Companies prefer upfront cheque/electronic transfer donations to political parties of their choice rather than taking the trouble of first procuring bonds from the SBI and then donating them to political parties, as they find no merit in the circuitous route now that both enjoy anonymity and both have to be through banking channels.
In reply to an RTI query by one Chandra Shekar Gaur recently, State Bank of India (SBI) that operates the electoral bonds scheme said:
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By implication and deduction, about 6 percent of the bonds were of Rs 10 lac denomination. That the anonymous electoral bonds cater to moneybags has all along been suspected and now it has been confirmed by the revelation that as much as 93.5% of the bonds were of the highest denomination i.e., one crore leaving the second in the race i.e., denomination of Rs 10 lac far behind. That it was never meant for the common folks is also confirmed by the lukewarm interest evinced by them---just 0.25 percent of the bonds were of rupees one lac, ten thousand and one thousand denominations.
The poor response to the scheme testifies that the scheme’s twin centerpieces--- anonymity (supposed to mask the identity of the donor) and eschewing the pernicious role of cash by insisting on payment to SBI through banking channels for procuring the bonds---have not cut much ice with the donors. The reason is not far to seek. The Finance Act, 2017 had rendered electoral bonds redundant and superfluous by providing for the following:
In a way the 2017 amendments cannibalised the electoral bonds scheme insofar as corporates are concerned for whom the earlier requirement to disclose the names of the beneficiary political parties was fraught with the danger of reprisal by political parties not in their favored list. It seems companies have deemed it fit to prefer upfront cheque/electronic transfer donations to political parties of their choice rather than taking the trouble of first procuring bonds from the SBI and then donating them to political parties. In other words, they find no merit in the circuitous route now that both enjoy anonymity and both have to be through banking channels.
As a result, electoral bonds might be appealing to non-corporate persons preferring anonymity on the back of the desire to avoid scrutiny as to the source of their funds. Therefore, the government must abolish the electoral bonds scheme now that it has been effectively cannibalised by upfront donations with section 182 of the Companies Act, content with the disclosure of the total or aggregate donations in company’s profit and loss account and not insisting on party-wise break up. Others don’t value anonymity unless the color of the money they are donating is black. Indeed, the electoral bond scheme’s leitmotif that it encourages clean money lacks credibility. Merely because payment for the bonds comes from bank accounts in India is no guarantee that the source of such funds is not dubious. After all, bank accounts of some 2 lac shell companies were frozen in September 2017 on suspicion of them harbouring laundered wealth.
The elephant in the room however is cash. The Election Commission has written
to the government pointing to a serious anomaly.
While Section 13A of Income Tax Act, as amended in 2017, had brought down the ceiling on cash donations from Rs 20,000 to Rs 2000, section 29C of the Representation of People’s Act, 1951 (RPA) remains caught in the time warp----it still allows cash donations upto Rs 20,000 by insisting on list of donors only if the donations were above Rs 20,000. It is common knowledge that cash rules the roost insofar as donations from the unorganized sector go. Let us say an unlisted company or a firm wants to give Rs 1 crore to a political party in cash. All that it has do is to give them in tiny parcels of 500 so that no parcel is of more than Rs 20,000. Even if section 29C of RPA is amended to bring it in sync with section 13A of the income tax law as suggested by the EC, it won’t unduly challenge the donors seeking anonymity----they have to makes 5000 parcels so that each parcel is of not more than Rs 2000!
Till cash is reined in, cash donations might be winked at both by donors and political parties. In the meanwhile, the government may abolish the electoral bonds scheme which in any case is facing challenge before the Apex Court. Having been cannibalised by section 182 of the Companies Act, it now holds appeal only to people who operate in the subterranean economy.
—S Murlidharan is a CA by qualification, and writes on economic issues, fiscal and commercial laws. The views expressed in the article are his own.
Read his other articles here
First Published: IST