Electoral Bonds threat to Parliamentary Democracy

Dec 13, 2019

(Peoples Democracy)

IT has been doing the rounds.  The surreptitious strike, which transformed the funding of political parties by the corporates, was of such far-reaching consequence, that the controversy has already reached the hallowed portals of the Supreme Court.

Three quick amendments to Foreign Contribution (Regulation) Act, the Finance Act of 2018 and amendments to the Companies Act had established a new instrument called the electoral bond by bulldozing them through the Lok Sabha and making the Rajya Sabha redundant by converting the key legislative proposal as a `Money Bill’.

What was the sum and substance of this electoral bond?  It is a financial instrument – a bearer bond – to be precise, which can be bought and contributed to a political party in a pre-assigned account specially for receiving them.  These bonds could be encashed and used in a manner which is as good as cash.  The infamously unique nature of the bond made it anonymous and opaque to the public eye.  Neither would identity of the donor corporate entity, nor, the recipient – the political party – would be in the public domain.  Amendments to the laws also meant that the corporate entities, which would, thus, be enabled to contribute towards funding of political parties could be the Indian subsidiaries of foreign multinationals or even shell companies who are frequently used as conduits for money laundering.  The slew of statutory changes would also ensure that the limits of funding restricted to only seven per cent of annual profits of corporates would be removed. 

The most serious ramification, however, was that the Election Commission (EC), which is empowered by Article 324 of the Constitution to exercise superintendence and control over the election process to ensure level-playing field between competing candidates and parties, would have no clue over the source of funding of the political parties and, by default, would be robbed of deterrence and punitive measures against electoral malpractices.

Corporate funding has been on the rise since the first decade of the 21st century.  Between 2004-05 and 2011-12, corporate contribution to political parties amounted to Rs 378.89 crores; but between 2016-17 and 2017-18, in just one year, this rose to Rs 985 crores to six national parties.  What stands out in this major upswing is the fact that BJP alone garnered Rs 915 crores, or, 92.5 per cent of all corporate donations.

It has now come to light that since the very onset of the electoral bond scheme, at least Rs 6,000 crores of bonds has been sold since March 2018. Of the first tranche worth Rs 222 crores, the BJP has managed to garner 95 per cent of the contributions, according to the data compiled by the Association for Democratic Reforms (ADR). But what is more stunning is that the BJP, which predictably was the overwhelmingly largest beneficiary, has not yet accounted for this amount.  One need not be a rocket-scientist to conclude that this humongous money power makes the existing electoral democracy, which is a pre-requisite for our parliamentary democratic system, a virtual mockery. 

From buying up opposition leaders, including elected representatives, to setting up candidates to possibly divide the anti-BJP votes, to setting up a massive big data analytics infrastructure – micro social engineering – faking news-driven capture of the public opinion has been facilitated by such huge funding.  Therefore, it will be foolish to overlook the role of anonymous corporate cash for funding of political parties and the devastation it can wreak on the very system itself.


Modi’s 2014 election campaign piggybacked the general concern for fighting political corruption.  This was sought to be underlined by the Anna Hazare’s movement for a Jan Lokpal.  Several high-profile scams had been highlighted by the corporate media loud noise formed a backdrop for a crusade against corruption. However, the striking feature of the cacophony was to shield the role of corporates in the engineering of these major scams; the onus was squarely on the political leadership and individuals.  We, of the Left, have always maintained that in the neo-liberal environment, corruption was no longer a matter of personal and moral degeneration; but essentially had a systemic nature. The corporate-politician-bureaucrat nexus forged in this neo-liberal paradigm functioned as the fountainhead of such huge scams at the cost of the people.

Modi and his image managers sold him as the crusader and, hence, this Bollywood script-sounding jumla, ‘Na Khaunga, Na Khane Dunga’!

However, last six years have shown that the Modi government could not care less for fighting corruption. Today, nobody talks about the pathetic treatment meted out to the Lokpal Bill, enacted in the last days of the UPA government.  Neither were other critical areas like National Judicial Commission, or, electoral reforms ever discussed.  Therefore, the surgical strike for “transparency for political funding” that Arun Jaitley initiated in 2017 and established the electoral bond as the chosen instrument has now turned out to be the real surgical strike against parliamentary democracy itself.  In fact, it galvanised the corporate-politician nexus and institutionalised corporate cronyism.  The last five and a half years stands as testimony to the playing out of this obnoxious phenomenon. 


From the time it was introduced, the controversy has never left. Arun Jaitley, the then finance minister, introduced the subject of electoral bond as part of his written speech captioned “Transparency in electoral funding”! He went on to claim: “This reform will bring about greater transparency and accountability in political funding, while preventing future generation of black money”.  From the outset, it was clear that nothing could be further from the truth.  For the electoral process to be transparent, the minimum requirement was electoral funding should be open to public scrutiny. This was particularly more so, because, as the debate raging across the world saw, that governments are prone to lobbying and funding.  Therefore, it is absolutely imperative for the people to know who fund which party and in the event of that party coming to power is there any quid-pro-quo involved?  Jaitley’s understanding of transparency was based on finance ministry’s claim that “the secrecy of the donor is the core objective of the scheme of electoral bonds”. 

