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How the electoral bonds scheme has worked so far, and why it has been challenged in SC?

Topics Covered: Parliament and State Legislatures – structure, functioning, conduct of business, powers & privileges and issues arising out of these.

How the electoral bonds scheme has worked so far, and why it has been challenged in SC?


Context:

The Supreme Court has dismissed petitions seeking to stay the sale of fresh electoral bonds ahead of Assembly elections in West Bengal, Tamil Nadu, Kerala, Assam and Puducherry.

  • Although the court said there is no justification to stay the current sale, the larger constitutional challenge to the electoral bonds scheme filed in 2017 is still pending.

What is the pending challenge?

Apart from challenging the constitutionality of the electoral bonds scheme, the petitioners had asked the court to declare all political parties as public offices to bring them under the ambit of the Right to Information Act and compel political parties to disclose their income and expenditure.

What are electoral bonds?

  • Announced in the 2017 Union Budget, electoral bonds are interest-free bearer instruments used to donate money anonymously to political parties.
  • A bearer instrument does not carry any information about the buyer or payee.
  • The holder of the instrument (which is the political party) is presumed to be its owner.
  • The bonds are sold in multiples of Rs 1,000, Rs 10,000, Rs 1 lakh, Rs 10 lakh, and Rs 1 crore, and State Bank of India is the only bank authorised to sell them.
  • Donors can buy and subsequently donate bonds to a political party, which can encash the bonds through its verified account within 15 days.
  • There is no limit on the number of bonds an individual or company can purchase.
  • If a party hasn’t enchased any bonds within 15 days, SBI deposits these into the Prime Minister’s Relief Fund.

Why have they been challenged?

  • The printing of these bonds & SBI commission for facilitating the sale and purchase of the bonds is paid from the taxpayers’ money by the central government.
  • Anonymity provided to donors of electoral bonds.
  • Through an amendment to the Finance Act 2017, the Centre has exempted parties from disclosing donations received through electoral bonds.

According to transparency activists, these infringe the citizen’s ‘Right to Know’ and make the political class even more unaccountable.

What is the EC’s stand?

The EC had objected to amendments in the Representation of the People Act that exempt political parties from disclosing donations through this route.

  • In a situation where the contribution received through electoral bonds are not reported, on perusal of the contribution report of political parties, it cannot be ascertained whether the political party has taken any donation in violation of provision under Section 29(b) of the RP Act which prohibits the political parties from taking donations from government companies and foreign sources.

InstaLinks:

Prelims Link:

  1. What are electoral bonds?
  2. Eligibility.
  3. Denomination.
  4. Features.
  5. Who can issue these bonds?

Mains Link:

Critically examine the effectiveness of electoral bonds in ensuring transparent political funding and suggest alternatives?

Sources: Indian Express.