Urgent need to Clean up the Corruption and Black Money Influence in Elections

New Delhi, December 2 : The Income Tax department has sent an assessment order to the Aam Aadmi Party slapping an income tax penalty of over Rs. 30 crores on account of a number of alleged irregularities in donations received by the party. The IT department claims that the AAP did npt declare a part of its income, did not record full donor details of some of its donors and received some funding through hawala. Consequently the IT department has denied AAP from availing tax exemption available to political parties on their incomes. The AAP has in return called this an act of political vendetta by the central goverment led by Prime Minister Modi.

While the details are yet to come out and the truth remains to be established, this incident brings into focus the murkiness of the political funding scene in India, where lack of transparency of who funds whom rules the roost.

Estimating the money in Indian politics is like opening an unending set of pandora’s box. To begin with, the amount of money, and especially unaccounted black money, in political funding is unknown and extremely hard to estimate. Even from the income that the political parties do declare, the source of only around 30% of those donations is disclosed by the political parties. And of these known funders, 89% are business houses, with BJP getting almost 3/4th of all corporate funding received by all political parties. The Rs. 705.8 crores it received from corporate houses over 2012-13 to 2015-16  also formed 92% of its declared donations from corporates*. To make things worse, companies also donate via Electoral Trusts – making it harder to ascertain the exact sources of funding.

There have been consistent demands from the Election Commission and the civil society for the government to bring in laws to increase transparency in all aspects of political funding – Who is the donor? How much is the donor donating? To which political party (parties)?

The BJP government, through the Finance Act 2017, brought in a legislation to limit cash donations at Rs. 2000. While this was welcome, it did not change the requirement of declaring the donor’s identity only for donations above Rs 20,000. This raises a question on why the identity of every donor donating less than Rs. 20000 should also not be disclosed, especially when countries all around the world are moving in the direction of full transparency.

But much more dangerous was the introduction of Electoral Bonds as a new means of donating money to a political party. Via this new instrument any corporation, association or individual can donate any sum of money to any party without having to disclose his or her own identity or revealing the identity of the beneficiary political party. With one fell swoop, the BJP government removed restrictions on the portion of net profits a corporation could donate to political parties and also removed all checks for transparency in the donation process. Additionally, by delinking the cap on donations that companies could make from their profitability, the government has opened the door for shell companies to sprout up for the sole purpose of funding political parties. But, there is one entity that can still access the full details of any donation made via Electoral Bonds. And that is the government itself.

This must be seen in conjunction with the amendments made in the FCRA Act in 2016 by the same BJP government. The amendment changed retrospectively, from 2010, the definition of foreign companies and hence allowed political parties to receive funding from foreign companies as well. And added to the soup is the blatant and willful disregard of the 6 national political parties of India of the order by the Chief Information Commissioner, to comply with the RTI Act and furnish information asked for.

That all these amendments in the FCRA Act, the RBI Act, the Companies Act, the Representation of People’s Act and the Income Tax Act were opportunistically made via the money bill route and hence escaped opposition from the Rajya Sabha and subverted the checks and balances in our democratic systemd seems like a minor detail in front of the magnitude of the import of the changes themselves.

A system where political parties can receive unlimited sums of possibly unaccounted black money from all over the world, with the public denied any information on who is funding whom is a system ripe for big businesses to buy the government off without the public even getting a whiff. Added to it is the fact that the state will know who is donating to the opposition, which further disbalances the already titled scales of information and power in the state’s favor. Going by historical precedents one can guess that this system of funding via Electoral Bonds will increase cases of vendetta against donors to the opposition and hence against the opposition itself through the arms of the state, by the state.

In that light, the recent notice to the AAP by the Income Tax department does not read well for India’s democratic processes and actually lends support to the AAP’s allegation of vendetta by the state against the Aam Aadmi Party.

We strongly condemn the introduction of Electoral Bonds via the Finance Act in 2017 and of the amendments in the FCRA in 2016. We demand that the government introduce measures for full transparency in political funding and roll back both sets of amendments immediately. We also urge the state to work towards strong electoral reforms to limit, if not completely remove, the possibility of lobbying by big businesses by funding political parties with the expectation of getting favors from the ruling regime in the future.


 “Sign a petition to ask the government to take back the amendments in Finance Act 2016 and repeal the Electoral Bonds scheme – http://actionnetwork.org/petitions/take-back-our-government