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Electoral Bonds

  • 01 Aug 2022
  • 6 min read

For Prelims: Electoral Bonds, Political Parties, Representation of the People Act 1951

For Mains: Effects of Electoral Bonds on the election process, Issues Arising Out of Design & Implementation of Policies

Why in News?

Recently, the State Bank of India (SBI) shared data reporting that Donations to political parties through electoral bonds (EBs) have crossed the Rs 10,000-crore mark.

  • In the 21st sale of EBs conducted in July 2022, parties received another Rs 389.5 crore from EB purchases.
  • The total amount collected by parties has gone up to Rs 10,246 crore since 2018 when the EB scheme was introduced.

What are Electoral Bonds?

  • About:
    • State Bank of India is authorised to issue and encash these bonds.
    • Electoral bonds are purchased anonymously by donors and are valid for 15 days from the date of issue.
    • As debt instruments, these can be bought by donors from a bank, and the political party can then encash them.
    • These can be redeemed only by an eligible party by depositing the same in its designated account maintained with a bank.
    • The bonds are issued by SBI in denominations of Rs 1,000, Rs 10,000, Rs 1 lakh, Rs 10 lakh and Rs 1 crore.
    • The bonds are available for purchase by any citizen of India for a period of ten days each in the months of January, April, July and October as may be specified by the Central Government.
  • Eligibility:

Why are Electoral Bonds a Concern for India?

  • Contradicting its Basic Idea:
    • The central criticism of the electoral bonds scheme is that it does the exact opposite of what it was meant to do i.e. to bring transparency to election funding.
      • For example, critics argue that the anonymity of electoral bonds is only for the broader public and opposition parties.
  • Possibility of Extortion:
    • The fact that such bonds are sold via a government-owned bank (SBI) leaves the door open for the government to know exactly who is funding its opponents.
      • This, in turn, allows the possibility for the government of the day to either extort money, especially from the big companies, or victimise them for not funding the ruling party — either way providing an unfair advantage to the party in power.
  • A Blow to Democracy:
    • Through an amendment to the Finance Act 2017, the Union government has exempted political parties from disclosing donations received through electoral bonds.
      • This means the voters will not know which individual, company, or organization has funded which party, and to what extent.
    • However, in a representative democracy, citizens cast their votes for the people who will represent them in Parliament.
  • Compromising Right to Know:
  • Against Free & Fair Elections:
    • Electoral bonds provide no details to the citizens.
    • The said anonymity does not apply to the government of the day, which can always access the donor details by demanding the data from the State Bank of India (SBI).
    • This implies that the government in power can leverage this information and disrupt free and fair elections.
  • Crony Capitalism:
    • The electoral bonds scheme removes all pre-existing limits on political donations and effectively allows well-resourced corporations to fund elections subsequently paving the way for crony capitalism.
    • Crony Capitalism: An economic system characterized by close, mutually advantageous relationships between business leaders and government officials.

Way Forward

  • There is a need for effective regulation of political financing along with bold reforms to break the vicious cycle of corruption and erosion of quality of democratic polity.
  • It is crucial to plug the loopholes in the current laws to make the entire governance machinery more accountable and transparent.
  • Voters can also help bring in substantial changes by demanding awareness campaigns.
    • If voters reject candidates and parties that overspend or bribe them, democracy would move a step higher.

Source: IE

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