Electoral Bonds - Threat to Democracy Or Step Toward Transparency?
Electoral bonds were introduced to make political funding more transparent, yet their opaque nature hides donors' identities, diminishing citizens' right to information and rendering the political class even less accountable.
They also allow unlimited corporate donations, eliminating any restrictions and opening the door for crony capitalism - an unquestionable threat to democracy.
How electoral bonds work
The BJP-led government introduced electoral bonds in 2017 with the goal of increasing transparency when it came to political funding. Their scheme operates under the principle that donations should only involve white money - this can be accomplished by channeling donations through banking channels while still remaining anonymous to ensure transparency and avoid black money.
However, electoral bonds are far from transparent. Since bond transactions take place through State Bank of India (SBI), which always knows who funds which political party; this asymmetry of information threatens our democracy and renders political processes opaque in India.
Election bonds make it even easier for big corporate houses to donate funds to political parties of their choice, further deepening the unholy alliance between business leaders and politicians in India - something the BJP has taken advantage of by pushing through laws favoring major corporations while undermining our democratic governance systems.
Electoral bonds may also be used to avoid disclosure of foreign and government company donations that violate the Representation of the People Act 1951, thus leaving our democracy vulnerable to external influence and putting our national security at risk. This poses an extremely serious risk.
Electoral bonds also have a direct effect on the quality of our elections. By eliminating reporting requirements to the Election Commission of India for individual donations, electoral bonds open the door for corruption.
Transparency is central to democracy, yet electoral bonds in their current form compromise it by allowing donors to give unlimited amounts of white money without needing to report it - providing an unfair advantage to incumbent parties in elections and jeopardizing our democracy's integrity.
The legal loophole for anonymous political donations
Critics of electoral bonds frequently voice concern that these donations allow political parties to accept anonymous funds without needing to provide documentation from donors, which allows wealthy individuals and corporations to pour endless sums of money into elections while remaining hidden from authorities, undermining political transparency while potentially exploited to buy influence over government decisions or tilt elections towards desired results.
The Government has responded to these concerns by asserting that electoral bonds are an effort at increasing transparency. They are only sold through state-owned banks such as SBI, thus keeping the identities of donors confidential. But this argument fails to address an essential factor: when purchasing electoral bonds on behalf of itself, buying them allows it to know exactly who is funding its opponents - an advantage the ruling party can use either to either pressure large businesses into giving more or simply penalise them for not contributing - giving it an unfair edge during elections.
According to data from the Election Commission, the BJP has received over half of all electoral bonds that have been cashed; this indicates how these electoral bonds are being used to fund one political party and not promote democracy; as a result, their influence in elections has never been so powerful before in our history.
This has grave repercussions for democracy and threatens citizens' rights - particularly the rights of poor and vulnerable groups. Furthermore, public policies will increasingly favor those with wealth over those representing most of society.
Shortly, electoral bonds have set India back decades in its fight for campaign finance reform. India's current system of electoral funding is opaque, corrupt, and open to abuse; hence it should be abolished to ensure democracy thrives in India.
India?s experiment with opaque political financing
Prior to the 2019 elections, the government celebrated electoral bonds as an effort at transparency in political financing. Unlike cash donations which must be reported to the Election Commission of India for accounting purposes, electoral bonds may be purchased by anyone and deposited directly into a party bank account without record of donors being kept; making it impossible for public or media scrutiny of who donated what amount.
While government defenders this anonymity as essential in protecting donors from harassment by political opponents or journalists alike; critics note it's no substitute for fully transparent financing systems.
By eliminating the limitation on corporate political donations - which was previously set at 7.5% of net profit - corporate donors can continue doling out cash for policy favors from politicians in return. At the same time, new vehicles such as electoral bonds centralizes political funds sources; even small amounts may make an enormous difference for national parties.
As electoral bonds are tax-exempt, there's no requirement to report them to the income tax department and they provide an easy way for shell companies and other organizations to hide bribes paid to politicians as black money in these bonds.
The Supreme Court recently ordered the government to remove electoral bonds' anonymity feature and disclose purchases made illegally without proper tax exemption. While this represents a critical victory in political reform efforts, this does not signal an end of corruption-driven politics.
India, being so cash-reliant, presents many avenues for dodging transparency rules and laundering black money. India's Supreme Court must do more to plug this perceived black hole with institutional safeguards lest this be seen as another win for opacity over democracy.
An ideal solution would include restricting cash payments while only permitting political donations through fully transparent methods; however, such action might prove disruptive; governments are likely wary after experiencing demonetization themselves.
Who benefits and who loses
As soon as electoral bonds were introduced, the government publicly asserted their intention to add transparency to political financing.
Their argument being that transactions through formal banking systems (namely State Bank of India ) will allow tracking who donated and which political party. Also, digital paper trails created by banks can easily be traced by banking regulators.
But electoral bonds only partially meet their intended goal of transparency. While electoral bonds have helped formalise previously cash-funded political parties' funding sources, their anonymity makes buying them problematic in terms of voters being informed which individuals, companies or organisations have funded particular political parties through electoral bonds - an issue raised by the Supreme Court case PUCL vs UOI.
Due to donors not needing to reveal themselves when purchasing bonds, and political parties not being required to include details of these donations in their contribution reports that are mandatory filed with the Election Commission - making it nearly impossible for voters to know which political parties are being funded with "dark money".
By creating electoral bonds, electoral bond legislation has effectively removed all previous limits on corporate political donations, enabling large corporations to use large sums of money as political contributions for politicians to buy off and manipulate elections.
This violates B.R. Ambedkar's vision of democracy - not simply guaranteeing one person, one vote - while also guaranteeing equal voting power across the board.
At first glance, electoral bonds may appear to be subject to criticisms that lack substance. Unfortunately, we believe that most critics fail to appreciate that rather than focus on any shortcomings of the bond mechanism, it is more important for government bodies to attempt to address those flaws directly and meaningfully.
