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Monday, 5 June 2017

The black box (The Indian Express - 5 June 2017)

     Government must address EC’s concerns about recent amendments to laws that govern political finance. One of the main contentions of the EC has to do with a proviso that exempts political parties from disclosing donations received from electoral bonds.

     The Election Commission has flagged the recent amendments in the Representation of the People (RP) Act and the Companies Act, related to donations made to political parties. It has expressed concern that they militate against greater transparency in political finance. The government must urgently address the EC’s concerns.
One of the main contentions of the EC, articulated in its letter to the law secretary, has to do with a proviso that exempts political parties from disclosing donations received from electoral bonds. In the last budget session, the government had introduced the bonds, which a donor could make and gift to registered political parties. Simultaneously, it also banned cash donations over Rs 2,000. The plan, it seemed, was to shift from cash donations that were difficult to track towards cashless transactions. However, the radical edge of the proposal was undermined by the amendment that exempted political parties from disclosing donations received from bonds. The EC rightly wants the provision withdrawn. Its concern that “in a situation where the contributions 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” is valid. Besides, the bonds allow anonymity to donors, who can channel large sums electronically to their party of preference. Earlier, political parties had to disclose details of the donors who made contributions above Rs 20,000. The provision made it possible to track the identity and volume of contributions received by every political party.

     These changes need to be seen in relation to amendments to the Companies Act. The Act has been diluted to lift the cap on corporate donations to political parties. Earlier, a company could not contribute more than 7.5 per cent of its net profit over the last three years to parties. The EC has warned that the change in the law “opens up the possibility of shell companies being set up for the sole purpose of making donations to political parties with no business of consequence”. The law in the previous form, the EC has argued, ensured that “only profitable companies with proven track record could provide donations to political parties”. The opacity of political finance has been a significant part of the story of political corruption in the country. In light of the EC’s note of caution, the government needs to revisit the changes it has made both in the RPA and the Companies Act.

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