Electoral Bonds

The government on Monday said it will go ahead with electoral bonds even if consensus eludes on the issue as political parties have not come up yet with any suggestion on the proposal. The system of cash donation has to change and people despite knowing the "truth" are "reluctant" to offer their suggestions on the electoral bonds, Finance Minister Arun Jaitley said.

While introducing the Union Budet 2017-18, Jaitley announced capping of anonymous cash donations to political parties at Rs 2,000 and introduced the concept of electoral bonds. The move is aimed at infusing tranparency in political funding to weed out black money and to make parties accountable. The government has to amend the rules of the Reserve Bank of India to facilitate such bonds in the form of promissory notes.

Any funding amount more than Rs 2,000 will be required to be made through cheques or digital payments, where all political parties are also required to file income tax returns for the same. Donor can be a person, an organisation or even a company. It is understood that electoral bonds can be issued only banks authorised by the RBI. Donors will subscribe to them by way of cheques or digital payments.

Donor's identity will be protected. Banks will pass on such bonds to the political parties concerned, which encash them in times of need. Such parties will have to submit their accounts to the Election Commission. Analysts feel that electoral bonds would take the form of a bearer bond. As a bearer instrument, it differs from the more common types of investment securities in that it is unregistered no records are kept of the owner, or the transactions involving ownership, says Wikipedia.

Where is the transparency then of the funding process? At present, political parties should report donations of above Rs 20,000 only to the Income Tax department. But in the case of electoral bonds, as identity is guarded, voters will not know who is contributing to the political parties, and hence no transparency. As parties cannot report sources to the I-T, they will continue to get tax exemptions, it is being felt.