Skip links

The Business Of Being A Political Party

During the year 2018-19, India’s ruling party, the Bharatiya Janata Party declared Rs 1,612.04 crore as income from unknown sources, which is 64% of the total income of all national parties. While the main opposition party, the Indian National Congress, declared Rs 728 crore from unknown sources.¹.

According to the Association for Democratic Reforms (ADR), a think tank and election reform watchdog, the national parties have collected Rs 11,234 crore from unknown sources in the financial year between 2004-2005 and 2018-19.

So does it mean it is good to be in the business of being a political party? With election trusts and newly-introduced election bonds, the political parties do not have the obligation of revealing their financial resources. But India’s multi-party system has always been an indication of its vibrant democracy. There are over 2000 political parties in India, with eight national parties and 59 recognised state parties. ²

Political parties, their symbols, their leaders, their party’s propaganda, especially before the election time, their sops and their improprieties are all visible to the public but what is not visible is their funding and how they are able to carry on such massive election expenditure.

The common man has a vague idea about funding of a political party. They know that donations by corporates are a few of the sources of funds for the parties. No questions are asked, neither is much hullabaloo caused in the media or otherwise about the source of party funds.

In a survey conducted by me, which received 67 responses, at least 14.1% of the total respondents said they know about donations from businesses and corporates. At least 34.3% people do not know about electoral bonds and electoral trusts while an equal number know about these.

But ideally in a democracy, voters should know the inner workings of the funding of political parties, as openness and transparency in financing of the parties is the mainstay of our representative government.

In countries like US, Japan, Germany, France, Italy, Brazil and even Bhutan and Nepal, the rule says at least 67% of their funding sources should be known, while it is not so in India as political parties do not come under the ambit of the Right to Information. ¹

While political parties have a right to source their finances to play an important role in the country’s democratic process, it is also necessary that the public are made aware of these business transactions. Otherwise there is every chance of corruption creeping into the system, which often gives rise to quid pro quo between donors and corrupt politicians.

People, especially the voters, have a right to know how and from where the parties acquire their funds and how these funds are expended for better accountability in the election process because political parties are not family-run businesses. Although some parties are almost akin to them starting from the grand-old party of Congress to Maharashtra’s Nationalist Congress Party to Bihar’s Rashtriya Janata Dal.

Parties need funds to carry out their all-the-year-round activities and more so during the elections. The election campaigns over the years have seen a splurge of money and starry campaigns and road shows to woo the voters. These are necessary activities for the parties because it initiates a dialogue between political parties and citizens. It also strengthens democracy by providing political parties a level playing field to showcase their ideology to the citizens. So parties need funding to carry out their core activities which are unavoidable costs of democracy. But money can become a tool for exerting undue influence and extracting benefits from the party and this may lead to nepotism, which defeats the very purpose of democracy.

Initially the parties got their money from the membership drive of people, then came corporate contributions, when often the donor companies were usually favoured. It kind of regularised the process of black money seeping into the system.

In 1969, Indira Gandhi banned corporate donations but this further facilitated the entry of black money as political funding went underground.

In 1998, the Supreme Court asked parties to file their annual audited returns, which brought in some transparency. Later, it became mandatory for candidates to file their educational, criminal and financial status before the Election Commission prior to the elections. Election reforms in 2003 made company and individual contributions to political parties 100% tax deductible, incentivising companies to donate openly. Later, there were attempts to make parties publish their incomes and expenditures as parties are ‘public authorities’ and come under the ambit of Right to Information but that rule has not been complied with yet.

More recently, in 2017, the ruling government took several initiatives, to increase the flow of funds to parties by digital and cheque payments but did little to disclose identities of the donors. These include introduction of anonymous electoral bonds, removal of limits on corporate funding and the requirement to declare their political contributions on their profit and loss statement and foreign direct investment in form of political contributions above $2000 in cash was prohibited. ³

The Modi government had introduced the electoral bonds to “cleanse the system of political funding in the country.” ³ An electoral bond is similar to a bank note that is payable to the bearer on demand and free of interest. It can be purchased by any citizen of India or a body incorporated in India. Issued in multiples of Rs 1000, Rs 10,000, Rs 1 lakh, Rs 10 lakh and Rs 1 crore, these bonds are available at specified branches of State Bank of India but what is interesting is that the electoral bonds will not include the name of the donor. In effect the donor and the party details would be available only with the banks. But that is highly unlikely as both parties would want to know each other for future correspondence as in a normal business. ³

As there is minimal transparency in political parties’ funding process, voters would never come to know who or which corporate donor is shelling out money and donating to which party. But this is essential as voters have a right to know if a party is shaping its policies according to the common man’s needs or twisting it according to the whims of its biggest funders.

