Political funding has not become institutionalized.
By Rajiv Theodore
NEW DELHI: The election battle for New Delhi has started. Activities ranging from the absolutely brazen to the most surreptitious will now flare up in the news. The power hungry political class would leave no stone unturned to gravitate towards their singular goal of seats and more seats. This class is known to push their cause for whatever it is worth down the throats of an almost gullible electorate via a universal language called money. Funding is an ongoing process and only each time it is becoming bigger and bigger.
This time the dose of cash is almost three times that was spent in the last elections in 2009, a whopping $5 billion, an amount only surpassed by the United States where the total expenditure has been just $2 billion more in 2012.
It is the politician who sets the tempo for corruption and a brazen flaunting of rules – the two reasons for which India is also known for. It is he (the politician) who sets the ball rolling by simply brushing aside rules that forbid any candidate to spend over Rs. 7 million on campaigns but end up using at least ten times the amount mainly on buying the voters with cash and alcohol. There are instances when cold cash is delivered rolled along with morning newspapers or through mobile alerts.
Cash, which is often unaccounted black money, has often been found in transport vehicles, be it helicopters or milk trucks and even hearse vans. Enormous amounts are spent on rallies and high tech media campaigns which also include the sleazy practice of paid news. An MLA in Punjab spent Rs. 35 lakh on a single piece of paid news.
It has not been some days back that the Delhi High Court had asked the Centre and the Election Commission to crack down on the country’s two biggest parties — Congress and the BJP for allegedly accepting foreign funds in gross violation of the laws — the Foreign Contribution (Regulation) Act. The court had responded to a PIL filed by activist Prashant Bhushan claiming the Britain-based Vedanta Resources and its subsidiary companies in India — including Sterlite Industries, Sesa Goa and Malco of allegedly donating several crores of rupees to major political parties like the Congress and the BJP. The FCRA prohibits any financial contribution from any foreign source or company to a political party registered in India. Even the cash-strapped AAP has not been spared of such allegations of sleaze-funds.
Political funding in India has remained opaque. Details of financing of the six national parties and 36 regional outfits between 2003 and 2011 show that the top five have mopped up Rs. 4715 crore with the Congress party topping the list followed by the main opposition BJP, BSP, SP and CPI(M). Of this less than 20% came from officially declared donations of Rs 20,000 or more.
Named donors are a tiny part. During the period 2009-11, 11.8 % of income for Congress and 22.78 % for BJP came from known sources. BSP says it has not received donations above Rs 20,000 of its Rs. 193 crore during 2009-10. Parties have refused to divulge any information on the largest donation or its donor. This comes back to the key underlying factor of opacity that almost 80 per cent of their incomes are from unknown sources. It also comes to another most significant but insidious fact that India’s democracy is plagued with its biggest farce, the opaque functioning of political parties with no space for a connect with the common citizen.
This problem persists in India because political funding has not become institutionalized as the conduct of politics costs lots of money, not just to contest elections but also to run a political party. An organized system for mobilizing funds is lacking. It is at this juncture that unorganized funding methods like sale of patronage, extortion and loot of the exchequer creep in.
It is also seen that the bureaucracy also colludes in this process of mobilizing political funding compromising the functioning of the government in the process. Once a politician or a civil servant starts collecting money in exchange for a clearance, permit or simply pushing a file, the concept of bribe-money comes into play. It is this failure to institutionalize political funding which has created widespread corruption and depravity in governance and not to speak of the groaning burden on the economy.
There are several in-built checks that try to stem steady deluge of funds into the elections. Let us take a look at them: The Companies Act, 2013 lays down rules for corporates to make contributions to a political party. It also states that government companies are not allowed to make political contributions. As elections are approaching in May 2014 and war chests are being readied, Indian business just don’t want to reveal their identity as been stipulated in the Act. This they say would lead to a backlash from those political parties that have been less generously funded. As such large groupings of the industry has urged the government to change the Section 182(3) of the new companies act that requires corporates to disclose names of political parties they give money to in their profit and loss account.
Another key law is the Representation of the People Act, 1951. The Section 29B allows registered political parties to accept voluntarily offered contributions from Indian companies, with contributions of more that Rs. 20,000 being required to be declared by the political party to the Election Commission. However it is seen from past experiences that this rule is openly flaunted.
What the political party does is take donations which are under Rs. 20,000 in numerous smaller tranches and amass funds, like the BSP has allegedly been doing.
