The NDA government's pitch for election finance reforms fizzled out as Finance Minister Arun Jaitley in Parliament last week said it was not consistent with the "Indian reality" to presume that no private donations would be used if the state funded elections. This truism, often mentioned by various expert committees on electoral reforms, effectively shelved Prime Minister Narendra Modi's push earlier for state funding of elections to fight corruption.
Election funding reforms are not a one-step solution against black money investment in elections, campaigns and party funding. Presently, an estimated 69% of all political funding in India came from unknown sources and over ₹5500 crore were collected by political parties to contest in the 2014 Lok Sabha elections, although the exact figure can never be known due to non-disclosure. Even the Law Commission had expressed apprehensions that funding from dubious donors might be repaid by political parties when they came to power.
The government could have introduced supportive reforms aimed at making finances of political parties transparent and available to voters, which would have allowed the eventual implementation of state funding.
The Finance Minister merely repeated the warnings of every committee set up in the past to explore election finance without mentioning the circumstances in which such reforms could succeed. In 1998, the Indrajit Gupta Committee found that money power influenced free and fair elections, and urged for reforms in all aspects of electoral activity if the recommendations were to be "useful." Restrictions were sought by law on election expenditure and "ostentatious show of money power" during elections. In 1999, the Law Commission in its 170th report strongly urged for a regulatory framework to be put in place before state funding was institutionalised. Although it supported the idea of an election fund, the Commission warned that if the objective was to end corporate control and black money power over elections, measures were required to ensure internal democracy in political parties, maintenance and publication of records and audits. Without these, state funding would be another source of political funding at "the cost of the public exchequer."
In 2002, the National Commission to Review the Working of the Constitution (NCRWC) pressed for several measures before state funding was even contemplated and the government was convinced that "these improvements have been institutionalised and are no longer being breached." It found that donations from businesses to political parties increased dependence, corruption and led to lack of "probity in public life." It recommended tax exemption of donations up to a certain limit and to treat that tax lost as state support for elections and felt that state funding must be "deferred till these regulatory mechanisms are firmly in position." Then in 2015, in its 255th report, the Law Commission warned that, without supportive measures, state funding would not serve the purpose of ending the effect of money on elections and only be "another source of funds for the political parties and candidates."
[There's a] possibility that the government used election finance reform as a tactic to corner its political rivals in this election season.
Political parties, ironically, have never been averse to state funding. Prime Minister Modi's pitch was supported even by leaders of the opposition, and senior members of the government urged the ECI to expedite the discussion. Earlier, in 2011, the then UPA-2 government sought to formulate legislation on state funding, a move that was countered by the ECI. The ECI had always been wary of state funding. It maintained that there were already some indirect benefits extended to political parties as in-kind state support and felt that state funding should be accompanied by reforms to curb criminalisation of politics, financial transparency and stricter laws to control corruption. Even earlier, the ECI had warned that state funding should not become another source of funds to political parties without reducing the influx of black money or unaccounted funds into the political system.
The government could have introduced supportive reforms aimed at making finances of political parties transparent and available to voters, which would have allowed the eventual implementation of state funding. Instead, the government has proposed half-measures in budget 2017, such as decreasing the amount of cash donations to political parties—which might fail to prevent large, undeclared donations. This gives credence to the possibility that the government used election finance reform as a tactic to corner its political rivals in this election season. If that was the case, the NDA-2 government's pitch for election finance reforms might have done much more damage to the cause of transparency in political funding than the inaction of previous governments.