The debate on political funding
67 years after independence India still struggles for a transparent mechanism for political funding. Parliamentary democracy, elections and a multi party system are here to stay. How do you fund Indian politics ?
When I was the law minister in the NDA Government I held extensive consultations with various stake holders. After reaching a large consensus I had suggested several legislative changes. The changed regime envisaged that individuals, partnerships and companies could make political contributions by cheque. The Income Tax Act was amended to provide that all such contributions would be eligible as a legitimate expenditure in the hands of the donor. Each political party which is otherwise exempted from payment of income tax was expected to file a return with the tax authorities and with the Election Commission of India. Its return would include the name of all such persons who had contributed to it more than Rupees twenty thousand. Since companies hold share holder monies, the Companies Act was amended to fix 5% of profit as the outer limit of monies spent on political party or candidates.
All political parties except the left had supported these changes. In the last 12 years, slowly the Indian donors are increasingly getting used to these transparent cheque donations. Their percentage is on the rise. Political Parties and donors need to be convinced more on the desirability of transparent donations. Additionally parties need to go back to the system of small donations. The BJP’s recent campaign of “One Vote One Note” has been highly successful. Today individuals and corporate have started donating by cheque either directly or through electoral trusts. The tax incentive which were offered have proven to be a step in the right direction.
State funding of elections has been suggested by many as the other solution. It is a step worth consideration. But will state funding be able to ensure that non state funds are not additionally used?
The Foreign contribution regulation Act prohibits parties or candidates accepting donations from foreign sources. An Indian company registered in India and doing business in India can be regarded as a “foreign source” if at any given point of time the FDI or the FII shareholding of the company exceeds 50%. For company’s listed in the stock exchange the share holding becomes variable. It may be 48% on one day and if FII buying takes place it may become 51% within no time. These fluctuations may not be known to political parties since there is no mechanism that they have of tracing out the transient shareholding of a company. Thus at some stage a relook may be required into these legislative provisions in order to incentivise transparent political funding. With FDI and FII limits on the rise in every sector Indian Companies would be substantially disqualified from transparently funding Indian Democracy. This may reverse the improved trend of transparent funding.
Is there a ground swell?
The data of the A.C. Nielson opinion poll released by a private news channel in relation to some states makes an interesting point. In Maharashtra and Bihar the NDA is clearly in the lead. But it is the figures of West Bengal which make a point, loud and clear. While the Trinamool Congress is shown to be strong, the BJP Popular vote is projected to be 14% with the Congress down to 8%. Many predict that the BJP Vote may rise in the coming weeks. Does it indicate that the ground swell is building up?