Prelims level : Polity / Governance – Governance Mains level : GS II - Important aspects of governance, transparency and accountability, e- governance- applications.
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  • The Election Commission of India (ECI) has told the Supreme Court that electoral bonds, contrary to government claims, wreck transparency in political funding.
  • Coupled with the removal of cap on foreign funding, they invite foreign corporate powers to impact Indian politics.

Electoral bonds Scheme:

  • The electoral bonds scheme was announced in Union Budget 2017 with an aim for increasing transparency in political funding.
  • It makes India first country in the world to have such unique bonds for electoral funding. These bonds are bearer instrument in nature of promissory note and interest-free banking instrument.
  • It aims at rooting out current system of largely anonymous cash donations made to political parties which lead to generation of black money in the economy.
  • These electoral bonds can be bought for any value in multiples of Rs 1,000, Rs 10,000, Rs 1 lakh, Rs 10 lakh or Rs 1 crore after fulfilling all existing Know Your Customer (KYC) norms and making payments from bank account.
  • It will not carry name of payee.
  • The bond deposited by any eligible political party to its account shall be credited on the same day.
  • No payment shall be made to any payee political party if bond is deposited after expiry of validity period.
  • Eligible political parties can encash electoral bonds only through their bank accounts. Electoral Bonds may be purchased by only citizen of India.
  • An individual can buy Electoral Bonds, either singly or jointly with other individuals. Electoral Bonds are valid for fifteen calendar days from the date of issue.
  • Only registered political parties, that have secured not less than 1% of votes polled in last election of Lok Sabha or legislative assembly of state, will be eligible to receive electoral bonds.
  • The cash donation has been capped at Rs. 2000 and beyond that donations are via electoral bonds.

Demerits of Electoral Bonds:

  • RBI s autonomy the government had to amend RBI act in order to issue these bonds as bearer bonds have the characteristics of currency notes which are issued solely by the central bank. The amendment however will amount to fragmenting of the notes issuing power of the RBI particularly at a time when its autonomy is being questioned over its tacit acceptance of Demonetization.
  • No Transparency The bonds are not registered in the name of a specific person as a result donation through electoral bonds continue to provide anonymity to donors.
  • Could be used as conduit for money laundering and hoarding black money Since these bonds continue to provide anonymity to holders, they can be misused much like the Indira Vikas Patras floated as development bonds in 1987 that fell into disrepute owing to similar reasons.
  • These will also facilitate round tripping that is rerouting of illicit funds that originate in India, back into the country through a tax haven. Here, it must be noted that India ranks at 19 in a list of 180 countries that figured in the Paradise paper leaks that listed out individuals and companies that moved finances to off-shore locations to evade taxes. Electoral bonds offer secrecy and will encourage such tax evasion.
  • Anti- democratic Law Commission in its 255th report pointed out that secrecy and anonymity provide fertile grounds for lobbying and capture of governments by big donors. Electoral bonds therefore will be instruments that ensure government of the few.
  • Non- disclosure to Election Commission While RoPA,1951 specifies that donations received by political parties in sums greater than Rs 20,000 be disclosed to the tax authorities, the Finance Bill,2017 explicitly provides an exemption from this clause to electoral bonds. This mars the very purpose of cleaning up electoral finance.
  • Not enough secrecy Another concern raised by political parties against electoral bonds is that the incumbent government can easily find out donor details using KYC details shared with banks. This could make the instruments unpopular.

Election Commission of India:

  • Election Commission of India is a permanent body entrusted for the conduct of free and fair elections.
  • An independent   Election    Commission has  been   provided   for   in Article   324 of    the Constitution of India.
  • Currently has three members including Chief Election Commissioner (CEC). They all are appointed by the President for a term which is fixed by the President.
  • Tenure: The service conditions and tenure of office of CEC and Election Commissioners are determined by Act of parliament titled The Chief Election Commissioner and Other Election Commissioners (Conditions of Service) Act, 1991.
  • This act has fixed their term for 6 years or till age of 65 years, whichever is earlier. Power/salary: The CEC and election commissioners have equal power and receive equal salary, allowances and other perquisites, which are similar to judge of Supreme Court. In case of difference of opinion amongst the Chief Election Commissioner and Election Commissioner, the matter is decided by the Commission by majority.
  • One of the most important functions of the election commission is to prepare an up-to-date list of all the persons who are entitled to vote at the elections.
  • Election Commission is entrusted with :
    • Election of President;
    • Election of Vice-President;
    • Election of Lok Sabha as well as Rajya Sabha;
    • Elections to State Legislatures as well as Legislative Councils;
    • Reservation of Seats in Lok Sabha and State Legislatures;
    • Qualifications of the MPs and MLAs;
    • Determination of population for purposes of the
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