Many companies that faced regulatory action from the Enforcement Directorate (ED) or Income Tax (IT) Department donated electoral bonds worth crores of rupees to ruling parties, show data submitted by the State Bank of India (SBI) to the Election Commission of India (ECI). Some companies which got huge government contracts purchased bonds for large amounts. Some new companies, which were incorporated during the COVID-19 pandemic, purchased bonds worth crores of rupees just months after starting out. Was the electoral bonds scheme used as an extortion tool? Subhash Chandra Garg and Anjali Bhardwaj discuss this question in a conversation moderated by Vignesh Radhakrishnan. Edited excerpts:
Electoral bonds data | Complete list of donors, parties and unique numbers
Subhash Chandra Garg: I trust the investigative analysis that civil society has been doing after the data became available. It is also possible to connect the time of action by investigating agencies and the date on which electoral bonds were purchased. But those who purchased the bonds perhaps trusted the anonymity which this scheme was designed to provide. They would have possibly avoided this route had confidentiality been in doubt. So, this scrutiny might not have been possible without the transparency of the scheme; donations could have remained untraceable.
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Anjali Bhardwaj: Quid pro quo is nothing new. Political party funding has been the fountainhead of corruption in India. Companies do not donate in public interest; they donate to influence policy and law, and give kickbacks to secure contracts. To be sure, this was happening before the introduction of the electoral bonds scheme as well. Some of these transactions were taking place through banking channels and a lot of them through cash. And unless somebody was caught red-handed, quid pro quo was impossible to establish.
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So, what’s the difference? Earlier, regulators had information on what was coming through the banking channels, but the electoral bonds scheme made even that information opaque. The main contention of the government counsel was that the scheme was brought in to reduce cash. The Supreme Court then asked a few questions. First, with the scheme, has there been a ban on accepting cash? The answer was ‘no’. So, along with the scheme, donations through cash continued. Second, although it was expressly forbidden to trade electoral bonds, in reality, there were no safeguards against trading these bonds. Anyone who had money in the bank could buy these bonds and these bonds could then be traded. So, effectively, money gets laundered. The Court weighed these issues against the intended benefits of the scheme and found the loss of transparency and public rights more significant.
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Names of purchasers of electoral bonds and the redeeming parties were never supposed to be in the public domain. Had there not been a judgment or had the SBI not recorded this alphanumeric number, citizens would have never known what was happening.
Subhash Chandra Garg: The argument that cash donations should have been stopped is inaccurate. Cash donations were transparent if they were above ₹20,000; this number was then brought down to ₹2,000. This was as good as banning cash transactions. After the electoral bonds scheme was introduced, cash donations reduced.
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The anonymity between donors and political parties was designed to protect companies from potential retribution. The debate on the public’s right to know donor identities overlooks the privacy of business transactions, which are not typically disclosed to the public or to the government. These include sales, purchases, and patents. The electoral bonds scheme, however, allowed some transparency, as companies disclosed political donations in their financial statements, providing a balance between anonymity and public interest in political financing. I also have to say that the government interferes with our culture of doing business. High taxes and numerous regulations, alongside the government as a major player in sectors such as electricity, mean businesses often have to please the government to succeed. Electoral bonds is a symptom of the sorry state of affairs of doing business in the country. The solution isn’t just to blame companies but to make it easier to do business.
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Anjali Bhardwaj: The electoral bonds scheme was introduced after amending at least four laws, three of which the Court found unconstitutional. The scheme allowed even loss-making companies to donate, a shift from earlier norms where only profit-making companies could donate a capped percentage of their profits. Why would loss-making companies make contributions? It has to be a quid pro quo.
The amendments facilitated the creation of shell companies to funnel anonymous donations to political parties. Critics, including the Reserve Bank of India (RBI) and the ECI, warned that this could lead to generation of black money and obscure political funding. Reducing the cash donation cap to ₹2,000 hardly curtailed the flow of undisclosed cash donations, as parties could still break down large amounts into smaller, untraceable contributions. The substantial income from electoral bonds reported by parties indicates that the scheme became a significant funding source, not necessarily reducing cash donations but by adding another layer of anonymity. Surprisingly, the data reveal few large corporates among the donors, raising questions about the use of shell companies for donations. The scheme’s stated goals of reducing cash in politics and increasing funding transparency have not been met.
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Subhash Chandra Garg: The concerns about shell companies and the potential for misuse of electoral bonds were addressed in consultations with the RBI. Adjustments were made to minimise risks, including setting a finite life for bonds to prevent them from being used as bearer bonds or for money laundering. The fear of shell companies being used extensively under the electoral bonds scheme is overstated. Direct donations from companies’ accounts are logical and transparent, negating the need for shell companies. The scheme’s design, focusing on anonymity, was intentional, and while the SBI’s detailed data might have been released, it offers a chance to understand donation patterns without undermining the scheme’s purpose.
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Anjali Bhardwaj: It is questionable that the SBI claimed it needed four more months to collate data, a task it later completed in just hours, suggesting an attempt to misinform the Court and delay disclosing information. This delay sought was significant because it aimed to push the disclosure past the election date, undermining voters’ right to information as emphasised by the Court’s three-week deadline. Furthermore, if the alphanumeric code was solely a security feature and not meant for creating an audit trail, its recording on both the purchaser and depositor sides potentially compromises the electoral bonds scheme’s integrity. This action by the SBI, a government bank, could have made sensitive information accessible to the ruling party, thus affecting the electoral process’s fairness. Both issues warrant thorough investigation, and citizens have a right to understand the SBI’s role in this context.
Subhash Chandra Garg is former Finance and Economic Affairs Secretary, Government of India; Anjali Bhardwaj is a Right To Information activist and founder of Satark Nagrik Sangathan, a citizens’ group working to promote transparency and accountability in government functioning