Amidst the inconvenience faced by citizens due to demonetisation and the confusion caused by innumerable orders issued regarding the deposit and exchange of old currency notes on 16 December, Revenue Secretary Hasmukh Adhia announced that political parties depositing old Rs 500 and Rs 1,000 notes would not be subject to income tax scrutiny, provided the donations were below Rs 20,000 per person. The irony in this announcement lies in the fact that it is claimed by the government that demonetisation is a 'war on black money', but the one of the primary conduits of the black money economy — political parties — seem to be exempt from any attack.
Donations received by political parties are systematically kept away from any kind of scrutiny. As per the current rules, political parties are supposed to file their annual income and expenditure statements with the Election Commission. Parties are supposed to submit the details — including the name and PAN number — of donors who give more than Rs 20,000.
However — and this is a big 'however' — parties need not submit details of donors who give less than Rs 20,000
One may ask why this is such a big issue; after all, Rs 20,000 is a small amount of money. It becomes significant since this loophole has been amply exploited by political parties, who now claim to get most of their donations in sums less than Rs 20,000 and hence, from undisclosed sources. Reports published by the Association for Democratic Reform (ADR) show that around 85 percent of donations received by political parties, now come from undisclosed sources.
The Congress received 70 percent of its declared funds from undisclosed sources. The BJP received 80 percent of its funds from undisclosed sources and the BSP claims that every donation it has received was below Rs 20,000, so 100 percent of its funding is from unknown sources.
The problem does not end here. It continues on to expenses made during election campaigns. While the Election Commission has set a limit to the amount of money a candidate can spend during the elections, it is an open secret that this norm is consistently flouted. The late Gopinath Munde had publicly stated that he had spent Rs eight crore to contest an election. And while it is openly visible that candidates are spending much more than the official limit, the Election Commission has virtually no powers to take action against the candidate or the party. This excess money too comes in the category of undisclosed money, since citizens do not know where it is coming from.
Undisclosed funding means undisclosed influence.
And this undisclosed influence over decisions and policies of the government is a crucial challenge facing Indian democracy today. A recent Credit Suisse report has shown that the richest one percent in India own 53 percent of the wealth. This figure was was at 38 percent in 2000. Today, the bottom 50 percent of India’s population owns only four percent of its wealth. It is not rocket science to conclude that the economic policies of successive governments have made the rich richer and the poor poorer. How do political parties — who form governments — ignore 50 percent of the population in a democracy? It is because, once elected, they work in the interests of those who fund their parties and election campaigns, not those who voted for them.
It is the 'undisclosed influence' that determines policies of the government, not the interests of ordinary people who vote governments into power
This 'undisclosed influence' gets disclosed at some junctures, as when the Niira Radia Tapes became public and it was found that the PR company of two well-known corporates was influencing who would become the Minister of Telecom and thereafter trying to broker deals in the 2G spectrum sale. We know that the CAG report on the 2G spectrum scam indicted the government for losses to the exchequer worth Rs 170,000 crore. The ability of a corporate lobbyist to have such influence could only have been coming from the corporate’s past or future funding of the party or politician.
In the Coalgate scam, the CAG report found that the government’s arbitrary allocation of coal mines led to a loss to the exchequer of Rs 176,000 crore. If the exchequer lost money, it was a loss for ordinary citizens; but someone must have gained? The CAG reports points to the fact that major telecom businesses were allocated 2G spectrum at throwaway prices and that 25 major industrial houses — including the Tata group, Naveen Jindal group, Essar and Vedanta — made huge profits because of the lack of bidding in the allocation of coal mines. Given the nature of the gains, there seems clear incentive for big businesses and corporations to fund political parties and thereafter, extract access to government contracts.
Therefore, regulatory mechanisms need to be put in place to ensure that large corporations or any other vested interests cannot use political funding as a means to gain wrongful access to public resources. Otherwise, political party funders — rather than ordinary voters — will continue to influence government policies.
This regulation, however, has not been put in place despite repeated recommendations from the Election Commission and high-level Committees. In 1998, the Election Commission had raised questions regarding a lack of transparency in political funding and spending. In 2013, the Central Information Commission ruled that all six national parties should come under the ambit of the RTI.
In 2015, the Law Commission recommended that it should be mandatory for parties to disclose contributions of less than Rs 20,000, if they exceeded 20 percent of the parties' total funding. If the Narendra Modi government is serious about a war on black money, then they need to introduce strong regulation to bring transparency in political funding. If they don’t, then it would be fair to assume that the 85 percent undisclosed funding received by the BJP, has far stronger, undisclosed influence on government policy, than the rhetoric of the 'war on black money'.
The author is a leader of the Aam Aadmi Party, and works as an advisor to the Government of NCT of Delhi
Updated Date: Dec 27, 2016 12:47:47 IST