POLITICS

The Ways In Which Political Parties Escape Financial Scrutiny Should Outrage Us All

Some parties have elevated scrutiny avoidance into an art form.

17/12/2016 6:17 PM IST | Updated 19/12/2016 12:13 PM IST
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In his news conference on Saturday, Finance Minister Arun Jaitley sought to clarify that the rules for political parties had not changed post-demonetisation. While this is true, it reiterates the fact that India's political parties have successfully evaded financial scrutiny for decades.

Despite the current crackdown on black money, political parties look set to be able to continue to collect money with far less scrutiny than a 20-year-old in her first job might have to undergo. This, while both political parties and politicians have huge stocks of cash in hand.

Here are the top 3 ways political parties escape financial scrutiny.

That Rs 20,000 Rule

Political parties are not required to disclose the source of donations of under Rs20,000 in value each received by them. The origin of this rule, says former Chief Election Commissioner S.Y. Quraishi, lies in the Income Tax rule that says that only transactions over Rs20,000 need to be made in cheque. The result is that political parties have gamed the system such that a majority of their funds come in the form of several thousands of individual donations of less than Rs20,000 each. The Bahujan Samaj Party has turned it into a fine art, year after year submitting that all of its donations came in the form of contributions of less than Rs20,000 each, and hence facing no financial scrutiny at all. Data meticulously collected by the Association for Democratic Reforms (ADR) shows that in the 11 years from 2004-5 and 2014-15 alone, the six national parties reported over Rs6,612 crore in donations from unknown sources.

Moreover, many regional parties do not submit audited reports. Parties routinely exceed the deadline for submission of accounts, and many freely leave gaps including incomplete addresses and PAN numbers for the donations over Rs20,000 that they do have to submit. ADR has recommended that the EC impose rules that no part of the form should be left blank and that full details of all donors--including under Rs20,000-- should be made public.

Taken with the demonetisation-driven crackdown on black money, donating individual sums of under Rs20,000 of demonetised money at a time to political parties could conceivably become an easy--and tax-free--money-laundering scheme for black money hoarders. Not exactly turning black into white, but turning in black to accumulate patronage and privilege credits and all manner of benefits.

Foreign funds are not ok--except for political parties

The Modi government has cracked down on NGOs receiving foreign funds under the Foreign Contribution (Regulation) Act for what they see as violations of the Act. But the two main political parties in India--the BJP and the Congress--were caught accepting foreign donations from the Vedanta Resources-held Sterlite in violation of Section 4 of the 1976 Act, which imposes a prohibition on election candidates, members of any Legislature and political parties or its office-bearers from accepting a "foreign contribution". After ADR approached the courts, the Delhi High Court ruled in their favour and found the two parties prima facie guilty. The two parties filed appeals which they later withdrew.

The two parties did not give up. The BJP-led central government simply amended the 2010 Act which replaced the 1976 Act by inserting a proviso to the effect that "as long as the foreign company's ownership of an Indian entity is within the foreign investment limits prescribed by the Government for that sector, the company will be treated as "Indian" for the purposes of the FCRA". However, the contributions in question date back to 2009, ADR says, and are not affected by the amendment. ADR has now asked the EC to take action against the two parties.

If you don't want to answer questions, ignore them

In June 2013, the Central Information Commission held that the six national parties qualified as "public authorities" under the Right To Information Act because of their public-facing role and the fact that they enjoyed substantial public funding. RTI activists immediately sought information from parties on, among other things, financial matters. The parties simply stonewalled them, and the activists were forced to go in appeal. Here too, they refused to participate in the proceedings before the CIC despite summons. The UPA-II government briefly attempted to escape proceedings by introducing a Bill to exempt political parties--using the same logic of legislating to avoid inconvenient laws as the BJP later did on foreign funds. But the Bill lapsed.

In an extraordinary order in March 2015, the CIC admitted that the parties were in violation of its order but it had no way to bring them to law. Yet again, ADR had to move court. Until it is resolved, political parties can continue avoiding tough questions about their finances.

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