In a party-based electoral democracy like ours, there can be no getting away from the central link between corruption and the need to fund political parties. Until this is confronted head-on, any control devised in one part of the system will merely push corruption to some other part of the system. There has to be some process like that which moved the drafting of the Constitution, which looks into this central cause, and devises some way by which to contain if not quite eliminate it.
In the US, political funding is legal and declared by both giver and receiver, but other problems have arisen in its wake. Policy is susceptible to capture by large funders, and has therefore loosened the regulatory apparatus which alone can prevent large corruption. The legal cap on any single contribution can easily be evaded by a concerted lobby, each member of which is below the cap. In a bid to shake free of this, President Obama famously collected substantial campaign funds through small online contributions, and even now, has begun his bid for a second term with an early start to a second online call.
In India too, political contributions are legal, and even carry an income tax deduction under sections 80GGB and 80GGC of the present Act (soon to be replaced by the Direct Tax Code now before Parliament). But the figures in the latest Union Budget documents show the tax foregone as a result of this deduction at a paltry Rs 42 crore in 2009-10 from corporate bodies, and Rs 2 crore from small firms. At current statutory rates of taxation, that works out to a total contribution of Rs 130 crore. The deductions claimed by individuals under section 80GGC were quite a bit larger, at Rs 170 crore. Applying the top marginal rate of taxation on these, we get a total contribution from individuals of Rs 500 crore. Adding together corporate bodies, firms and individuals, we get Rs 630 crore. Over five years, if initial collections are well invested by party treasurers in the interim, that could amount to nearly Rs 4,000 crore.
How many parliamentary campaigns would that fund? One candidate each in 400 constituencies, maybe? There are 550 parliamentary constituencies, and at least three other major contenders in each race, who would need equivalent funding. Then there are state elections. These in some cases are more serious business in terms of funding required. In the current campaign in Tamil Nadu, small refrigerators have replaced colour TV sets as the electoral inducement of choice.
You see why political parties have to look elsewhere for funding. The Indian diaspora provides some of it. The rest has to be domestically raised through organised corruption. There is also unorganised corruption, where the demand is placed by an unsupported individual, which takes inspiration from the organised variety and runs along the same channels.
As an illustration, some years ago I was travelling by auto-rickshaw in Bangalore, when at a traffic stoplight, a cop came over to my driver and demanded Rs 100. The driver pleaded poverty.
The cop described himself as a kind-hearted man, trying to save the driver the penalty for the traffic offence he had committed, which was Rs 500. The driver furiously disputed the charge, and the cop eventually let him off.
No move to legalise bribe giving could have headed off the incident. The cop was anonymous. If traced, he could have turned the tables on the auto driver, and accused him of trying to wriggle out of a traffic offence. Even if bribe giving becomes legal, an allegation of obstruction of justice will always carry the day. No witness could have testified against that accusation.
Later, the driver said the only reason he was let off was that this was an individual without the department behind him. He said in cases of organised collection by the police department in response to demands from above, the demander gets to keep none of what he collects, and even gets the sympathy of the bribe giver.
In the old import control days, the banned and restricted lists were a steady source of income for political coffers. Defence deals are another perennial standby. The pattern of collection evolves continually. The only people who have an understanding of the pattern of organised collection as it stands today are the treasurers of the various political parties. They are deeply knowledgeable, and have gained their very important posts as fund-raisers by virtue of the trust the party places in them. As people in stressful jobs, they might extend their cooperation towards devising a more open system of political funding.
But what might such a system be? Maybe a political cess, to add to all the others now in place? But that will surely bring upon us cess fatigue, particularly since we do not know what is happening to all the other cesses we have been paying.
At a recent conference on renewable energy, questions were raised about the cess on coal, which feeds into a Clean Energy Fund. One speaker estimated that the accumulated collections from the cess should have amounted to Rs 3,332 crore by the end of 2010-11. But the Fund has become a black hole, from which nothing emerges. Renewable energy, which is characterised by the natural regional imbalance in generation capacity, critically needs transmission lines to evacuate the energy generated. It was to fund those transmission lines, along with other facilitative investments towards replacing thermal with renewable energy, that the cess on coal was introduced.
Against this background, yet another cess will not be welcomed at all. And there are huge issues that will go with it, such as how the fund is to be distributed among political parties. But some such mechanism has to be devised if we are serious about tackling corruption in the Indian system.
The author is Honorary Visiting Professor, Indian Statistical Institute, Delhi