https://odishapostepaper.com/edition/4727/orissapost/page/6
Election is an important festival of democracy. Indians are known for splurging on any type of festival. Election is no exception. More than fifty thousand crore was spent in India’s 2019 Lok Sabha elections, making it the world’s most expensive democratic event. An evolved democracy has the responsibility of developing a robust mechanism for funding the elections. The process of financing elections should be transparent and should not create opportunity for the political parties to raise funds with implicit understanding of extending benefits.
In the last few months, the country has witnessed a very interesting and important legal debate on this issue. A five-judge Bench led by the Chief justice of India (CJI) D.Y. Chandrachud said, the ultimate purpose of devising a scheme to sanitize the process of political donations is to reduce the infusion of unaccounted cash elements in electoral system and bring in transparency.
One instrument which has become a focal point of heated debate in the corridors of power and justice is the Electoral Bond. The Electoral Bond is a bearer banking instrument to be used for funding eligible Political Parties. The problem is not the with the instrument per se, but the process of introducing the instrument has left several questions unanswered.
Important provisions of several Acts were amended without proper deliberations. The government brought in amendments to four Acts to introduce the Electoral Bond Scheme, through the Finance Act of 2016 and 2017. These Acts are, The Representation of the People Act (RPA), 1951, the Companies Act, 2013, the Income Tax Act, 1961, and the Foreign Contributions Regulation Act (FCRA), 2010. The amendments in these Acts have wide ramifications.
The Indian subsidiaries of foreign companies are now eligible to donate to political parties through the Electoral Bonds. Previously, foreign companies could not donate to political parties under the FCRA. This amendment has paved the way for foreign companies to donate money through the Electoral Bonds. Is this amendment against the public interest?
The political parties had to maintain a record of all donations of more than Rs. 20,000, including the name and address of the donor. The Income Tax Act, 1961 has been amended exempting the political parties from their obligation to keep a detailed record of contributions received through the Electoral Bonds. The feature of anonymous donations to a political party seems to be counter to international best practices in promoting transparency in the political funding. Are we compromising on accountability in the pursuit of providing anonymity?
Corporate entities could donate up to 7.5 percent of three years of the net profits. Now the upper limit has been removed through the amendment of the Companies Act (2013). It seems even a loss-making company can buy the Electoral Bonds and donate money to the political parties. Will this amendment lead to the creation of shell companies to transfer funds to the political parties?
Similarly, the companies have been exempted from declaring their contributions to the political parties. Such an amendment may be violating the basic tenets of the agent-principal relationship existing between the shareholders and the board of directors. The shareholders have a right to know the values and strategies of the political parties to which their funds are given. Is this a violation of one of the fundamental rights of the citizens?
The Representation of the People Act 1951, has been amended to exempt the political parties from sharing details of contributions received through electoral bonds with the Election Commission of India. Now it is impossible to ascertain whether a political party has received any contribution from foreign sources, because of the amendment of the above-mentioned important Acts. Such apprehensions were also expressed by the Election Commission of India. Will this open the gates for the foreign players to influence the government?
Despite the uncertainty about the future of the Electoral Bonds, a healthy debate on election funding is taking place at different levels of democracy: from the court rooms to the classrooms. It is a good time to explore the possibilities of using some of the well-established financial instruments for raising funds from the market.
One such financial instrument which is slowly gaining ground in the sphere of not-for-profit organisations is the Zero Coupon-Zero Principal (ZCZP) Bonds. As the name reflects, the issuer of the ZCZP Bonds has neither the obligation to pay interest, nor to repay the principal. The regulatory environment around the ZCZP Bonds is robust and well established under the purview of the experienced regulator, the Securities Exchange Board of India (SEBI).
At present the ZCZP Bonds are issued by not-for-profit organisations, registered with the Social Stock Exchange (SSE) segment of a recognised stock exchange. These organisations will need to do regular audits of social impact, and these will be disclosed to all stakeholders. The ZCZP Bonds have features which can address most of the limitations of the Electoral Bonds.
A Special Purpose Vehicle (SPV) may be created for the purpose of raising funds for financing elections through the ZCZP Bonds. The SPV may get registered and listed on the Social Stock Exchange and be subject to regulations of the SEBI. This is also in line with the suggestion of the CJI. During the latest hearing of the case, he stated that to have a level playing field, all donations should be given to the Election Commission of India which would then be distributed on an equitable basis.
Unlike the Electoral Bonds, the collection through the ZCZP Bonds may happen throughout the year. As and when the elections are declared by the ECI, the SPV may devise a model for distribution of the funds among the contesting candidates, rather than the political parties. The ZCZP Bond has the potential to make the entire process of giving donations and utilizing them more transparent and authentic. Let us make the festival of democracy more colourful by making it more white than black.