The Supreme Court of India is currently examining the validity of the Electoral Bond (EB) scheme, raising concerns about whether it effectively “legalizes kickbacks” to political parties and perpetuates “selective anonymity” of donors. The scheme, introduced in 2018, enables individuals and corporations to donate to political parties while keeping their identities confidential. As the court deliberates on the case, it is vital to understand the intricacies of the EB scheme, its implications for political funding, and the arguments presented.
The Electoral Bond Scheme – A Closer Look
The Electoral Bond scheme was launched with the aim of bringing transparency to political donations by moving them from an unaccounted cash-based system to a formal banking channel. These bonds, available in various denominations, can be purchased through a Know Your Customer (KYC)-compliant account at designated State Bank of India (SBI) branches.
Under the scheme, political parties registered under Section 29A of the Representation of the People Act and securing at least 1% of the votes in recent Lok Sabha or state elections are eligible to receive these bonds. Donors, on the other hand, enjoy 100% tax exemption for their contributions, and their identities are kept confidential both by the bank and the recipient political parties.
Selective Anonymity and Lack of Transparency
The major concern raised by critics of the EB scheme is its “selective anonymity.” While the scheme is not entirely anonymous, it provides a level of confidentiality that allows larger donors to evade risk by breaking down significant contributions into smaller amounts through official banking channels. The result is that their names do not appear in the SBI’s account records, creating a significant information gap.
The opacity of the EB scheme has a cascading effect on the level playing field in India’s electoral landscape. The court highlighted that a significant portion of the funds invariably goes to the party in power, whether at the central or state level, further tilting the balance in favor of incumbent parties. This observation brings into question the fairness of the scheme, as political donations should ideally be distributed evenly to ensure a level playing field among parties.
Balancing Transparency and Confidentiality
Solicitor General Tushar Mehta, representing the government, emphasized that protecting the identity of donors aims to incentivize a shift from a cash-driven economy to a regulated legal system. The confidentiality clause, he argued, safeguards donors from potential backlash or reprisals by political parties that do not receive contributions from these entities.
Mehta’s argument, however, did not fully convince the Supreme Court, which raised questions about the possibility of quid pro quo and kickbacks. The court asked whether the EB scheme might be inadvertently legalizing the motives behind such contributions, creating a loophole for potential misuse.
The Supreme Court proposed an alternative approach where all political donations would be channeled through the Election Commission of India (ECI). This mechanism would ensure that the ECI, a neutral and independent body, distributes contributions to political parties, eliminating any potential biases.
Mehta acknowledged that such a system would likely deter donors from routing their contributions through the ECI, reinforcing the concerns about potential abuse and kickbacks.
Key Concerns and Future Implications
The primary concerns raised during the Supreme Court’s hearings on the EB scheme revolve around its impact on transparency and political fairness. Critics argue that the scheme does not provide a level playing field for political parties and creates a significant information gap. The court’s observations suggest that while the intent of the scheme may be laudable, it may not meet the test of Article 14 (right to equality).
The court’s role in this case is to determine the constitutional validity of the scheme, with the possibility of suggesting revisions or alternatives that better address the concerns about transparency, accountability, and a level playing field in India’s political funding system.
As the case continues to unfold, the fate of the Electoral Bond scheme and its implications for the future of political funding in India remain uncertain. The court’s decision will play a pivotal role in shaping the landscape of political donations in the country.
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