Electoral Bonds Scheme

Electoral Bonds Scheme

• Electoral Bonds Scheme are a type of money instruments that can be bought by companies and individuals in India from the State Bank of India (SBI) and donated to a political party.
  • The political party can encash these bonds within 15 days, only through the allotted account. The bond does not bear the donor’s name.
• Objective of the Electoral Bonds Scheme: The scheme was introduced to clean the system of political funding in the country by preventing unaccounted money from coming into the country’s economy through political funding.
  • The government claimed that that it would make political donations transparent while also protecting the identity of the donor.
• Denomination of bonds: Bonds can be bought from any SBI branch in multiples of Rs 1,000, Rs 10,000, Rs 1 lakh, Rs 10 lakh and Rs 1 crore.
  • There is no limit on the number of Electoral Bonds Scheme that a person or company can buy.

• Eligibility: Political party should be registered under section 29A of the Representation of the Peoples Act, 1951 (43 of 1951).
  • The party should have secured at least one per cent of the votes polled in the most recent Lok Sabha or State election.
  • It should have been allotted a verified account by the Election Commission of India.
• Sale window: The Electoral Bonds Scheme go on sale in 10-day windows in the beginning of every quarter, i.e. in January, April, July and October.
  • In addition, there will be a 30-day period specified by the Central Government during Lok Sabha election years.

Electoral Bonds Scheme: Concerns Expressed

• Electoral Corruption: Electoral Bonds Scheme would result in unlimited political donations and anonymous funding of political parties by Indian and foreign companies.
  • The Electoral Bonds Scheme would legitimize electoral corruption at a huge scale, and would have serious repercussions on the Indian democracy.
• Amendments to finance act: To introduce electoral bonds, the centre had made multiple amendments through Finance Act, 2017 and Finance Act, 2016. They were introduced as money bills, which have been challenged for being ‘unconstitutional’.

• Amendments to Representation of People Act: Section 29C of the Representation of the People Act, 1951 was amended.
  • It exempted political parties from informing the ECI about the details of contributions made to them through Electoral Bonds Scheme.
• Companies Act amendment: The amendment to the Companies Act 2013 exempted companies from giving details of political contributions in their annual profit and loss accounts.
  • The removal of the cap or ceiling for companies to make donations was also opposed.
• Amendment to the FCRA Act: The amendment allowed foreign companies with subsidiaries in India to fund Indian political parties.
• Income Tax Act amendment: The amendment to the Income Tax Act 1961 allowed anonymous donations of less than Rs. 20,000.
• Right to Know:  ‘Right to Know’ has been interpreted as a part of the freedom of speech and expression. The opacity and anonymity made political parties unanswerable.
• Violate ECI guidelines: The amendments violated ECI’s 2014 guidelines on disclosure of expenditure and contributions received by political parties.
• RBI’s concerns: The issuance of the bonds in the physical form would actually not serve the purpose of transparency as they are transferable.
  • In current form, they could be transferred without leaving a trail, leading to possible money laundering.

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