– An article by Maj Gen Anil Verma (Retd) (Head of ADR) and Ms Shelly Mahajan (Program and Research Manager (Political Party Watch) at ADR)
There is a need for intervention to ensure healthy electoral competition and to diversify the sources of political funding. Otherwise, it is always the citizens at large who end up paying for the costs of their democracy
The unequal access to and the distribution of private donations directly impact the equality of political participation and electoral competition. The electoral level-playing field can be seriously undermined as a result of financial disparities between political forces, giving the better-resourced parties an edge over their competitors. This is also true for political funding in India. Despite decades of reform proposals, the nexus between money and politics persists due to weak legal enforcement, inadequate regulation, and a lack of political will.
Before the introduction of electoral bonds, which were ruled unconstitutional by the Supreme Court last year, corporates made donations to political parties either directly or through electoral trusts. Between the Financial year 2013-14 and 2023-24, the direct corporate donations declared by the incumbent BJP are at least four times more than all other national parties combined, and its overall share is almost 84.648 per cent. In the case of electoral trusts, the incumbent party received six times more funds and around 71.665 per cent of the total share.
The Electoral Trust Scheme was introduced by the UPA government in 2013. Among the top ten trusts, Prudent Electoral Trust received the highest donations of Rs 33,30.537 crore, 86.38 per cent of the total contributions declared by all trusts between FY 2013-14 and 2023-24. During this period, 75 per cent of the donations disclosed by the Trust were made to the BJP. In its latest report of FY 2024-25, the trust declared receiving the largestz donations of Rs 2668.4917 crore. It donated Rs 2180.7119 crore to the BJP and Rs 216.335 crore to the Congress. Thus, not only are the funds contributed to electoral trusts dominated by one particular trust, but the funds disbursed from these trusts favour the incumbent party.
While trusts are relatively more transparent than the electoral bonds, the information regarding the method of disbursal of funds received from the donors to the political parties by them is not publicly available and is likely left to their discretion without ample scrutiny. The companies that have donated to these trusts and the beneficiary parties are known through the regular filing of reports. However, what is not known to the public is which party benefited from which company. Only the Election Commission and the income tax department know this since the introduction of the transparency guidelines in 2014, which required trusts to disclose the records of their donors or donees to them. For greater transparency, the names of electoral trusts should indicate the name of the company/group of companies that set up the trusts.
The present political funding in India relies largely on corporates which donate directly or through Electoral Trusts to political parties ruling at the Centre or state level. There seems to be a quid pro quo between the corporates and such parties. As far as other parties are concerned, there is no level-playing field. The five-judge constitution bench of the Supreme Court in the electoral bonds case called quid pro quo an instance of institutionalised corruption. In paragraph 201, the court bluntly said that “the reason for political contributions by companies is as open as daylight.” In paragraph 212, it further added that “contributions made by companies are purely business transactions made with the intent of securing benefits in return.”
Campaign finance is also mired by the absence of legal limits on political parties’ election expenditure. Unlimited party spending on more ambitious, sophisticated and professional campaigns has resulted in increasing costs of elections, making it one of the most expensive elections globally, surpassing even the US elections.
The earliest discussions on the cost of elections were held in the Constituent Assembly in 1948. They argued in favour of the need for the state/public treasury to bear election expenditure in a regulated, least expensive and organised manner. They reasoned that an election is a state affair, not a private concern, and any unfair advantage to richer candidates must be avoided. Several committee reports and experts have recommended the introduction of public funding in India. It is argued that such a move should follow the implementation of requisite political and electoral reforms, such as the enforcement of internal democracy and transparency in the working of political parties, bringing parties under the Right to Information and a ban on private donations, among others. However, it is important to remember that corporate donations were banned in India from 1969 until 1985. In the absence of any alternate means for lawful funding, this ban was followed by the consolidation of an opaque, corrupt political finance regime in which political favours were traded for donations, popularly referred to as “briefcase politics”.
Hence, any political finance framework or legislation that is adopted must be able to address the issue of disparity in access to funds among political parties, concentration of economic power in the hands of a few parties and donors, and political corruption as a result of illegitimate sources of funding. Steps must be taken to reduce entry barriers to political contestation or the representation of candidates who do not enjoy financial prowess. There is a need for intervention to ensure healthy electoral competition and to diversify the sources of political funding. Otherwise, it is always the citizens at large who end up paying for the costs of their democracy.
The article was originally published in The Indian Express.