06/07/2017 10:58 AM IST | Updated 06/07/2017 11:59 AM IST

Next On Modi Govt's To Do List: Cleaning Up Political Funding

"We are looking at some major steps to be announced...."

Amit Dave / Reuters

Last year, the Modi government scrapped the ₹500 and ₹1000 notes in circulation at the time, claiming that demonetisation would strike at the heart of black money and corruption.

The Economic Timesreported today that the Modi government will soon announce measures to clean up political funding in the country. Addressing the SBI Banking and Economics Conclave in Mumbai on Wednesday, Finance Minister Arun Jaitley said, "We are looking at some major steps to be announced by which we want to cleanse the entire political funding in India."

"For the last 70 years, the world's largest democracy has survived on funding which really brings no credit to the democracy. And I think it has been the prime minister's insistence that this has to be one of the subjects that the government has to take up now as a top priority," Jaitley told bankers and traders via video link.

While presenting the Budget, earlier this year, Jaitley announced various measures aimed at cleaning up political funding. The finance minister said that anonymous cash donations should be capped at ₹2000 and that donations to political parties should be made through electoral bonds. (Previously, the Representation of the People (RP) Act, 1951, allowed political parties to accept donations up to ₹20,000 from anonymous individuals).

Speaking at a public event in Delhi, earlier this month, he said, "In the coming days, we will come out with mechanism for electoral bonds which will ensure only tax-paid money comes into the political system. We have moved much ahead in this."

These electoral bonds will resemble promissory notes which can be bought from authorized banks and deposited in notified accounts of political parties. Those buying these bonds, however, can do so anonymously.

The Modi government believes that electoral bonds will allow people to make political donations through authorized banks while protecting their identity, but critics have raised concerns about its impact on transparency in political funding.

The outgoing Chief Election Commissioner Nasim Zaidi, for instance, told the Times of India, "The recent amendments to Representation of the People Act have affected transparency. Contribution reports of political parties need not mention names and addresses etc of those contributing by way of electoral bonds. We have written (to the government) that this way parties will never file contributions received through electoral bonds.. And if commission will never get to know of that contribution — and EC regularly displays such information on its website — the people will also not get to know."

A study by the Association of Democratic Reforms (ADR) for the past 10 years shows that between 2005 and 2015, the Congress Party and the Bharatiya Janata Party received ₹5,450 crore from "unknown sources." The Congress Party received ₹3,323 crore (83 per cent of its total income) from these anonymous benefactors, while the BJP received ₹2,125 crore or 65 per cent.

Critics have also pointed out that reducing the ₹20,000 to ₹2000 will not help because this move can be countered simply by increasing the number of anonymous donors. Speaking to Scroll, Jagdeep Chhokar, a former professor at the Indian Institute of Management, pointed out, "Parties now will resort to multiple receipts of ₹1,999 each like they did to evade the old limit of Rs 20,000 cash donations, issuing multiple receipts of ₹19,999."

Some have argued that if the Modi government is really serious about enhancing transparency than it should do away with cash donations altogether.

Earlier this year, the Modi government removed restrictions on how much money companies can donate to political parties. Previously, a corporate entity could contribute 7.5 percent of the average net profits in the last three financial years to political parties. The amendments to the Finance Bill removed the 7.5 percent limit and did away with the requirement to disclose the name of the beneficiary political party.

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