Electoral bonds are facing public scrutiny again after a recent amendment allowed anonymous donations to political parties. Not just that, a November 7 notification issued by the Finance Ministry extended the dates to make donations by an additional 15 days ahead of the crucial Gujarat and Himachal Pradesh assembly polls. 

What is an electoral bond?

An electoral bond is a financial instrument in the nature of a promissory note or bearer bond which can be purchased by any individual, company, firm, or association of person who is a citizen of India or incorporated in India. Electoral bonds have been pitched as an alternative to cash donations made to political parties as part of the efforts to bring transparency in political funding.  

Taxpayers can take advantage of tax deductions by buying Electoral Bonds for donations to political parties under section 80GGC/80GGB of the Income Tax Act.

The Government has recently approved the issuance of the 23rd tranche of the electoral bond that was opened for sale from November 9 - 15. On November 7, 2022, the Ministry of Finance issued a notification amending the electoral scheme to provide an additional period of 15 days for their sale. 

“Electoral bonds are important instruments which is a step to curb black money in the electoral process. Though there are more regulations needed to curb the circulation of black money in the electoral ecosystem, an electoral bond will establish an audit trail for the supply side,” said Gopal Krishna Agarwal, the national spokesperson of BJP. He stressed the fact that on the expenditure side regarding black money in the electoral process, the election commission has taken other steps regarding expenses and limiting the expenditure. 

“Electoral bonds should be seen along with the other initiatives of the election commission like the restriction of cash donation beyond Rs 2,000,” added Agarwal.  

What do the data say?  

The electoral bonds have always been criticized for favouring the ruling party, in the current case the BJP. Recently, the State Bank of India (SBI) shared data that reveals that donations to political parties through electoral bonds (EBs) have crossed the Rs 10,000-crore mark. In the 21st sale of EBs that happened in July 2022, political parties received another Rs 389.5 crore from EB purchases. 

The total amount collected by parties has surpassed Rs 10,246 crore since 2018 since the introduction of the EB scheme. 

The recent data by the SBI came in response to an RTI application where the bank revealed that a total of 741 electoral bonds have been sold during the 22nd tranche, 96 per cent of which were of the denomination of Rs 1 crore each. Nearly 90 per cent of the donations through the electoral bonds went to four parties – the BJP, the Congress, the Nationalist Congress Party, and the Trinamool Congress, it said. 

Why public scrutiny? 

The public scrutiny came as the amendment was pushed just days ahead of the assembly elections in Gujarat and Himachal Pradesh. Although, according to the BJP national spokesperson, this decision has been taken by the election commission depending on the request of the people from the corporate sector who want to donate.

“The party in power wants electoral bonds to be available on tap, whenever you feel the need for the electoral bond, it should be available. That is the aim. If they do it in one go, they might be criticised. So, they are doing it gradually,” said Jagdeep Chhokar, Founding Member & Trustee of the Association of Democratic Reforms (ADR). 

The critics claimed that preliminary it was supposed to be available only for the Lok Sabha elections. Now it is open for every state assembly election. Now it was opened for a specific number of days and now it will be open for 15 additional days. So, they believe that in the next few years, it is likely that will be available all around the year.

“There is a feeling that as elections are happening in some or the other state on a year-on-year basis, this extension is going to be available annually regularly. Various petitions are pending before the Supreme Court in respect of pleas challenging the process to allow anonymous, unlimited, and unchecked political donations. These together with challenges in respect of various amendments are due to be heard in the Supreme Court on December 6, 2022,” added Anita Basrur, Direct Tax, Sudit K Parekh & Co. LLP, an audit and tax practice firm.

Moreover, critics have strongly condemned the use of the term “anonymous” for EB. As pointed out by Chokkar, “The State Bank of India (SBI) will have the information on who has bought the electoral bonds and what amount is going to whose accounts. Now, this information is supposed never to be revealed unless the court orders it. But the ruling party can access the information with the court order. But other parties won’t have the access to the details. This bond can choke the funding of all opposition parties.”