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EDITORIAL ANALYSIS : Challenging the Electoral Bond Scheme


Source: The Hindu

  • Prelims: Electoral bonds, ECI, GST etc
  • Mains GS Paper I and II: Parliament-Structure, functioning and conduct of business, powers and privileges and issues arising out of them etc



  • Civil society has been campaigning to empower the voter by improving her access to background information on:
    • The candidates in the electoral fray
    • Bring about greater transparency in the domain of political funding.
  • Electoral bonds were introduced as a financial tool for enabling donations to political parties.




Electoral Bonds:

  • As debt instruments, these can be bought by donors from a bank, and the political party can then encash them.

Who can purchase it?

  • Citizen of India: Electoral Bonds may be purchased by a person who is a citizen of India or incorporated or established in India.
  • Single or jointly: A person being an individual can buy Electoral Bonds, either singly or jointly with other individuals.


  • Political Parties registered under Section 29A of the Representation of the People Act, 1951: Which secured not less than one percent of the votes polled in the last General Election to the House of the People or the Legislative Assembly of the State.
  • Authorized bank: The Electoral Bonds shall be encashed by an eligible Political Party only through a Bank account with the Authorized Bank.
  • State Bank of India (SBI): It has been authorized to issue and encash Electoral Bonds.
  • Electoral bonds have become the favored mode of political donation.
  • Bonds worth ₹13,791 crore have been sold in 27 tranches until July 2023.
  • The ADR’s research: electoral bonds accounted for 55.9% of the donations totalling ₹9,188 crore received by 31 political parties.
    • BJP got 5% of electoral bonds redeemed until 2020-2021.
    • The INC was a distant second, at 11%
    • Followed by the Biju Janata Dal, the YSR Congress Party and the Trinamool Congress.


How does it work?


Benefits of electoral bonds:


Arguments against Electoral bonds:


Instruments used for political funding by political parties:

  • Electoral Trusts Scheme (2013) to create a smokescreen between political
  • Electoral Bond Scheme (EBS): by incentivising political donations through banking channels.
  • Foreign Contribution (Regulation) Act (FCRA) was retrospectively amended through the Finance Act of 2016.
    • It permitted Indian subsidiaries of foreign companies to donate to political parties

The regulatory framework:

  • Representation of the People Act (RPA)
  • The Companies Act
  • The Income Tax Act
  • Reserve Bank of India (RBI) Act through the Finance Act of 2017,


Impact of these Amendments:

  • The device of incorporating the amending Bills in the Finance Bill:
    • It effectively short-circuited the consideration of the legislative proposals by the Rajya Sabha and ensured their smooth passage.
  • The Association for Democratic Reforms (ADR) and Common Cause filed a PIL to challenge the constitutionality of the amendments made in the legal framework of corporate donations by the Finance Act of 2017.
    • These amendments infringed the citizen’s fundamental ‘Right to know’ under Article 19(1)(a)
    • The vires of the amendment to FCRA effected through the Finance Act of 2016 were also impugned.
  • The amendments
    • jeopardized the country’s autonomy
    • militated against transparency
    • incentivised corrupt practices
      • by lifting the caps on corporate donations
      • allowing contributions by loss-making and shell companies.
    • The nexus between politics and big business rendered more opaque.
    • The instrument would enable special interest groups, corporate lobbyists and foreign entities to secure a stranglehold on the electoral process and influence the country’s governance to public detriment.
    • By relieving the political parties of the duty to disclose the particulars of their donors
      • The amendments eroded the ECI’s constitutional role and deprived citizens of vital information concerning electoral funding.
    • The recourse to a money bill to amend the relevant laws subverted the legislative scheme envisaged in the Constitution.

Way Forward

  • The government has stressed the imperative of protecting donor anonymity, ostensibly to shield them from retribution by political rivals.
  • The Solicitor General: anonymity is central to their right to privacy, even though this fundamental right is not available to artificial legal persons.
  • Over 94% of the electoral bond sales are in the denomination of one crore rupees — a sum beyond the capacity of individual donors.
  • The Supreme Court’s record in expanding the scope of the right to freedom of speech and expression and empowering the voter to make an informed choice
    • The next round of elections will be contested on a reasonably level-playing field.
  • Institutional safeguards: It is important that independent institutions (such as the ECI and the Supreme Court of India) step in to layer the seeming black hole of electoral bonds with a minimum level of institutional safeguards.
  • There is a need for effective regulation of political financing along with bold reforms to break the vicious cycle of corruption and erosion of quality of democratic polity.



Discuss the role of the Election Commission of India in the light of the evolution of the Model Code of Conduct.(UPSC 2022) (200 WORDS, 10 MARKS)