Demonetisation and black money: PM Modi must first account for BJP’s poll funds - Firstpost
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Demonetisation and black money: PM Modi must first account for BJP’s poll funds


Prime Minister Narendra Modi deserves kudos for asking to make state-funding mandatory for elections and conduct simultaneous polls for assemblies and Parliament, as the next step to curb black money in the system. The kind of political will and courage Modi has exhibited in his fight against black money, most recently the demonetisation exercise and now the issue of state-funded polls, is tremendous. These are areas where most politicians feared to tread.

Prime Minister Narendra Modi in Lok Sabha on Wednesday. PTI

Prime Minister Narendra Modi in Lok Sabha. PTI

The idea of state-funding was suggested by the PM in a recent all-party meeting last week. Surely, this is a great way to cleanse the political system from black money, which is essentially a child of political-corporate-nexus. But, that idea isn’t due on the discussion table until self-cleansing ceremony is done by political parties themselves on their existing funding sources and the guilty is brought to book.

There is none better than PM Modi and the ruling political party, the BJP, to initiate the process by disclosing own funding sources. Can Modi, who has embarked on a crusade against black money, show the political will to set the process rolling? If the PM himself initiates this process, this will leave other political parties, including principal opposition party Congress and Left, with no option but to follow suit and start on a clean slate to prepare for a transparent regime.

As of now, Arvind Kejriwal’s Aaam Aaadmi party (AAP) is the only outfit which claims to have transparent process to accept donations. But, AAP is relatively a small fish in a big pond.

The basis of making this point is that unless the current structure of political funding and answer to the question—who owes whom—is not answered in public, there is hardly any point of dreaming of a better tomorrow. Opaque political funding is the mother of all black money transactions in the country. It is based from this unholy give-and-take relation at different levels, all other unaccounted cash transactions involving a corporate, real estate mafia, mining dons, diamond merchants or jewelers is born and the common man is left to die in distress.

The numbers

According to a report compiled by NGO, Association of Democratic Reforms (ADR) titled as an ‘Analysis of Income and Expenditure of National Political Parties for FY- 2014-2015’, based on the I-T returns filed by the parties, total income of political parties from unknown sources (income specified in the I-T Returns whose sources are unknown), for the financial year 2014-15 is Rs 685.36 crore, which is 54 percent of the total income of the parties.

What are these unknown sources? These are income declared in the I-T returns but without giving source of income from donations below Rs 20,000. Such unknown sources include ‘sale of coupons’, ‘relief fund’, ‘miscellaneous income’, ‘voluntary contributions’, ‘contribution from meetings/ morchas’ etc. The details of donors of such voluntary contributions are not available in the public domain, according to the ADR report.

Table (1)

BJP has even greater reasons to take the lead in putting an end to this mystery funding. According to the same ADR report, a total of Rs 582.72 crores (55 percent of total donations) of the total donations to National Parties was collected during FY 2014-15 from donors whose details are not available in the public domain. BJP, which declared the highest total income and highest income from donations above Rs 20,000 amongst the national parties, had collected Rs 434.67 crores (50 percent of total donations) from donors whose details are unavailable.

Of the national parties, BJP has shown the highest income amongst the national parties with a total income of Rs 970.43 crore during FY 2014-15. This forms 76.06 per cent of the total income of national parties put together during FY 2014-15. CPM declared the second highest income of Rs 123.92 crore which forms 9.71 percent of the total income of the national parties. CPI declared the least income of Rs 1.84 crore which forms a mere 0.14 percent of the total income of the national parties during the fiscal year 2014-15. The Congress party, the principal opposition, has not even submitted a copy of its audited report to the Election Commission for the fiscal year 2014-15 at the time of release of the ADR report, i.e 19 April.

In short, there is significant opaqueness in the way funds reach political parties, and BJP is the highest beneficiary of that. This is not to say other political parties are better though.

Once the political parties’ balance sheets are purged, there will be room for discussions on state-sponsored funding to elections. Here again, there are certain practical issues. Like this Firstpost column, it is difficult to ascertain the fund requirements of candidates individually and that of political parties. If there are no proper ways to address the problem, ultimately the taxpayer will be overburdened with paying for the poll extravaganza. But, it is an idea worth a trial.

Demonetisation alone won’t work

Fundamentally, the crux of the black money problem lies in dubious financial transactions in real estate deals and other benami transactions that takes place with the blessings of politicians. Tackling this would require immense political will, which would be absent until the time political funding for elections (both for general election and local bodies) is made state-funded. The current demonetisation exercise will help address part of the problem—those holding unaccounted wealth in the form of cash will suffer a temporary jolt. But, as the new Rs 2,000, Rs 500 and Rs 1,000 notes become freely available in the system, in no time the new stock of black money will start building up. The realtor will start asking black money in new currency notes, just like he used to ask for old Rs 500, Rs 1,000 notes.

As explained in earlier articles, corporate lobbies, especially in real estate, operate hand in glove with local politicians and this is the key reason why political-corporate nexus wouldn’t die easily. The work to clean-up the economy from the ills of black money should thus begin with breaking the back of this give-and-take relationship. This can happen only if political funding is made state-funded. Modi has shown the courage to speak on the issue now, but he needs to set an example first cleansing his own party.

Corporate funding

It is not practical to put a blanket ban on corporate funding for political parties. Instead, the feasible way is to route the money through an independent, transparent body under the surveillance of the Election Commission of India (ECI) and investigative agencies. This is something SY Quraishi, former chief election commissioner of India, has pointed out in the past. “State funding will free the parties from dependence on — and clutches of — the corporate houses who feel tempted to run the government by proxy.”

If necessary, Quraishi says, an Election Trust Fund could be created, to which corporations can make donations. The fund could be administered by an independent Trust or Election Commission. The allocation of funds will be based on the actual performance of parties, whose accounts will be audited by an independent auditor on the ECI approved panel or by CAG.

The global experience shows that this system has worked in other countries. A study of ‘Political Finance Regulations around the World’ by the International Institute of Democracy and Electoral Assistance, Stockholm (2012), showed that this system is working well in over 70 countries, including most European countries (86 percent), Africa (71 percent), North and South America (63 percent) and Asia (58 percent). In September last year, Brazil banned corporate funding in elections.

The short point here is: more than demonetisation, purging political parties from the practice of enjoying donations from unknown sources can be a much bigger move. PM Modi must begin this process from within his own party and make others fall in line.

First Published On : Nov 23, 2016 13:24 IST

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