against the policy.
I am sure people may have many more useful suggestions to improve the functioning of our political parties. I have no doubt that the general public and many enlightened politicians will support these suggestions, as they will ultimately help their parties gain public support for their political activities.

(The writer is a retired IAS officer)