Govt's electoral bonds for political funding: A cloak to hide the daggers?

After a concerted effort by political parties to circumvent disclosures under the RTI Act come the electoral bonds that will confer on them the benefit of pretending to not know who has donated

While the nation’s attention stands rivetted to divisions in the Supreme Court with political parties jumping in to seek mileage over recent events, the noise has succeeded in deflecting public attention from a massive retrograde step. A new year gift to all political parties is the Central government delivering on its threatened promise of enabling a white-wash of anonymous political funding through “electoral bonds”.

Electoral bonds were conceptually discussed briefly last year after the Union Budget was presented. While political parties are merrily commenting on the need for transparency in all institutions, they are happily engaged in a conspiracy of silence over how electoral bonds have cemented their ability to raise money without accountability and propriety being addressed.

Here’s how the bonds would work. The State Bank of India (SBI) would issue these bonds with a validity of just 15 days. You buy a bond from SBI. Within 15 days you donate the bond to a political party with full secrecy guaranteed by depositing the bond in designated accounts of political parties — no trail required. Neither do you need to disclose that you acquired the bonds nor do you need to disclose to whom you made the donation. The political parties can purport not to know who the donors are. This is facetious only because they would clearly know who donated to them through electoral bonds just the way they know today who donates them cash. However, through the figment of anonymity, they stand relieved of the obligation to disclose the colour of money received.

The burden of laundering cash will shift to the donors from the political parties, allowing the latter to claim clean funding through electoral bonds

This is a fantastic concept for full exemption for political parties to follow any know-your-client norms. After the concerted conspiracy across party lines to circumvent disclosures under the Right to Information Act, electoral bonds will confer on them the benefit of pretending not to even know who has donated to them.

The root cause of corruption in India is the hoarding of monies by political parties to fund elections. Parties that have lost their key treasurers in unforeseen circumstances have had adverse electoral impact. Every party would like to believe that that party alone is good for the nation. Each party would claim in its head that its winning is important to save the nation. Party leaders offer the delusion that they are not really corrupt because they only take monies for party funding, which is driven by notions of nation-building. Corporates generate cash through their operations and that finds its way to political parties. Many an immoral action has for long been masked by such specious and self-serving notions of national interest.

Money changers and launderers thrive in the business of converting cash into bank balances. Now electoral bonds will trigger some disintermediation – political parties can now cut out the shroffs and hawala agents through whom they convert cash into bank balances, but the work would shift to those who fund them, who would buy electoral bonds with the cash they launder.

The political parties that are entitled to make use of electoral bonds have brazenly flouted the Chief Information Commission’s direction to disclose their sources of funding. Electoral bonds will now give them the cloak beneath which they would wield their daggers. Last year, one of the many substantive amendments smuggled into the “money bill” that was passed as the Finance Act, 2017, removed the cap on corporate funding of elections.

Now that electoral bonds are actually in, none other than the SBI would know who has acquired electoral bonds of what size, and in whose account these bonds have been deposited. The SBI should be able to co-relate the purchase of the bonds and the receipt of bonds. The bank is state-owned and whichever government is in power would get an edge over this confidential information. The possession and safeguarding of confidential information in a state agency is always suspect — the Competition Commission of India is the only state agency that has so far lived up to its statutory assurance of confidentiality.  

What is known to the SBI would be amenable to intelligence gathering by the government. For the common man to know which corporate has funded which political party would be impossible. This is where the concerted conspiracy of silence across political parties matters. Corrupt political funding has now received a veneer of respectability by pinning one point of the chain to banking channels. Funding of political parties is not an area where political parties would blow the whistle on competitors. On the matter of sources of funds, they all have a proven track record watching out for one another and ensuring that no real transparency and reform of political funding ever takes place.  

Every party would disclose aggregate amount of funding received through electoral bonds, but not the identity. Neither the donor nor the donee would then have to make data public. By bringing in the bonds and given the role of SBI, the bonds are being touted as replacement of cash. All this means the burden of laundering cash will shift to the donors from the political parties, allowing the latter to claim clean funding through electoral bonds.  

There are two seemingly benign pointers to all I have said here, in the government’s official defence of electoral bonds. A press statement issued by the Press Information Bureau states that the bonds will bring in “some element of transparency” and suggests that criticism of the bonds fall in the domain of “impractical suggestions” that would consolidate preference for cash donations. In short, the political parties that are in glee over judges who were briefly in public conflict over institutional systems, have privately firmed up institutionalising anonymous corporate funding without having to account for propriety in doing so.

The author is an advocate and independent counsel. Twitter: @SomasekharS