As discussed above, The Foreign Contributions Regulations Act (FCRA) prohibits political parties receiving funds from a “foreign source” as defined in the Act which includes a foreign company or a company which is a subsidiary of a foreign company, or a multinational corporation. Parties are also not allowed to accept contributions from foreign companies or companies controlled in India by foreign companies unless a special permission is sought from the Central Government. But this rule is also often violated.
The Ceiling on Spending by Political Parties [notified under the Representation of Peoples Act], provides a limit of Rs. 40 lakhs in a parliamentary constituency and Rs. 16 lakhs for an assembly constituency. But with growing inflation and pressures from the political parties, the Election Commission is also discussing another possible 30% hike in individual poll expenditure ceiling, which would ramp up the current ceiling (for Lok Sabha poll) from Rs. 40 lakh to Rs. 52 lakh and for assembly poll from Rs. 16 lakh to nearly Rs. 20 lakh.
Electoral Trusts: This kind of funding of political parties has found favor among both the donor and receiver. Electoral trusts have now started playing an important role in the funding of national and regional political parties. While many of the regional parties prefer to get individual donors who give less than Rs. 20,000 in the form of donations, so that the party does not have to disclose the names of the donors, the bigger parties receive funds from the electoral trusts that are often funded by corporates.
So we see here that despite several teeth to the regulators no laws are left unchanged or simply abused by the rich and the political.
It is interesting to note that in the United States the laws prohibit corporations, labor organizations from making contributions to political parties. The corporations have to establish Political Action Committees, for raising funds to support political contributions. Political contributions, which used to go directly to candidates, now often flow to Super PACs, independent organizations that can raise money to either help or defeat a political candidate. Historically, traditional political action committees have been prohibited from accepting donations from unions and companies. However, following rulings by the U.S. Supreme Court and the Court of Appeals, Super PACs are now allowed to accept unlimited donations from unions and companies, provided the money does not go directly to the campaign.
In the U.S, the Tillman Act, 1907 debarred corporations and national banks from making financial contributions to candidates running for public office. While this ban has survived so far, it has resulted in political parties devising other methods to achieve their objectives. The Bipartisan Campaign Reforms Act, 2002, therefore, laid down strict guidelines to curb the flow of soft money, role of interest groups and political action committees as well as issued regulations to prevent the abuse of issue advocacy (advertisements supposed to inform the public on certain issues but, in practice, supporting or opposing a party candidate.)
Since the introduction of the BCRA in 2002, there has been an upsurge in small donors, especially those making online donations. This became highly visible during the 2008 and 2012 Presidential elections. But considering the cost of these elections, which had been estimated to be a humongous $2.4 billion highly ineffective in curbing the role of big money in elections, but other countries can learn much from their use of strict disclosure laws.
In India, the maximum limit on poll expenditure was last enhanced by 60 per cent in 2011 after six years. The limit for a parliamentary constituency was raised to Rs. 40 lakh from Rs 25 lakh, while the maximum expenses for an assembly constituency was revised to Rs. 16 lakh from Rs. 10 lakh in all major states. These limits are fixed on the basis of the size of a state and several other factors. While the EC has put a cap on the expenses incurred by a candidate, there are no limits on the money spent by political parties and a candidate’s friends.
With pressure from political parties mounting the Commission is also currently looking at hiking this limit too. And if the EC’s latest proposal is accepted, the maximum limit for a parliamentary constituency in Delhi would now be hiked to Rs. 1 crore while a candidate contesting in a parliamentary constituency will be able to incur an expenditure of nearly Rs. 82 lakh.
This recommendation would trigger a fresh round of controversy in the backdrop of the ongoing raging debate over the role of money power in elections. Critics are bound to point out that this will favor the bigger political parties and put the smaller ones at a disadvantage.
This was one of the issues flagged by the Arvind Kejriwal-led Aam Aadmi Party in the recent Delhi assembly elections. The debutant political party had brought about transparency in its fund collection and expenditure by putting all the details in the public domain. It had demonstrated that it was possible to contest an election within the prescribed limit laid down by the EC.
On the flip side, political parties have argued that the current expenditure limits were not realistic and these actually encouraged the use of black money in elections. The cap is laughably low and takes no account of realistic election expenditures. Such caps have the perverse impact of driving campaign expenditure underground. They create the conditions for reliance on unaccounted funds or black money. This in turn makes those candidates who are able to source black money and slush funds dominate politics.
