Who is going to bell the cat?

The black money trail in election campaigns has been a widely discussed topic in India over the decades. The Election Commission of India (ECI) has shared its concerns about the role played by big corporate houses, anonymous donors and foreign funders in the campaign finance that leads to corruption, lack of transparency and entry of criminal elements into the poll arena. Reforms to cleanse the election process that includes curbs on expenditure on the campaign front are suggested but the government and the parties in power lack the certitude to implement them or subvert those attempts.

During the UPA-II regime, an attempt was made to create electoral trusts so that the donors can use them to fund political parties; the NDA-II regime has introduced electoral bonds. Both the trusts and the bonds failed to make it mandatory for the donors and recipients to declare their support base. Recent studies on the performance of the electoral bonds show that the source of more than 70 per cent of the money that was received by major political parties in India has been anonymous. Understandably, those who fund the political campaign heavily will have their pound of flesh when the party that they sponsored is chosen to form the government. The Rs 70 lakh upper limit set by the ECI for each Lok Sabha constituency towards the campaign expenditure has not yielded the desired result as well.

It is in this context that many have been demanding state financing of the election campaigns. In fact, four committees have studied this matter in detail in the last two decades: the Indrajit Gupta Committee on State Funding of Elections (1998), the Law Commission Report on Reform of the Electoral Laws (1999), the National Commission to Review the Working of the Constitution (2001) and the Second Administrative Reforms Commission (2008). All of them while concurring with the idea of state funding, reported that it limited the scope and scale of the campaign.

The Indrajit Gupta committee raised concerns about the fiscal challenges that the state may face by supporting the candidates in the fray. Rather, it suggested giving indirect benefits and subsidies like national broadcast time for political parties, support for printing of campaign materials, etc. The report also insisted that the funding, to begin with, could be possible only for recognised national and state parties and not for independents. The Law Commission report recommended that the funding is desirable only if the parties are restricted from taking private money. The two other commissions proposed the need for a proper regulatory framework to oversee the functioning of the political parties that includes inner-party democracy, declaration of financial statements, etc. Unless a proper regulatory framework that insists on transparency and accountability on the financial front of the political parties is put in place, the Commission opined, state funding will yield no positive outcome.

Globally, more than 70 per cent of countries offer state support for political campaign. It varies from country to country with mixed results. The recent developments and reports about the meddling of foreign agencies in the US presidential campaign have raised eyebrows on the regulatory principles established by the systems over a century. In some of the oligopolies,  state funding is used to thwart political opponents. Among the European countries, Germany has done exceedingly well. The system is well defined and established there so that the parties receive grants from the state on the basis of their vote share in the elections.

According to the Centre for Media Studies (CMS), New Delhi, Rs 35,000 crore was spent in the 2014 Lok Sabha election, though the official estimate was just Rs 7,000-8,000 crore, which suggests that the rest — Rs 27,000 crore — was unaccounted for. This time in 2019, it is expected to go up to Rs 60,000 crore. It is not the campaign alone that leads to expenditure. The campaign money is also spent on food and gifts for voters, travel and accommodation, buying party tickets, etc. The long list of expenditure demands the cleaning up of the system before state finance, partial in nature, is mooted. Unfortunately, political parties reach a consensus among themselves while getting out of the ambit of the Right to Information (RTI) Act and amending the FCRI provisions, so that the scrutiny on all the receipts since 1976 is done away with and foreign funding to political parties is made legal.

The amendments to the Income-Tax Act lifting the maximum limit of 7.5 per cent on the profit on the balance sheet in the case of donations to political parties are yet another area of concern. While the government wants to widen its tax base by widening the scope of the tax net, the better way could have been to target the exemptions given to tax payers for donations to political parties by recording their transactions with a cap. There is a suggestion to set up a national election fund, which could be used by individuals and corporate houses for donations to political parties. The proposal is to reimburse the expenditure by choosing a base unit (say Rs 100) against each vote polled by a candidate so that even independent candidates could secure some funding from the state. This proposal requires in-depth study and understanding of the multiparty and multi-level elections held in the largest democracy in the world.

The author is chairman, Centre for Public Policy Research