View: The real problem with electoral bonds

It is remarkable that it took two years and 10 months for the Opposition to wake up to the perils of electoral bonds. This columnist had, for example, pointed out its flaws on February 1, 2017, hours after the bonds had been proposed in that year’s budget ( http://bit.do/tkarun-electoral-bonds1 ).

All the Opposition’s objections to the bonds are valid.

But these objections and their object, the bonds, collude to perpetuate the essential fraud in political funding in India: the expenses that are shown and accounted for in some fashion or the other is just a fraction of the actual money spent, and the bulk of this actual spending comes from funding drawn totally off the books of companies as the proceeds of corruption.

Electoral bonds leave an audit trail. State Bank of India, which is the bank authorised to issue the bonds — why these are called bonds is another mystery, these are like the gift cheques or pre-paid cards that are often given away as wedding gifts — has to maintain records as to whom they sold electoral bonds to and who redeemed those bonds. Every bond has a number —in its absence, any decent forger would go berserk just at thought of what he could achieve — and SBI has to be prepared to provide the information, should that be required, to law enforcement agencies, should the bonds be used for any nefarious purposes.

If ever there were to be a change of government and a party that is currently in the Opposition were to form the next government, it could extract information from SBI as to who had been funding its rival through electoral bonds. Suppose the funding has been routed through a shell company. Even then, it would be possible to trace the eventual beneficial owner. Which sane businessman would want to take the risk?

It is far more prudent to keep funding political parties as businessmen always have: in complete anonymity, as a matter of trust between the giver and the recipient.

The essential problem with electoral bonds is that it removes transparency and accountability in political funding. Voters have the right to know which fat cats fund their political parties and if such funding has an influence on policies framed by governments formed by these parties.

The essential problem with the brouhaha over electoral bonds is that it obscures the real extent of the rot in political funding. Formally accounted for funds, whether as donations in cash, cheque or electoral bonds, constitute a tiny fraction of the actual expenditure of a political party. The bulk of the money is received and spent completely informally and not reported to any authority.

The only way to capture the real extent of political expenditure is to use modern data capture and analysis. It is possible for dedicated watchdogs, including voluntary groups like the Association for Democratic Reform, to keep track of each and every item of political expenditure: whether advertisements, billboards, rallies, publications, leaders’ travel, establishment expenditure or leaflets and posters.

The Election Commission could ask each party to furnish a monthly list of activities undertaken at every level from the polling booth and the panchayat to the state and the nation. It could publish these figures and invite anyone who thinks these figures are wrong to explain where the figures are wrong. Taking into account all such objections and defence by the political parties, the Commission could finalise monthly expenditure figures at District, State and National levels for every party, and ask it to show source of that income.

Of course, this would only capture the money that is actually spent. The money that has gone to line individual politicians’ pockets would escape scrutiny. But this would be a good beginning.

India cannot forever fund its democracy with the proceeds of corruption, money taken off the books of companies and funnelled to parties in wholly opaque ways. Such funding corrupts politics and makes the economy non-competitive. If project costs are routinely padded to siphon funds out during project implementation, so as to create the war chest with which to pay off parties, politicians and babus, the extra capital cost would necessarily push up the cost of the product from that plant. It would erode corporate governance and the integrity of accounting. The company would be unable to compete with produce from a plant with a leaner, more realistic capital cost.

Scrap the electoral bonds. Estimate political expenditure first and get parties to show the source of their income that enabled them to carry out such expenditure. Both India’s polity and economy would improve — drastically.