But in this, the Indian law seems to be aiding the funders as not only donors’ identities remain anonymous, more than half of all the income of national parties in India is derived from unknown sources. ADR, in one of its reports, has claimed these unknown sources include donations through electoral bonds, sale of coupons and relief funds. According to ADR, during the year 2018-19, the total income of national parties from unknown sources stood at Rs 2,512.98 crore. ¹

BJP received more than Rs 900 crore as donations from over 1,500 corporates between 2016-18, over 16 times more than what the Congress got in the same period. ¹ “Out of the six national parties, BJP received the maximum donations of Rs 915.596 crore from 1,731 corporate donors followed by Congress which received a total contribution of Rs 55.36 crore from 151 corporate donors and NCP with Rs 7.737 crore from 23 corporate donors in financial year 2016-17 and 2017-18,” the report said.

So the trend is parties which are more flush with funds are likely to dominate in elections. Similarly the richer candidates, with flashy publicity campaigns are more likely to win over their cash-starved rival in an election. In the same survey conducted by me, at least 79.1% people believe that money does play a disproportionate role in winning elections.

But just as every business, big or small, has to file their returns, provide details of sale, purchase and profit and loss, it should also be made mandatory for political parties, which are almost like business entities. However, none of these guidelines are followed with all political parties refusing to part with details about their donors. And hence over the years, we have seen a steady rise of some political parties with aggressive marketing and propaganda compared to other parties, culminating in an almost non-existent opposition with no voice.

But do these ever widening funding gaps between the political parties, almost run-like businesses now, argue well for a healthy democracy?

Whenever questions have been raised over funding sources of political parties, most parties cutting across party lines have come together and refused to divulge information. They have consistently refused to come under the RTI Act, suggesting amendments in RTI to undermine its basic goals of transparency.

In 2010, the ADR and RTI activist Subhash Agarwal filed an application under RTI, asking for information about the ’10 maximum voluntary contributions ‘ received by them in the past five years. While the Congress Party replied it did not fall under the purview of the RTI Act, the BJP did not bother to reply. Later the petitioners filed a complaint with the Central Information Commission (CIC). In 2013, the CIC gave a landmark judgment, declaring the Congress, BJP, CPI (M), CPI, NCP, and BSP as ‘public authorities’, within the purview of the RTI Act. ⁴

The political parties in turn tried to bring in an amendment in the RTI Act, to keep themselves out of its purview. Parties argued they do not get any government fundings, so how can they be ‘considered public authorities’ and also all information is available in their Income Tax filings.

RTI activists, however say, only limited information is available about party fundings. Moreover, with removal of limits on corporate fundings, electoral bonds, foreign fundings, free airtime on government-run TV and radio, prime land for office in posh localities at nominal rates, political parties should ideally fall under the RTI Act. And as political parties are registered with the Election Commission of India, they have constitutional and legal obligations and play a major role in public life and governance. But political parties are yet to part with their business secrets. It seems nothing is better than to be in the business of politics.

By Jiyan Roytalukdar Senior Secondary Student, Maharaja Sawai Man Singh Vidyalaya, Jaipur

REFERENCES

1. https://adrindia.org/sites/default/files/FAQs%20on%20Electoral%20Trust%20-%20English.pdf2. https://economictimes.indiatimes.com/news/elections/lok-sabha/india/india-now-has-2293-political-parties-149-registered-between-february-march/articleshow/68451605.cms?from=mdrref3. https://www.thehindu.com/news/national/the-hindu-explains-what-is-an-electoral-bond-and-how-do-we-get-one/article22367124.ece4. https://adrindia.org/content/political-parties-under-rti#roadmap

THE SURVEYQuestionnairehttps://docs.google.com/forms/d/e/1FAIpQLSdZgoaROwQqPmaRMJdDlbUv8hiGKRi74FUPvZM9GnSpZnLeSg/viewform
This website uses cookies to improve your web experience.