Time to consider state funding of elections

SY Quraishi

The questions raised about some donations received by AAP have brought at centre-stage the need for transparency of political finance. The facts will, of course, come to light after an investigation that surely must be underway. The immediate effect is that the people have started debating it for the first time. Therein lies an opportunity to take the matter to its logical conclusion and set up complete transparency of political funding. 

It is, no doubt, true that democracy cannot function without money to contest elections. However, money cannot be allowed to dominate the process so much that only the rich can contest and hijack the political system. The law, therefore, prescribes a ceiling on expenditure of the candidates — though not on the expenditure of political parties. 

The dominant role played by money power in election is vitiating the country’s democracy. When a candidate spends crores of rupees in elections, he needs to raise crores from whatever sources. If he belongs to a political party, his party has a strong stake in his victory and would therefore spend crores to get its candidates elected. Unfortunately in India, there is no ceiling on the expenditure by the parties. 

The absence of a ceiling on expenditure has created conditions of financial profligacy. To outdo their rivals, all parties spend thousands of crores of rupees. Where does this money come from? The sources could be: corporate funds, small donations, sale of coupons and membership fee besides interest on deposits, rental and revenue income. There is no transparency in the source of donations. As much as 75 per cent of all funds are shown as donations without disclosing the source. This is a serious matter. It may be foreign money or from crime mafia. In any case, most of it is unaccounted for and could, therefore, be ‘black’ money.

The ECI has been demanding for over two decades that there should be full transparency. It wants a law prescribing an annual audit of parties by an independent auditor from a panel given by the ECI — instead of an in-house auditor who may only do the whitewash job. The party must put up the audited accounts on its website.

The fact that AAP suo motu decided to put all its fund receipts on its website was an extremely healthy precedent worth emulating. When doubts were raised about some donations received by alert activists, the debate followed. I consider this a success of transparency. This is the only way to keep out tainted money from the democratic process. 

Unfortunately, political parties have not reacted positively to the ECI’s demands. And it is not parties alone who refuse to disclose their sources of income, corporate houses also prefer anonymity. Their excuse is that if the competing parties get to know what they have given to their rivals, they will either be flooded with similar requests or face vindictiveness. The real reason, however, for both parties and the corporates is that they would not like the quid pro quo to be exposed. 

The problem is not exclusive to India.  

Although the poll commission has been opposed to the idea of state funding of elections, I feel the best way out is the state funding of parties (as different from funding of candidates). 

The parties have been showing a fund collection of an average a thousand crore rupees per annum. This can be given by the state. For every vote secured, Rs 100 can be given. In the General Election to the Lok Sabha in 2014, nearly 55 crore votes were cast. At the rate of Rs 100 per vote, this will add up to Rs 5,500 crore. This roughly corresponds to the collection of all parties put together. Private and corporate donations will then be totally banned. 

State funding will free the parties from dependence on — and clutches of — the corporate houses who feel tempted to run the government by proxy. Crony capitalism has become a buzzword. An equal amount will be required for the Vidhan Sabha elections. The amount of nearly Rs 12,000 crore in five years to make our democracy corruption free is a negligible price. The image of the political class in India is considered very murky, which is very unfortunate for democracy. Not all politicians are corrupt. India has become a major power in the world, thanks to many great statesmen and political leaders. 

The amount proposed is so small that it can easily be accommodated in the national budget. But, if necessary, an Election Trust Fund could be created, to which corporates may be asked to make donations. The fund could be administered by an independent Trust or Election Commission. The allocation of funds will be based on the actual performance of parties, whose accounts will be audited by an independent auditor on the ECI approved panel or by CAG. A study of ‘Political Finance Regulations around the World’ by the International Institute of Democracy and Electoral Assistance, Stockholm (2012), showed that this system is working well in over 70 countries, including most European countries (86 per cent), Africa (71 per cent), North and South America (63 per cent) and Asia (58 per cent). 

Time has come for India to take the wake-up call. The global model already available makes it the best option. 

—The writer is former Chief Election Commissioner of India