The Government has outlined the details of the electoral bond scheme.
The concept of the electoral bond was first mentioned in the budget speech for the year 2017-18 delivered on 1st February 2017 by Finance Minister Arun Jaitley.
The scheme was proposed to increase transparency in political funding and cut down the flow of black money into Indian politics.
What is electoral bond?
It is an instrument through which a person can donate to a political party.
Example: If you want to donate Rs.5000 to BJP, you can go to designated State Bank of India (SBI) branch and buy electoral bonds worth that amount. You have to then gift this bond to BJP. The BJP will be able to convert the bond into money at an authorised bank through the party’s registered bank account.
The registered bank account used must be notified to the Election Commission
The electoral bond will not contain the name of the donor. Hence, the BJP will not know who has donated the money.
Though the donor will remain anonymous, the money donated will be white as the bond can be purchased only through cheques or electronic transfer of funds via his KYC complaint bank account. It cannot be bought in cash.
What are the details of the electoral bond scheme?
- Any citizen of India or a body incorporated in India is eligible to purchase the bond.
- Electoral bonds will be issued in denominations of Rs 1,000, Rs 10,000, Rs 10 lakh, and Rs 1 crore.
- The bond can be purchased from any of the specified branches of the State Bank of India (SBI)
- The validity of the bond is 15 days. It will have to be redeemed by the political party through their registered bank account within this time.
- The electoral bonds will be available for purchase for a period of 10 days each in months of January, April, July and October with additional 30 days to be specified by the Central government in the year of the general election.
- Only registered political parties that have secured at least 1% of votes polled in last general election to Lok Sabha or Assembly can avail funding through bonds.
Though electoral bond has been referred to as a bond, it is not exactly a bond. It will have no principal repayment and interest. It is more like a promissory note.
What are the other rules regarding electoral funding?
- Political parties cannot accept cash donations above Rs.2000.
- There is no requirement to disclose the name of the donor.
This change was made last year. Until 2017, the political parties could accept cash donations of any amount. But, they had to disclose the details of the donor if the donation exceeded Rs.20000.
What will be the impact of electoral bonds?
- It will ensure that clean money comes into the system through electoral bonds. Though the donor will remain anonymous, the amount will be reflected on their balance sheet as the money will be transferred via a bank.
- Even if people do not use electoral bonds, most money will flow through the banking channel. It will leave a digital trail of money. This is because cash donations more than Rs.2000 is not allowed.
- Political parties are not required to disclose the name of the donor. The anonymity will be retained through electoral bonds as well. This will address the concerns of the donors who do not want to reveal their identity. Previously, companies who wanted to donate money had to take cash route if they were wary of revealing their identity. Till 2017. nearly 70 percent of the ₹11,300 crore in party funding over an 11-year period came from unknown sources, according to the Association for Democratic Reforms (ADR). Therefore, last year the cash donation limit was reduced to Rs.2000 from Rs.20000.
- But, there is a concern. The anonymity can be misused by the corporates with deep pockets. They might manipulate elections to favour their preferred party. The electoral bond scheme will not do anything to break the nexus between political parties and corporates.
- Lastly, the donors may not really be anonymous. The state-owned bank will have the details of the owner. The government can easily find out the donor’s identity and use it against him. This is one of the reasons why donors want to be anonymous. Also, some donors might want to donate to multiple political parties. The identity of the donor will be available to the Government, but not to the public. Therefore, it might not increase transparency
All said and done, it will take at least one election year to know the impact of the electoral bond. It is because it is a first of its kind. India is the first country to experiment with such type of funding.
Electoral bonds have certain loopholes. The Government can bring in other measures. But, as Arun Jaitley mentioned in his Facebook post, electoral Bonds would bring “substantial improvement in transparency over the present system of no-transparency” in political funding.
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