Swim against funding tide - Opaque India stands out

Charu Sudan Kasturi, TT, New Delhi, April 2: A clutch of legal amendments the Narendra Modi government has introduced to allow corporate political donors to mask their contributions drags the world's largest democracy against global currents of rising transparency in electoral funding, analysts and activists have warned.

From Brazil to Bangladesh, and Croatia to Cyprus, countries of diverse sizes and varied histories with democracy have over the past decade adopted laws and rules aimed at making the disclosure of all political funding mandatory.

In more established democracies like the US, transparency of political funding has emerged as a key focus of election debates, including those in the run-up to last year's presidential election. Some, like Britain, have tightened existing rules after discovering misuse.

But the Finance Bill that the Lok Sabha passed last week exempts companies from declaring the identities of the political parties they have donated to. It also eliminates a cap on corporate funding to political parties: firms could so far donate only up to 7.5 per cent of their average net profits over the previous three years.

Separate amendments --- to the Representation of the People Act, Reserve Bank of India Act and the Income Tax Act --- have allowed political parties to avoid disclosing corporate funding received through the newly launched "electoral bonds".

These changes clash sharply with international trends, analysts said. They contrast with the promise of greater transparency in administration that the Prime Minister and his party have repeatedly made, before and after coming to power in 2014.

They coincide with demands the government has made for greater transparency from ordinary citizens, such as through the Aadhaar card.

"These changes run contrary to global trends of increasing transparency," Eswaran Sridharan, academic director of the University of Pennsylvania's Institute for the Advanced Study of India, said. "The sum total of all these changes is that there will likely be an increase in the flow of funds to political parties, but not greater transparency."

Even before the latest changes, regulations on political funding in India were riddled with holes and opportunities for misuse far greater compared with other major democracies.

"I don't think India is normally held up as an example in political finance," Kevin Casas-Zamora, a former Vice-President of Costa Rica who is now a senior fellow at Washington-based think-tank Inter-American Dialogue and has researched international political financing for years, said in an email to The Telegraph.

"In terms of regulation, the global trend is clearly towards greater transparency, for instance by banning anonymous contributions and imposing more taxing reporting requirements on parties and candidates," Casas-Zamora said, before referring to the Indian changes. "It doesn't help, for sure."

In the US, companies are banned from directly funding political parties or candidates. They donate to campaigns through "political action committees" (PACs) set up by groups of supporters, and even firms.

The PACs collect funds from multiple sources and use them for campaigns. The PACs are required to submit details of all their funding and expenses to the Federal Election Commission.

Still, activists and shareholders have been trying to plug a key loophole: social welfare organisations are not required to disclose their political funding, so corporate groups desperate to shield their donations can route them through such groups.

Many major firms -- such as Intel, Microsoft, Edison and JP Morgan Chase -- have voluntarily begun sharing details of their political funding with shareholders.

Britain requires companies and individuals to disclose political donations of more than £5,000 (Rs 4.06 lakh) to a central party office or more than £1,000 (Rs 81,300) to a local party office.

To circumvent this law, parties in the 2005 general election began drawing loans -- instead of donations --- from companies. So the law was amended to make the reporting of loans and other forms of sponsorship mandatory too.

Parties in Germany need to submit detailed accounts of their funding, including the identities of the donors, to the Bundestag, the country's lower house of parliament.

France has a National Commission for Campaign Accounts and Political Funding that publishes the accounts of all parties annually.

Many countries with more chequered, or recent, trysts with democracy have over the past decade strengthened their monitoring norms for political funding.

Plagued like India by corruption, Brazil made it mandatory in 2010 for political parties to reveal the details of all donations on their websites.

Since 2011, Kenya, Tunisia and Cyprus have required parties to publish annually in newspapers the details of all the donations they have received.

In Bhutan, which adopted democracy only in 2008, parties need to make public the details of all donations received.

In Bangladesh, which unlike India has suffered coups and military-backed rule, parties must reveal details of donations over 5,000 takas (Rs 4,040). Companies have since 2009 been barred from donating more than 25 lakh takas (Rs 20.2 lakh) to any party.

In contrast, India in 2013 took a step aimed at stalling the transparency of political funding. After the Central Information Commission declared political parties "public authorities" under the Right to Information Act, the then UPA government introduced a bill to exempt parties from having to disclose the donations they have received to RTI applicants.

The amendments haven't been passed by Parliament -- a new Lok Sabha took oath --- but the CIC has not enforced its own ruling, letting RTI applications seeking information on political funding gather dust.

Registered parties in India, therefore, need to detail their funding only to the income-tax department and the Election Commission --- a requirement from which donations through electoral bonds are now exempt.

The latest amendments risk pulling India farther away from other major democracies because industrial houses can now donate as much as they wish, through electoral bonds, without either them or the parties needing to reveal this funding, analysts said.

Transparency activists contend that this clashes with the government's pledge to inject greater transparency into public life.

"This takes us backwards," said Venkatesh Nayak of the Commonwealth Human Rights Initiative (CHRI), which in 2013 conducted a comparative study of India's political funding norms and those in other democracies. "The promise they made of greater transparency appears completely hollow."

Finance minister Arun Jaitley has said in Parliament that the government was giving corporate donors anonymity to shield them from fears of a political witch-hunt.

He said that companies that fund Opposition parties need not fear the government, and those financing the ruling party need not worry about a backlash if the government changes.

But there is little evidence of such backlash, based on the limited details of political donations that groups like the CHRI and the Association for Democratic Reforms have accessed, Nayak said.

"These are details with the government, and they show that major donors consistently fund both the party in power and the major Opposition party - that is, the two major parties, the BJP and the Congress," Nayak said.

"But we haven't seen any evidence of retribution. Is the finance minister saying he doesn't have faith in his government's impartiality?"

Among the amendments the Modi government has introduced is a lower limit to the value of each cash transaction used for political donations -- down from Rs 20,000 to Rs 2,000. All donations above this must be made through cheques, electronic transfers or electoral bonds.

The lower cap, the government has said, will curb the use of unaccounted wealth -- black money -- for political funding. But the argument, Sridharan said, is flawed.

"All that people need do is make many small transactions instead of a large one," Sridharan said. "It doesn't solve the problem."

The amendments come at a time government orders are making the use of the Aadhaar card necessary for an increasing number of services, not just for welfare initiatives but even for university certificates.

This implies an effort to use different standards for the country's citizens and their government, Nayak said.

"The government wants citizens to be completely transparent to them through the Aadhaar," Nayak said. "But the state is simultaneously withdrawing into opacity. That is very unfortunate."