Therefore, this was quite apparent and predictably so, that there has been a strong opposition.  Apart from political opposition, the Election Commission had also clearly stated in the form of an affidavit before the Supreme Court that it was opposed to the scheme as it would deny the possibility of knowledge about the money trading to the political parties and, to that extent, undermine its capacity to deal with possible financial malpractice in the elections.

Along with several other entities, the CPI(M) also has petitioned the Supreme Court for scrapping electoral bonds. But even the fears of the opposition have perhaps been heightened by the recent six part expose published by Huffington Post.  The series has been penned by veteran journalist Nitin Sethi, who has drawn largely from RTI replies received by transparency activist Lokesh Batra and one by another RTI activist Venkatesh Nayak.

The series actually is a virtual read from a crime thriller.  That a constitutional elected government can indulge in such levels of subterfuge of frustration and mislead independent constitutional and statutory authorities like the RBI, the ECI and the parliament is really beyond normal capacity of comprehension.  The series of expose saw with intimate details as brought out by the original notings in files of finance ministry, RBI and ECI and the communication between them. The authenticity of the documents has not been challenged and that makes the situation spine chilling. 

The expose brings out that while the finance ministry had been preparing for initiating the electoral bond scheme, only at the eleventh hour, it found that it would require a formal clearance from the RBI. Having realised so, it went through the motions of having a consultation, but virtually ignored whatever the central bank had to say.  Not only did RBI object to the proposal from the patently unfair nature of funding, particularly at the time of elections, but it also raised the question of financial integrity and security of the monetary system.  That these bonds were essentially bearer bonds and the donor could not be tracked would actually endanger the security of the system itself was the principal ground for RBI’s objection. Even after RBI received bunch, they falsely noted that RBI had come around as RBI knowing full well that the government was hell-bent to go ahead in amending the RBI Act made certain concrete proposals to minimise the damage by reducing the period of bond sale and the number of windows for such transaction. These are all established by the files that form part of the expose. 

A similar approach was taken towards the EC which, for reasons, mentioned were dead opposed to the introduction of electoral bonds.  In this case, the government was brazen enough to claim on the floor of the parliament that EC had not specifically opposed the move. However, subsequently, through a formal clarification, Jaitley’s successor, Nirmala Sitharaman had to admit the mistake in the parliament.

The expose also reveals that the bonds were originally designed to fund political parties during general elections. However, in actual practice, it was linked to assembly elections and in the case of Karnataka assembly elections, it was the PMO, which prevailed in changing rules to ensure transaction of electoral bonds and time limit of such an exercise contrary to what was set out in the guidelines.  Not only this, the SBI was also cajoled into accepting time-barred electoral bonds to be encashed by political parties by inventing non-existing ground. 

The latest expose also shows, on the basis of replies to RTI queries by Nayak, that there was no representation from any request by potential donors.  Ironically, this was the premise which laid the foundation of the anonymous nature of these bonds.


The government had claimed that the bond will be ‘anonymous’ with inbuilt security features to ensure that there is no forgery by putting a random serial number which is invisible to the naked eye in the bond while avoiding the possibility of any individual/corporate donor.  However, in the expose, the files actually established that the serial number visible under ultra-violet light is, indeed, under SBI tracking; the details about both donor and the recipient beneficiary – the political party concerned.  Not only this, the system actually put into practice was done with the clearance of the finance ministry.  This SBI record would also be open to investigating agencies like income tax department, CBI, ED etc.  It is amply clear, that for all practical purposes, the incumbent government will have all the data regarding these electoral bonds, even though they will not be available in the public domain for scrutiny and for establishing quid-pro-quo

The basic claim that anonymity is aimed to insulate the corporate donor from retribution is a charade!  It is only exclusively available to the incumbent ruling party. One can well imagine its effect when the agencies are acting not only as ‘caged parrots’, but also ‘hunting vultures’! 


That the response of the government is to indulge in the same bluffs which went into the engineering of the electoral bond project is clear!  On the one hand, in the face of authentic documents, the government is not in a position to deny the pile of factual evidence; on the other, in its response, minister Piyush Goyal went on to repeat the same fallacious arguments, which the government had embarked upon from the outset.

But the proof of the pudding is in the eating!  That this entire project was to make  political funding as opaque as it can be, so far as public scrutiny is concerned, while ensuring that virtually the entire amount  raised from such  corporate donations flow into the BJP corpus. 

It is obvious that under these circumstances, there is no way that there can be a level playing field between parties and candidates fighting for elections either to parliament, or, to assemblies, with the financing pattern so skewed in favour of the ruling party.  There is no way that the ECI can meaningfully discharge the role that is assigned in Article 324 of the Constitution. 

On the other hand, the electoral bond reinforces the relationship of cronyism between the government and corporates through this instrumentality with the inevitable consequence of quid-pro-quo

The only way out for saving the sanctity of electoral democracy in India to some extend would be by immediately scrapping the electoral bond scheme itself.  It is necessary that the Supreme Court, which is in the middle of examining the ramifications of this scheme has to take on board this additional documentary evidence and on a war footing examine the petitions and come out with a final order. 

The other vital question is that the political parties which cherish the values of democracy and the constitutional arrangement should on an urgent basis take up a nationwide campaign to sensitise the citizenry about the dangers posed by this obnoxious electoral bond scheme.  A combined battle, both at the legal and the popular plane, can rid our political system of the threat that this obnoxious instrument poses. Read More