The Big Corporate Takeover of Political Funding

On 14 May, Kapil Mishra accused the Aam Aadmi Party of running shell companies and receiving black money as political funding. In light of the development, The Quint is republishing this story detailing how the Modi government, through the Finance Bill 2017, made it easy for corporates to donate huge sums anonymously to political parties.

Tunday kababs were thought to be near-extinction, anti-Romeo squads are on the prowl, Yogi Adityanath is scrunching his nose in disapproval at paan-stained walls and his ministers are angrily sweeping office corridors, because, Swachh Bharat.

While news channels were tripping over each other to broadcast the Uttar Pradesh chief minister’s very own ‘Truman Show’, the big boss at the Centre passed the Finance Bill 2017 in the Lok Sabha. With a voice vote, amidst a walkout by the Congress and the BJD.

The brazenness with which the government clubbed non-money related clauses in a money bill to avoid a debate in the Rajya Sabha is only half the story. Among the contentious amendments that have failed to get adequate attention, is the one on political donations.

(Photo: The Quint/Rythum Seth)

Also Read: IT Act Passed - Why Even Honest Taxpayers Should Be Really Afraid

Political Donations Made Easy, for Companies

Not only has the government removed the limit on the amount companies can donate to political parties, it allows it do so without naming the political party.

As PRS, a legislative research firm, explains:

Currently, a company may contribute up to 7.5 percent of the average of its net profits in the last three years to political parties. The company is required to disclose the contributions made to political parties in its profit and loss account, along with the name of the political parties to which such contribution was made.

The amendments to the Finance Bill 2017 propose to remove: (i) the limit of 7.5 percent of net profit of the last three financial years, for contributions that a company may make to political parties. (ii) The requirement of a company to disclose the name of the political party to which a contribution has been made.

(Photo: The Quint/Rythum Seth)

Political Donations in ‘Digital India’

Additionally, this contribution can only be made through a cheque, bank draft, electronic means, or an electoral bond. An electoral bond, introduced through an amendment to the Reserve Bank of India Act, 1934, is a bond issued by notified banks, worth specified denominations, that can be bought by depositing a cheque or using digital money.

In his post-Budget media interaction on 1 February, Finance Minister Arun Jaitley elaborated on just how inventive the electoral bonds will be.

Every recognised political party will have to notify one bank account in advance to the Election Commission and these can be redeemed in only that account in a very short time. These will be bearer bonds to keep the donor anonymous. The present system has failed and we are experimenting with a new system.

Ye dosti hum nahin todenge?  Both UPA and NDA have refused to bring political parties under the ambit of the RTI. (Photo Courtesy: The Quint/Liju Joseph)

Essentially, under this new system, a company can now channel large sums of money into a political party through electronic means and maintain anonymity.

We, the people, remain oblivious as to which company is wielding how much influence on which political party that may or may not be in government or shaping our country’s agenda.

Win-Win Situation

As for cash donations, the government reduced the limit of anonymous cash donations from Rs 20,000 to Rs 2,000.

Lowering the limit, without putting a cap on the total amount of anonymous cash donations, undermines the effort to stop the channelling of black money into political parties. The parties can simply claim they got multiple donations of Rs 2,000 instead of a lump sum.

Also Read: Why is Govt Desperate to Make Aadhaar Compulsory For I-T Returns?

Comparison with American-Style Corporate Lobbying

An analysis by Stockholm-based International Institute of Democracy and Electoral Assistance (IDEA) shows that India is among a mere 10% of the countries in the world (or one of nine among 37 Asian nations) that allow political parties or candidates to receive anonymous donations.

Unlike the United States, lobbying is illegal in India. Unlike the United States, where lobbies are mandated to make full disclosures on their spending and activities, there is no grasp on the stakes held by corporate interests on Indian decision-making bodies.

But we know lobbying already exists in India. It has come to the fore with the Radia tapes expose, the 2G scam and when Walmart told the American Congress that it spent $25 million on lobbying activities including “enhancing access to the Indian market”. What we do not know is to what extent are our decision-making bodies ‘taken’.

Donald Trump’s refusal to reveal his tax returns was a major flashpoint during his campaign for President. (Photo: Reuters)

One can argue that the American system is far from perfect. In fact, Lee Drutman, a political scientist and author of The Business of America is Lobbying suggests that American corporations are spending more money to push their agenda in Washington than the American government spends on running the country.

Corporations, he claims, spent $2.6 billion in 2014 on reported lobbying expenditures – more than the $2 billion the country spent to fund the House and the Senate.

But mandatory disclosures allow the American public access to a fair amount of information on their political leaders and those who fund them. Even so, the fight for transparency from those in public life continues in the American discourse.

In comparison, the Modi government’s decision to give a free pass to companies to invest heavily and anonymously to political parties, pushes the light at the end of the tunnel to a distant future.