Should the Indian taxpayer pay the hidden cost of donations to political parties?

Prof. Jagdeep Chhokar
Prof. Jagdeep Chhokar

Sruthisagar Yamunan deserves to be complimented for his informative article that brings out a hidden dimension of the electoral bonds used to make anonymous donations to political parties in India.

Headlined “controversial electoral bonds are not only opaque, they come at a cost to the Indian taxpayer, the article asserts that there’s an invisible cost to the scheme. Every time an electoral bond is bought from the State Bank of India, it charges a commission that is paid by the government of India – or, in effect, by the Indian taxpayer.

Towards the end, the article quotes me as saying that “since the [electoral bonds] scheme funnels donations, neither the donor nor the recipient can be expected to pay the commission”. The quote, though accurate, is attributed in a way that leaves the issue hanging, giving the reader a vague impression that I prefer the commission on electoral bonds to be paid by the government.

The issue is a bit more complex. Let me try to clarify it.

  • Corporates and sundry donors were, until fairly recently, donating money to political parties in whatever way the parties and donors preferred.
  • It was the government that decided that donations – above Rs 2,000 – to political parties must be made through electoral bonds. The ostensible purpose for this, the finance minister stated in his budget speech on February 01, 2017, was to introduce “transparency in electoral funding”.
  • The government authorised the State Bank of India to sell electoral bonds.
  • Combining the three facts above, it can be inferred that:
  1. Neither the donors nor the political parties and the State Bank of India initiated the electoral bonds scheme. It was the government that mandated it. Of course, the government got the scheme passed through the Parliament, but more on that later.
  2. Expecting the donor or the receiver to bear the transaction cost is unjustified since neither chose it. It was the government that forced the scheme on them.
  3. The State Bank of India also did not choose the scheme but was forced into it by the government.
  4. This means that since the government forced the three entities – donors, recipients and the bank – into the scheme, the government should bear the transaction costs.

The matter does not end here, though. A few issues remain.

Assuming that the government took this action in public interest, and given the fact that the State Bank of India is a public bank, it should not make profits on the scheme. Rather, it should only charge the expenditure it incurs in the scheme’s implementation. This is why, I had said that the State Bank should deduct the interest it earns on electoral bonds – from the time they are bought to the time they are deposited – from the expenses incurred on administrating the scheme. The balance should be claimed from whoever is determined to pay the transaction cost.

But who should bear the transaction costs?

  1. One option is for the government to lay down – through legislation or executive fiat – that since the donor decided to spend their money, they should bear the transaction costs.
  2. The second option is for the government to lay down – though a similar process – that since the beneficiary in the transaction is the receiver, the transaction costs should be borne by them. But seeing as the receivers in this case are political parties, the government is unlikely to do this.
  3. The government could alternatively order the State Bank to bear the transaction costs.
  4. Or it could bear these costs itself.

It is the fourth option that is at the root of the problem.

Government bearing the transaction costs means that, in effect, they will be borne by the people at large or the taxpayers. This simply means that the people of this country will bear the cost of political parties receiving donations. And if the people’s money is being used to give benefits to political parties, then shouldn’t those political parties be answerable or accountable to the people?

But the Bharatiya Janata Party-led government has told the Supreme Court in an affidavit that political parties should not come under the purview of the Right to Information Act. This was a stand also adopted by at least six national political parties – Bharatiya Janata Party, Congress, Nationalist Congress Party, Bahujan Samaj Party, Communist Party of India and Communist Party of India (Marxist) – all of which blatantly ignored a decision of the full bench of the Central Information Commission in 2013.

If the political parties refuse to be accountable to the people, it is unjustified to use people’s money to pay for administering the electoral bonds scheme.

To top it all, the constitutionality of the electoral bond scheme itself has been questioned, an issue mentioned by Sruthisagar Yamunan in his July 27 article. The scheme was brought before the Parliament as part of what is called a “money bill” – which was not in keeping with the definition of money bill given in Article 110 of the Constitution – making it unconstitutional and illegal.

All of this raises the question whether the scheme was introduced in public interest, or for the interest of political parties and corporates. The Supreme Court recognised the importance of this question on April 13, when in an interim order it said, “All that we would like to state for the present is that the rival contentions give rise to weighty issues which have a tremendous bearing on the sanctity of the electoral process in the country.”

Given this sanctity of the electoral process and the weightiness of the issues, it might well be a contravention of the Supreme Court order to spend more money on the electoral bonds scheme.

The writer is a former director in-charge of the Indian Institute of Management, Ahmedabad. He is among the founding members of the Association for Democratic Reforms.

 

This article was originally published on Scroll.in

Prof. Jagdeep Chhokar
Prof. Jagdeep S. Chhokar (Founder and Trustee, ADR) has a Ph.D. from Louisiana State University, USA and is a former Director In-charge of Indian Institute of Management, Ahmedabad. He had earlier worked with the Indian Railways as a mechanical engineer and manager for over a decade, and as international marketing manager with a public sector organization for four years. He has also taught at Universities in Australia, France, Japan and the US.
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