Context: Supreme Court has struck down the Electoral Bond scheme as being unconstitutional. This has again raised debates about the model of Electoral funding in India.
Electoral Funding in India:
- Representation of Peoples Act, 1951 regulates the election financing landscape in India.
- Section 77 of the RPA, 1951 and Conduct of Election Rules, 1961 provides for limit on electoral expenditure for contesting candidates.
- Section 10A of RPA, 1951 provides for the disqualification of candidates for a period of three years for the failure to lodge accounts of election expenses.
- Section 29B of RPA, 1951 provides for political funding of parties and there is no limit on funds to be received. Note: It bans foreign funding of political parties in India.
- Section 29C of RPA, 1951 regulates the disclosure of donations received by political parties and prepare an annual report on it, which is to be submitted to Election Commission of India.
- Section 182 of Companies Act, 2013 provides for the corporate donations to political parties.
Need for Electoral Funding reforms in India:
- Supreme Court in Kanwar Lal Gupta case highlighted that financial superiority translates into electoral advantage.
- Money power in elections has raised the issue of violation of equality and equal footing between the rich and poor candidates.
- Issue of Black money, bribery, and quid pro quo corruption through electoral funding by private business entities. This was highlighted by Supreme Court in Ashok Shankarrao Chavan case (2014).
- Capture of government by private individuals and groups in a quid pro quo mechanism.
- At the same time, the election funding scheme should respect the privacy of donors as there is a possibility of targeting of donors by other parties.
Legal loopholes:
- Expenditure on star campaigners is shown in disproportionately in financial reports of parties to hide the real areas of expenditure.
- Scope of section 77(1) of RPA, 1951 is very narrow. It only applies on election expenditures of a candidate from the date of nomination to the date of declaration of results.
- There is no limit on election expenditure by a political party.
- New modes of VOTE for NOTE being devised such as the "Thirumangalam Formula" of Tamil Nadu.
Alternative Models for Election Funding
A. Electoral Trust scheme:
- In the Electoral Bond Judgement, SC suggested Electoral Trusts as a better model to be followed which balanced the need for transparency of electoral funding and the confidentiality and anonymity of donors.
- Any company registered under Section 25 of Companies Act, 1956, can form an Electoral Trust.
- Under Section 17CA of the Income-tax Act, 1961, any citizen of India, a company registered in India, or a firm or Hindu Undivided Family or association of persons living in India, can donate to an electoral trust.
- The electoral trusts have to apply for renewal every three financial years.
- They must donate 95% of contributions received in a financial year to political parties registered under Representation of the People Act, 1951.
- The contributors’ PAN (in case of a resident) or passport number (in case of an NRI) is required at the time of making contributions.
- Transparency under Electoral Trust Scheme:
- Electoral trusts are mandated by law to maintain a list of contributions and submit to the Election Commission of India. Such records must also be submitted to income tax commissioner along with an audit report.
- Electoral Trusts receive donations from various donors and donate to various political parties. This makes it difficult to determine to whom an individual donor may have contributed.
- During the period 2017-18 — the financial year in which Electoral Bonds were first made available — to 2021-22, the money donated through Electoral Bonds was more than five times the amount that came through the Electoral Trusts.
B. Recommendations of 255th Law Commission Report:
- Scope of section 77(1) of RPA, 1951 should be enlarged to cover the period spanning date of notification of election to the date to declaration of results.
- Limits on election related expenditure of political parties should be imposed.
- The decision regarding funding of political parties should be taken in the Annual General Meeting and not in the meeting of Board of Directors as done presently.
C. State Funding of Elections recommended by Dinesh Goswami and Indrajit Gupta Committee.
Conclusion
Before finalizing the future models of electoral funding to be adopted, adequate consultation with all stakeholders should take place with the aim to boost transparency and address issues of black money in the election funding.
Read about Supreme Court Judgement for abolishing Electoral Bond Scheme: Link




















