Why is it in the news?

• The Supreme Court has recently struck down the Electoral Bonds Scheme.

 About the ruling

• The apex court’s ruling declaring the Electoral Bonds Scheme unconstitutional is primarily based on its infringement of the Right to Information under Article 19(1)(a) of the Indian Constitution. This fundamental right ensures citizens’ freedom of speech and expression, including the right to know.
• The court highlighted that the scheme also undermines the principle of free and fair elections enshrined in the constitution.
• Additionally, the court nullified the amendments made to the Income Tax Act and the Representation of People Act, which facilitated anonymous donations through electoral bonds.
• The Supreme Court criticized the provision allowing unlimited political contributions, emphasizing that it paves the way for undue influence by entities with significant financial resources.
• As part of its judgment, the court directed the State Bank of India (SBI) to provide details of electoral bonds purchased since April 12, 2019, to the Election Commission.

About Electoral Bonds

• The Electoral Bonds Scheme, introduced by the Government of India in 2018, aimed to reform political funding by introducing a mechanism for transparent donations while protecting the anonymity of donors.
• Electoral bonds function as promissory notes that can be purchased by Indian citizens or incorporated companies from select branches of the State Bank of India. These bonds can then be donated to eligible political parties.
• Donors have the discretion to contribute electoral bonds to the political party of their choice, maintaining their anonymity. This feature was intended to safeguard donors from potential repercussions or bias.
• The primary objectives of the Electoral Bonds Scheme were to enhance transparency in political donations and curb the influence of black money in elections. By channelling contributions through formal banking channels, the scheme aimed to track and regulate political funding.

Working Mechanism

• Electoral bonds are issued in denominations of Rs 1,000, Rs 10,000, Rs 100,000, and Rs 1 crore.
• The bonds can be encashed through the verified account of the recipient political party and are valid for fifteen days.
• They are available for purchase for a duration of 10 days at the beginning of every quarter.
• Eligibility for receiving electoral bonds is restricted to political parties registered under section 29A of the Representation of the Peoples Act, 1951, and securing at least one percent of the votes polled in the most recent General or Assembly elections.
• Donors’ identities remain anonymous as the electoral bonds do not bear the name of the donor, potentially leaving the political party unaware of the donor’s identity.
• Tax exemption is granted to both the donor, who receives a deduction, and the recipient political party, provided returns are filed by the political party.

Concerns Raised

• Critics raised concerns about the anonymity of donors, arguing that it hampers transparency and accountability in the political funding process. The cash donation limit was reduced from ₹20,000 to ₹2,000, while mandatory disclosure remained at ₹20,000.
• Amendments removing caps on corporate donations and disclosure obligations were perceived as detrimental to transparency efforts.
• The issuance of electoral bonds primarily in high denominations raised apprehensions about corporate dominance over individual donors.
• The lack of transparency in fund transfers to political parties through electoral bonds posed challenges in tracking corporate contributions.

Conclusion

• Transparency in election funding is essential for voters to understand the financial backing behind political parties and candidates.
• Implementing stringent regulations is necessary to limit the influence of private interests on elections and governance.
• Creating a level playing field ensures fair competition among politicians and parties, irrespective of their financial resources.
• Stricter enforcement of campaign finance laws and promoting public financing can enhance accountability and integrity in the electoral process.