Insights into Editorial: How to make publicly-funded elections a reality

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Insights into Editorial: How to make publicly-funded elections a reality



Competitive political parties and election campaigns are central to the health of democracies. Parties and campaigns require significant resources to be effective. India has developed complex election expenditure, political party funding, and reporting and disclosure laws. However, these laws may have perverse impacts on the electoral system: they tend to drive campaign expenditure underground and foster a reliance on unaccounted funds or ‘‘black money.’’ This tends to lead to an adverse selection system, in which those willing and able to work with black money dominate politics. In this context, experts have suggested to go for publicly-funded elections.

What is state or public funding of elections?

This means that government gives funds to political parties or candidates for contesting elections. Its main purpose is to make it unnecessary for contestants to take money from powerful moneyed interests so that they can remain clean. In some countries, state funding is extended to meeting some specific forms of spending by political parties, not confined to electioneering alone. Countries keep changing laws relating to state funding depending on experience and financial condition.


What is direct and indirect state funding of elections?

Direct funding means giving funds directly to political parties (or candidates). Indirect funding takes the form of various subsidies or access. Indirect funding can take the form of subsidized or free media access, tax benefits, free access to public spaces for campaign material display, provision of utilities and travel expenses, transport, security etc. If both these types are included then very few countries in the world remain with absolutely no state funding, direct or indirect.


What is the status in India?

There has been little progress on this in India. Current state funding measures include provision of free time on public broadcasters for national parties in general elections and for registered state parties in state legislature elections. Besides this, national parties are provided some benefits like security, office space, utility subsidies etc. Another form of indirect state funding available in India is that registered political parties do not have to pay income tax, as laid down in S.13A of the Income Tax Act.


What have various commissions and committees said about this?

Some major reports on state funding include those given by the Indrajit Gupta Committee on State Funding of Elections (1998), Law Commission Report on Reform of the Electoral Laws (1999), National Commission to Review the Working of the Constitution (2001) and the Second Administrative Reforms Commission (2008).

  • Except for the 2001 report, all other recommended partial state funding only, given the economic situation of the country.
  • The 1998 report said that state funds should be given only to registered national and state parties and that it should be given in kind only.
  • The 1999 report concurred with this but also recommended first putting a strong regulatory framework in place including internal elections, accounting procedures etc.
  • The 2001 report said that first a regulatory framework needs to be established before thinking about state funding.


Why public funding is good?

  • Political parties and candidates need money for their electoral campaigns, to keep contacts with their constituencies, to prepare policy decisions and to pay professional staff. Therefore, public funding is a natural and necessary cost of democracy.
  • Public funding can limit the influence of interested money and thereby help curb corruption.
  • Public funding can increase transparency in party and candidate finance and thereby help curb corruption.
  • If parties and candidates are financed with only private funds, economical inequalities in the society might translate into political inequalities in government.
  • In societies where many citizens are under or just above the poverty line, they cannot be expected to donate large amounts of money to political parties or candidates. If parties and candidates receive at least a basic amount of money from the State the country could have a functioning multi-party system without people having to give up their scarce resources.


Is it a good idea?

There are divergent views on the efficacy of state funding of elections. Some have been dismissive of the idea. Those against this idea wonder how a Government that is grappling with deficit budgets, can provide money to political parties to contest elections.

  • They also warn that state funding would encourage every second outfit to get into the political arena merely to avail of state funds.
  • Also, given that state expenditure on key social sectors such as primary healthcare is “pitifully small”, the very idea of the Government giving away money to political parties to contest polls, is revolting. Therefore, opponents ask the government to channelize public resources towards and not diverted from such essential services.


What can be done?

  • The government should consider state funding of political parties contesting elections. But such funding should be limited to parties recognised as ‘national’ or ‘State’ by the Election Commission of India, and to candidates directly fielded by such recognised parties.
  • Budgetary constraints could come in the way. Therefore, a good start could be made with partial funding — that is, with the state taking care of certain expenditures of the recognised parties. The aim should be to discourage political parties from seeking external funding (except through a nominal membership fee) to run their affairs, carry out their programmes and contest elections.
  • A separate Election Fund with an annual contribution of some Rs 600 crore by the Centre and a matching amount by all States put together should be created. Only those parties which have submitted their income tax returns up to the previous financial year could avail of state funding.
  • Every candidate of the party eligible for state funding should be given a specified quantity of fuel for vehicles during an election campaign and a specified quantity of paper to prepare electoral literature.



It isn’t India alone that has been struggling with the idea of state funding of political parties; other democracies too have grappled with it. Some like Finland, Italy, Israel, Norway, Canada, the US, Japan, Australia and South Korea implemented the concept with mixed results. Italy, Israel and Finland, for instance, did not see any significant reduction in state expenditures due to public funding, despite the many checks and balances. In most of these countries, the argument against state intervention has been that political parties, being a free association of citizens, are independent entities, and that they cannot be bound by financial strictures. It’s an argument that can well be applied to India by anti-state interventionists.

The opaque and gargantuan nature of electoral finance is at the root of the twin evils of corruption and black money. The only permanent solution is to strike at its foundation.