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The need to have full disclosure electoral bonds and political funding

GS Paper 2

Syllabus: Government Policies and Interventions and Issues arising out of their Design and Implementation


Source: TH

 Direction: This article demonstrates how electoral bonds have concealed funding to political parties even more, its impacts, way ahead and a best practice in the conclusion.

 Context: According to an RTI reply, electoral bonds worth ₹10,246 crore have been sold by the State Bank of India (SBI) since the instrument was launched in March 2018.


Background in which electoral bonds were introduced:

  • Political parties violating FCRA: In 2014, the Delhi HC found both the Congress and BJP guilty of illegally accepting donations from a foreign company, in contravention of the Foreign Contribution (Regulation) Act (FCRA), 1976.
  • Amending FCRA: Following this, the two parties came together to amend the FCRA to retrospectively legalise the violations, bringing in full anonymity to corporate and foreign political donors.
  • Old vs new provisions:
    • Previously, only profit-making domestic companies could contribute to political parties, now, loss-making can as well.
    • Foreign companies could not previously contribute. A foreign firm operating in India or a foreign entity through a shell company may fund Indian political parties now.
  • Capping cash donations: In 2017, the anonymous cash donations to political parties were reduced from ₹20,000 to ₹2,000 to ensure greater transparency in political funding.


Introduction of Electoral bonds:


  • The Electoral Bond Scheme (EBS), announced in the 2017 Union Budget, was notified by the Central Government in 2018.
  • These bonds can be purchased from select SBI branches by any Indian person or corporation incorporated in India under the scheme.
  • The introduction of electoral bonds brought a new form of anonymity to thousands of crores of donations.


How did electoral bonds introduce a new type of anonymity?

  • By reducing public and legislative oversight: For example, only the ruling party via the SBI has a full account of all donations being made via electoral bonds.
  • Political parties do not disclose electoral bond donors: The only requirement is the annual audit reports with all donations received via electoral bonds. However, these reports are submitted with great delays.


Impact of anonymity:

  • Dilutes one voter-one vote principle: This is because electoral bonds give political power to companies, wealthy individual donors and foreign entities, to influence public policies.
  • Undue advantage to the ruling party, whether at the Centre or in a State.


Suggestions given by the SC: In 2021 (in response to ADR PIL challenging EBs as unconstitutional), the SC refused to stay the sale of electoral bonds and suggested matching the following (between the purchaser of the bond and political party) to bring in transparency.


Problems with the match the following approach:

  • No ordinary person has the time or money to go through documents on government websites or go through income tax returns.
  • The total number of registered companies is unknown, and many do not report political donations even if they file annual financial statements.
  • All private companies’ annual reports are not easily accessible on the government’s website since they are not mandated to produce them aside from filing annual returns.


Way ahead:

  • The information regarding donors and donations should be accessible to the Parliament, the Election Commission of India, and the Opposition via SBI.
  • The RTI must be strengthened, as only RTI petitions filed with the SBI provide insight into the millions of dollars spent on political parties.


Conclusion: Companies and political parties can show moral leadership by voluntarily disclosing the identities of recipients and donors, as the Jharkhand Mukti Morcha did recently.


Insta Links:

Opaque political financing could cost democracy dear


Mains Links:

Q. Trace the changes witnessed in political funding with the introduction of the electoral bond scheme. Critically analyse the potential of electoral bonds in fulfilling the goal of transparency in political fundraising. (250 words)