Introduction
Today in this article, we shall understand what does the term political party funding mean. We will also look at various legal provisions that guide this funding and the advantages and disadvantages of allowing this funding.
Across the world, political parties require funding to explain and advertise their policies to the electorate, reach out to the people and raise funds for their needs during campaigns. These funds are sometimes also used for carrying out their routine activities. But the first question is what is political party funding? So let’s start our article by answering this question.
Political Party Funding
- It is a type of method used by various political parties to raise money for their campaigns and other activities. This type of funding is also known as grassroots funding or support. This model of funding is also called PPF.
Laws associated with PPF
Provisions according to Representation of the People Act
- Section 29Bof the Representation of the People Act (RPA) entitles parties to accept voluntary contributions by any person or company, except a Government Company.
- Section 29Cof the RPA mandates political parties to declare donations that exceed 20,000 rupees. Such a declaration is made by making a report and submitting the same to the EC. Failure to do so on time disentitles a party from tax relief under the Income Tax Act, 1961.
Provisions as per the Companies Act, 2013
- This Act governs the funding by corporate bodies. Under Section 182, it is given that:
- A company needs to be at least three years old to be able to donate to a political party.
- Companies can donate up to 7.5% of average net profits made during three simultaneous preceding financial years.
- Such contributions must be disclosed in the company’s profit and loss account.
- Approval of the Board of Directors needs to be obtained for the contribution.
Provisions according to Foreign Contribution (Regulation) Amendment Act, 2020:
- Transfer of foreign contributions:Previously under Section 7 of the Act, stipulates a complete prohibition on transfer of foreign contribution received by a person to any other person.
- The FCRA Amendment Act has added a new provision Section 12A which provides that the Central Government may require persons seeking registration/prior permission/renewal to also provide Aadhaar number of all office bearers, directors, key functionaries, or provide copies of passport or the Overseas Citizen of India card, for foreigners.
- Section 8 now states that spend of foreign contribution towards administrative expenses shall be restricted to an upper limit of 20%.
- The Central Government now has been provided with powers to suspend the registration of a person for a period of another 180 days. In addition to the existing 180 days. This is given under Section 13.
Arguments for Political Funding:
IN FAVOUR
- A natural cost in democracy: Political parties and candidates need money for their campaigns and for executing their agendas. They need this funding to advertise their policies, reach out to voters, keep contact with their constituencies and may other related things. This funding is thus a necessary and a natural cost in democracy.
- Cooperation between the private and government: The private companies or individuals who fund these political parties tend to bring forth projects or ventures in the coming times which can benefit the nation and lead to cooperation in terms of development.
- Government treasury is saved: Though the elections are a very important aspect in a country’s democratic structure but spending much of people’s money on it is not good. Thus with the help of this funding the Government treasury to some extent is saved and this money can be utilized in other essential matters.
AGAINST
- Fake companies: In a country like ours, where corruption sores high making fake companies to route black money for funding the political parties is very easy and thus a big problem. Therefore, political funding through companies should be strictly monitored to curb black money.
- Influence: The companies or the individuals who provide funds can easily exercise their influence over the political parties. They can influence in terms of the decisions taken or the policies listed out. This is not desirable for better functioning of the State.
- Loopholes in the legal structure: There are various gaps in the Indian rules and regulations. Thus, parties can get the benefit of non-reporting of funds or misrepresenting the funds at the time of disclosing their assets. This can simply lead to corruption.
- More money in circulation: Due to the existence of fake companies and the funds that go unreported, the spending of the political party increases. This increase in expenditure leads to more money in circulation in the economy. Now, this extra money in economy can result in inflation. This situation is not favorable for any country or economy.
Electoral Bonds
- Electoral Bond is a financial instrument for making donations to political parties.
- The bonds are issued in multiples of Rs. 1,000, Rs. 10,000, Rs. 1 lakh, Rs. 10 lakh, Rs. 1 cr. and Rs. 10 cr. without any maximum limit.
Who can issue these?
- State Bank of India is authorized to issue and encash these bonds, which are valid for fifteen days from the date of issuance.
- These bonds are redeemable in the designated account of a registered political party.
Who can purchase these bonds and when?
- The bonds are available for purchase by any person (who is a citizen of India or incorporated or established in India)for a period of ten days each in the months of January, April, July and October as may be specified by the Central Government.
- A person being an individual can buy bonds, either individually or jointly with other individuals.
- Donor’s name is not mentioned on the bond.
Concerns related to these Bonds
1) Defeats clarity: these clearly defeat the principle of transparency in political finance because it simply hides the identities of the donors from the public.
2) Anonymity: neither the political party nor the donor is under the obligation to reveal anything. This clearly threatens the freedom to obtain political information. But in 2019 the Supreme Court held that all political parties who had received donations through electoral bonds must submit details to the Election Commission of India.
Conclusion
Now that we have understood the topic of political party funding we come to its conclusion. The corruption or fake companies to route black money can all be curbed a little. This is possible if the anonymous donations do not exceed a certain limit say 25% of a party’s total collections. The income of the party through these funds should also be limited keeping in view the number of workers, representatives and the level of elections- Lok Sabha/State Assembly. This will help to curb the misrepresentation.
This Article is authored by:- Bhoomika ( MCMDAV-36, Chd.)