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Modi govt vs EC: The battle over election funding is far from over

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Anonymity of the donor and enabling even non-profit making companies to buy bonds are the two major concerns raised by the EC.

New Delhi: The battle over transparency in election funding is far from over. Even as the Narendra Modi government pushed through the controversial electoral bonds and announced their contours this week, the Election Commission is planning to once again express its unhappiness.

Sources told ThePrint that the EC still feels these bonds may hurt transparency in poll funding, contrary to the government’s stated intent of cleaning up the funding of elections.

Anonymity of the donor and enabling even non-profit making companies to buy electoral bonds are the two major concerns raised by the EC—both have been ignored in the scheme announced this week by Finance minister Arun Jaitley.

The poll panel had red-flagged these in a communication to the law ministry in May 2017, and later at a meeting called by the finance ministry to discuss the scheme.

The reservations

The EC had written to the law ministry on 26 May 2017 expressing concerns over the amendments in the Finance Act 2017 that these will have “serious impact on transparency aspect of political finance/funding of political parties”.

The Finance Act 2017 had introduced changes in the Income Tax Act, 1961, the Companies Act, 2013 and the Representation of People Act 1951 to enable the launch of the Electoral Bond scheme.

The amendment to the RP Act has enabled that any donation received by a political party through an electoral bond is taken out of the ambit of reporting under the ‘contribution report’ prescribed under the act.

The EC had termed this a “retrograde step” as this will make it difficult to identify whether a political party has taken any donation in violation of Section 29B of the RP Act, which prohibits parties from taking donations from government companies and foreign sources.

Another major concern expressed by the EC is over amendments made to Section 182 of the Companies Act. This section earlier required that a company register at least 7.5 per cent average net profit in the last three financial years before contributing to a political party. Amendments made now have taken off this clause from the statute.

The EC had written to the law ministry pointing out that this opens up the “possibility of shell companies being set up for the sole purposes of making donations to political parties with no other business of consequence having disbursable profits”.

It emphasised in its communication that the earlier provisions ensured that only profitable companies with a proven track record could provide donations to political parties and recommended that the same be re-introduced.

The EC had pointed to these gaps and asked that these clauses be “reconsidered and modified” so as “to provide for transparent reporting of contributions received by the political parties through electoral bonds”.

At a stakeholder meeting with the finance ministry, it was also expressed by some quarters that with only banks in the know of the identity of the donor, there is a possibility that the ruling party could use this information to its own advantage.

More opposition

The scheme has run into more hurdles. The Congress party has argued that the scheme will work against the very objectives with which the government claimed to have announced it and it could end up legitimising anonymous donations of unlimited amounts.

Former chief election commissioner S.Y. Quraishi has also pointed out that it will only increase the level of anonymity in political funding in the garb of electoral bonds.

As he was demitting office, then CEC Nasim Zaidi had also pointed out that the scheme was at odds with the principle of transparency.

“What has been indicated in law so far doesn’t indicate much transparency. Some people’s concern may be to give anonymity to big donors but we are here to work for the people,” Zaidi had told ThePrint in the interview.

“They want to know who has contributed to whom and how much amount — this should be disclosed. So it is a question of trade off — whether the people’s right to know is supreme or not,” he added.

The government’s stand

Sources in the finance ministry who have been closely involved with the deliberations on the scheme maintain that concerns raised by the EC had been discussed within the government but it was felt that a balance had to be found between taking a decisive step to curb use of black money in political funding and allowing legitimate use of white money to fund political parties.

Jaitley also said this week that electoral bonds will ensure clean money. On the question of anonymity of the donor, the minister said that past experience has shown that once the names are disclosed, there is a tendency to shift to cash donations and the new system will bring in substantial amount of transparency if not total.

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  1. No amendment to sec 182 by Administrative Ministry i.e. MCA has been made in its act nor any notification/circular issued amending the aforesaid section whereas finance act had amended.

    what would be the stand of sec 182 as of now if no circular/notification or amendment by concerned administrative ministry is there

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