Copies of official letters and file notings provided by the government to RTI activist Commodore (Rtd) Lokesh Batra unveiled this week a web of lies and deception the government resorted to in introducing electoral bonds in February, 2017. This was supposedly a transparent way of political funding that would also curb the use of ‘Black Money’ in politics.
But the government, as usual, had not consulted anyone. When its attention was drawn at the last moment that it might require the concurrence of the Reserve Bank of India, because it would require an amendment in the RBI Act, the Finance Ministry sent a casual mail for early ‘comments’ to RBI Deputy Governor R.S. Gandhi on a Saturday, January 28, 2017. The Reserve Bank of India replied at length on Monday itself. It wrote on January 30 to the Joint Secretary, Department of Economic Affairs:
•“We have examined the proposal…it would seriously undermine a core principle of central banking legislation and would set a bad precedent.”
•“Even the intended purpose of transparency may not be achievable, as the original buyer of the instrument need not be the actual contributor to a political party.”
• “There is no special need for, or advantage by, the creation of an Electoral Bearer Bond, that too by disturbing an established international practice.”
• “If it is the intention that the person/entity buying such a bond is expected to tender it to a political party, such an intention can be accomplished today by a nominal cheque, demand draft or any electronic or digital mode of payment.”
But Revenue Secretary Hasmukh Adhia and Secretary of the Department of Economic Affairs Tapan Ray noted that the RBI had not ‘understood’ the scheme. In any case, its advice was received ‘too late’ and since the Budget papers had already been printed, there was nothing more to be done.
Adhia noted in the file, “It appears to me that the RBI has not understood the proposed mechanism of having pre-paid instruments for the purpose of keeping the identity of the donor secret, while ensuring the donation is made only out of fully tax paid money of a person”. What is significant is that the ministry had already printed the Budget and was committed to amend the RBI Act without holding any consultation with it.
The amendment in the RBI Act did away with three important caveats for corporate donations to political parties in India:
· No foreign company could donate to any political party under the earlier Act.
· No company could donate more than 7.5% of its average annual profit declared in the preceding three years and
· Companies had to disclose details of their political donations in their annual statement of accounts.
The introduction of the electoral bonds did away with all the three restrictions and has allowed on paper, foreign companies and even shell companies to donate to political parties.
Ironically, the then Finance Minister late Arun Jaitley had claimed in his budget speech, “This reform will bring about greater transparency and accountability in political funding, while preventing future generation of black money”.
The scheme has been challenged in the Supreme Court of India but since April, 2019, there has been no hearing in the case.
Huffpost India in a series of reports has also exposed how the finance ministry misled the Election Commission of India, lied to Parliament and claimed that the ECI had not communicated any concern and how the government not only failed to consult political parties but also kept them in the dark.
In yet another expose, Huffpost India has published government communication indicating that it was the PMO which directed that finance ministry violate its own rule and open the sale of bonds for longer periods and more than the four times in a year that was laid down. This was done before crucial state assembly elections.
While Congress has demanded the Government should scrap the scheme, all eyes are now on the Supreme Court to see if it puts its seal of approval on it.