The Finance Act passed in 2017 as a money bill has allowed for unlimited donations to political parties while maintaining anonymity of both the donor party and the political recipient. YOGESH SAPKALE examines the mindboggling amount of money that has moved since then and given an unprecedented rise to electoral corruption.
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The anonymity provided to the donors by electoral bonds (EBs) is making it the preferred choice for big donors, including corporates. Over the past three years, State Bank of India (SBI), the official channel for selling these instruments, has sold EBs worth Rs 6,492.68 crore in 14 phases, shows an analysis by Commodore Lokesh Batra (retd).
Commodore Batra says, "During 2018 to 2020, SBI sold 12,773 electoral bonds, of which 12,632 bonds worth Rs 6,472.43 crore were encashed. Bonds worth Rs 20.25 crore that remain uncashed were transferred to the Prime Minister's National Relief Fund (PMNRF)."
The analysis carried out by Commodore Batra is based on replies he had received under the Right to Information (RTI) Act from several public authorities, including SBI.
It shows Mumbai, with 31.16% share, remains at the top where electoral bonds were sold. Mumbai is followed by Kolkata at 22.98% and New Delhi at 14.67% share.
“Over the past three years, State Bank of India (SBI), the official channel for selling these instruments, has sold EBs worth Rs 6,492.68 crore in 14 phases, shows an analysis by Commodore Lokesh Batra (retd).
However, when it comes to encashing the electoral bonds, Delhi leads the pack. Over the past three years, 77.31% of electoral bonds sold, were encashed in the national capital, followed by Hyderabad at 9.31% and Bhubaneshwar at 4.84%. Despite contributing most in the electoral bond sale, when it comes to encashing, Mumbai is at the fifth spot with 2.34% share in total bonds encashed by the donee.
SBI in the 14th phase of the sale was authorised to issue and encash electoral bonds through its 29 authorised branches from 19th October to 28 October 2020. Redemption or encashment of electoral bonds at SBI branches took place till November 11, 2020.
“ Until the latest window period October 2020, a total of 12,773 electoral bonds of various denominations were sold. A major portion of them is the highest value denomination of Rs 1 crore (5,981 bonds) followed by the next highest denomination of Rs 10 lakh (4,943 bonds).
Information obtained by Commodore Batra shows that during the 14 phases of sale of electoral bonds, SBI has earned Rs 3.66 crore as commission, excluding taxes. During the 14th phase, SBI sold 321 electoral bonds worth Rs 282.29 crore, of which all except one bond of Rs 1,000, were encashed.
Until the latest window period October 2020, a total of 12,773 electoral bonds of various denominations were sold. A major portion of them is the highest value denomination of Rs 1 crore (5,981 bonds) followed by the next highest denomination of Rs 10 lakh (4,943 bonds). A total of 1,731 bonds of Rs 1 lakh denomination were sold in these 14 cycles. Meanwhile, the purchases made for the lower denominations of Rs 1,000 and Rs 10,000 are only 48 and 70 electoral bonds, respectively.
The analysis by Commodore Batra shows that electoral bonds with the highest denomination value of Rs 1 crore are the most preferred by the donors and constitute 92.12% in the total value. It is followed by bonds worth Rs 10 lakh, which form 7.61% of the total share and Rs 1 lakh with just 0.27% share in the total value of electoral bonds sold till date.
“ The political party does not have to disclose who it has received the bond from in its account nor does the donor entity have to state the party to which it has donated. Also, as per the scheme only eligible political parties with 1% vote share are eligible to buy electoral bonds.
On January 2, 2018, the ministry of finance had notified the EB scheme. As per the scheme, an electoral bond is a bond issued in the nature of a promissory note. It may be purchased by a person who is a citizen of India or entities incorporated or established in India. The bonds are issued in multiples of Rs 1,000, Rs 10,000, Rs 1 lakh, Rs 10 lakh and Rs 1 crore.
These are available at specified branches of SBI and any account-holder compliant with know-your-customer (KYC) norms can buy these bonds. Donors can donate the bonds to their party of choice, which can then be encashed by the party's verified account within 15 days. The bond does not carry the name of the buyer or the payee.
“An analysis by ADR shows that Lok Sabha 2019 elections saw the highest ever anonymous funding through electoral bonds. Between FY17-18 and FY18-19, political parties received a total of Rs 2,760.20 crore from electoral bonds as donation, ADR says.
The political party does not have to disclose who it has received the bond from in its account nor does the donor entity have to state the party to which it has donated. Also, as per the scheme only eligible political parties with 1% vote share are eligible to buy electoral bonds.
Also read: Electoral Bonds: A whopping Rs 3622 crore sold just before the general elections, says ADR
The Association for Democratic Reforms (ADR), a non-government organisation (NGO), has been raising the issue of political funding through electoral bonds by anonymous donors. An analysis by ADR shows that Lok Sabha 2019 elections saw the highest ever anonymous funding through electoral bonds. Between FY17-18 and FY18-19, political parties received a total of Rs 2,760.20 crore from electoral bonds as donation, ADR says.
In its plea filed in October last year before the Supreme Court, ADR had called sale of electoral bonds just before election as "corruption on a huge scale".
“The plea contends that the Finance Act of 2017 had introduced the use of electoral bonds which is exempted from disclosure under the Representation of Peoples Act, 1951, thereby opening the doors to unchecked, unknown funding to political parties.
"Certain amendments made through the Finance Act, 2017 and earlier Finance Act, 2016, both passed as money bills, and which have opened the doors to unlimited political donations, even from foreign companies, thereby legitimizing electoral corruption at a huge scale, while at the same time ensuring complete non-transparency in political funding," the plea filed by ADR says.
The plea contends that the Finance Act of 2017 had introduced the use of electoral bonds which is exempted from disclosure under the Representation of Peoples Act, 1951, thereby opening the doors to unchecked, unknown funding to political parties.
"The said amendments have removed the existing cap of 7.5% of net profit in the past three years on campaign donations by companies and have legalised anonymous donations," added the plea.
(Yogesh Sapkale is Deputy Editor of Moneylife and writes on several subjects, including banking, finance, regulations as well as on consumer issues. The views are personal. This article was first published by Moneylife.)