SC to Hear Petitions Challenging Electoral Bonds Scheme

October 11, 2023

The Supreme Court has scheduled a hearing for October 31 to address petitions challenging India’s electoral bonds scheme. This scheme, introduced in the 2018 Union Budget, provides a method for anonymous donations to political parties. Two non-governmental organizations, Common Cause and the Association for Democratic Reforms (ADR), filed petitions against the scheme, questioning its transparency and legality.

What Are Electoral Bonds?

Electoral bonds are interest-free bearer instruments designed to facilitate anonymous financial contributions to political parties in India. In essence, they enable anyone to donate money to political parties using these bonds.

Purchasing Electoral Bonds

These bonds are available in multiple denominations, ranging from Rs 1,000 to Rs 1 crore. They can be acquired from authorized branches of the State Bank of India (SBI). Donors must pay the chosen amount, for instance, Rs 10 lakh, via a check or digital means (cash is not accepted) to the authorized SBI branch.

Utilization by Political Parties

Political parties can encash these bonds within 15 days of receiving them and use the funds for their electoral expenses. There are no restrictions on the number of bonds that an individual or company can purchase. If a political party fails to encash the bonds within the stipulated time frame, SBI deposits them into the Prime Minister’s Relief Fund.

The Rationale Behind Electoral Bonds

When the electoral bonds scheme was introduced by the then Finance Minister Arun Jaitley in 2017, it aimed to address the issue of opaque political funding. Jaitley noted that anonymous donations in cash were prevalent, and this system needed to be cleaned up to ensure transparent political funding.

The scheme brought two main changes. First, it reduced the permissible amount of cash donations from anonymous sources from Rs 20,000 to Rs 2,000. Second, it introduced electoral bonds to enhance transparency in political funding.

Legal Challenges and Criticisms

Several legal challenges and criticisms have emerged regarding the electoral bonds scheme:

Obscure Funding System: The scheme is criticized for being an opaque funding system with limited oversight, and this has led to legal challenges by various parties and NGOs.
Removal of Donation Limits: Before the scheme, there was a cap on corporate donations to political parties at 7.5 percent of the average net profits over the previous three years. Critics argue that the removal of this cap through amendments to the Companies Act opened the door to unlimited corporate funding, potentially compromising the interests of the people.
Anonymity and Lack of Transparency: Critics argue that the anonymity of donors under the scheme contradicts its goal of transparency. It raises concerns about potential government knowledge of who is funding opposing parties, potentially enabling undue influence or victimization.
Disproportionate Beneficiary: Critics note that a substantial portion of electoral bonds have been in the highest denomination (Rs 1 crore), undermining the intention to enable common people to support political parties of their choice.

Furthermore, concerns have been raised regarding the disproportionate distribution of electoral bonds, with a significant majority going to the party in power, raising questions about fairness and equity in the political funding landscape.

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