March 20, 2023


Syllabus: general studies paper 2


Electoral funding of political parties lacks transparency. Over the years, many steps are taken by the government to make it a more secret affair


  • In 2014, the delhi high court heldthat both main national parties (congress and bjp) were guilty of accepting donations illegally. They both accepted donations from companies registered in india but who’s controlling shareholders was a foreign company. The court held that this is a violation of the foreign contribution (regulation) act (fcra), 1976.
  • In 2016 and 2018, thegovernment amended the fcra through the annual finance bills. These bills exempt political parties from the scrutiny of funds they have received from abroad since 1976. This enabled new and regressive pathways that afford full anonymity to corporate and foreign political donors.
  • In 2017, the amount of anonymous cash donations to political parties was reduced from ₹20,000 to ₹2,000to ensure greater transparency in political funding. However, the introduction of electoral bonds introduced a new form of anonymity. It led to the funding of thousands of crores of anonymous donations.

Issues with electoral funding system:

  • Amendments in fcra, 1976:in 2014, the delhi high court held that two national political parties were guilty of illegally accepting donations from two companies registered in india but whose controlling shareholder was a foreign company.
    1. In 2016 and 2018, the government amended the fcra through the annual finance bills, to retrospectively legalise the violations.
    2. As per the amendment, earlier, foreign companies or companies where the controlling stake was held by a foreign company couldn’t contribute; now they can.
  • Amendments in companies act, 2013:the finance bill of 2017 amended section 182 of the companies act of 2013 to remove the requirement for declaring disaggregated donations to political parties.
  • Nullifying rti effect:the right to information (rti) act of 2005 enables easier access to information held by public authorities.
  • Electoral bonds:in 2017, the introduction of electoral bonds brought a new form of anonymity to thousands of crores of donations.

Suggestions for transparency in election funding:

  • All parties in existence should submit their audited accounts on the website and file it returns
    • The sources of revenues should be recorded and disclosed
    • After elections the expenses with details of the source of fund should be filed within 6 months
    • All parties should maintain proper accounts with details of receipt and expenditure and it should be published every year after audit by appropriate authority appointed by the election commission
    • Political donations to various political parties should be routed through the election commission of india
    • Compulsory registration of donors should be enforced
    • Issuance of a receipt for donations should be made compulsory
    • Every party should be asked to disclose the amount they have spent on their campaign
    • Cash donations should be completely banned
    • The funds from all parties could be managed centrally through the election commission of india
    • An election deduction can be introduced so a small percent is deducted from every citizen’s payroll and directed to the political party of his/her choice. If no choice is identified by citizen, such funds are put in a central pool and allocated based on number of candidates and other criteria.

Question- recent changes in india’s election funding system create more loopholes rather plugging it .discuss

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