Mounting costs of election campaigns result in candidates taking recourse to incomplete and inaccurate expense statements. If this is known to all, surely we need to do something about the elephant in the room. EC must prepare a paradigm shift where the accent is no longer on spending caps but rather on the transparent and rigorous auditing of party funds. Abolishing the cap on poll expenses would remove a large part of the incentive for illicit funds. Instead of knee-jerk reactions, the EC should root for mandatory auditing of party accounts and strictly enforce disclosure norms which will enable the public to know about large contributors and thus guard against undue influence bought by money. Transparency, rather than unenforceable spending caps, is the best way to reform campaign finance.
Now, if we want to see how these astronomical sums of money are been utilized, here are some facts. The EC has estimated that over Rs 3,500 crore were paid in bribes during assembly elections in 2012. Some trails have led to tax havens like Switzerland. Once Election Commissioner H S Brahma had quoted in the media that the ‘’play of black money is terribly high.’’ During elections an Assembly candidate from a prosperous state like Tamil Nadu, Andhra Pradesh, Karnataka or Maharashtra, in a standard constituency of 3.5 to 5 lakh people, would spend roughly around Rs 1.5 to 3 crore. In more affluent regions where the contest is very tough and the candidates are equally poised and financially very solid, the sky is the limit.
Candidates usually circulate money six to eight months ahead of elections. The EC has pointed out that some candidates ask a friend or supporter to spend on their behalf and reimburse them after the elections, with 10 per cent interest. Centre for Media Studies, a Delhi-based think-tank, said that in the 2008 and 2009 polls, 33.6 per cent of voters in Tamil Nadu were offered money, while the figure was 13.4 per cent in Kerala and 4.4 per cent in West Bengal. The Association for Democratic Reforms said that election expenses were anywhere between Rs. 35,000 crore to Rs. 81,000 crore in a five-year period.
In the 2009 Lok Sabha polls, Rs 10,000 crore was spent, one-fourth of it being black money. An MLA in Punjab spent Rs. 35 lakh on a single piece of paid news.
There are also instances of candidates paying off rebels or other candidates. As per law, political parties do not have to declare the source of a contribution under Rs. 20,000. This loophole is used liberally by almost all parties. Between 2007 and 2009, the Bahujan Samaj Party got Rs 200 crore; not one rupee came in by check. In the same period, the Samajwadi Party received Rs 55 crore, of which Rs 50 lakh was by check. The BJP received Rs 297 crore, of which Rs 55 crore was by check, and the Congress got Rs 72 crore, of which Rs 35 crore came by check.
The week before polling day and the day itself sees a huge surge in the flow of cash, liquor and drugs. This time, in Punjab alone the EC seized Rs. 12 crore, heroin worth Rs. 200 crore and 36 lakh liters of illicit liquor. Till February 5, in UP alone, the EC nabbed Rs. 32 crore unaccounted cash. A Congress leader said bottles of alcohol were kept in small batches in various houses to prevent the EC from raiding.
What we need is a body akin to what has been set up in the U.S. under the Federal Election Campaign Act 1974 which created an enforcement agency called the Federal Election Commission. This body supervises all financial transactions by political bodies that have solicited or spent money to support or defeat federal candidates. The organization verifies all reports presented, and discloses the same to the public and the media. Ideally our Election Commission should be empowered to do exactly this, by law. If this were done there is no need for individual parties to give responses under RTI.
Political parties could also support a law to ban anonymous donations and cash contributions beyond a threshold and put a ceiling on election related expenses of individual political parties. The Election Commission or even a new statutory body should have full authority to oversee the inflow and outflow of political finance and institute legal action if scrutiny is stone-walled.
As a public body, it should suo motu give information collected by it on its website and also arrange for regular media briefings based on the declarations made by political parties. An example has been the AAP which has put up details of donations it received on its website in an effort at transparency that emphasized how the fledgling party was different from established parties and their opaque ways of raising funds.
But first voters need the reassurance that political parties are concerned enough to unite to clean the mess. The present opportunity and its timing can be used to augur the much-needed change. If it is merely used to remove the irritant called RTI, it will show that self-preservation is more important to political parties than bringing transparency into their financial dealings. When half the countries in the world have a strict code and laws on political finance, insist on full public disclosure and impose ceilings on party election expenditure, should the Indian voter be forced to accept any less?
(Rajiv Theodore is India Bureau Chief, The American Bazaar.)
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