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According to the Bhagwat Puran, Kaliyuga is characterised by unauthorised, uncivilised and corrupt men ascending to positions of power. Going by published governmental statistics, the general elections of 2014 saw the highest number of politicians with criminal records being elected to the Indian parliament. As per the government records, every third newly elected MP in the Indian parliament has a criminal record. An analysis of 541 of the 543 winning candidates by the Association for Democratic Reforms (ADR) shows that 186 (about 34%) of the newly elected MPs have confessed in their election affidavits to have criminal cases against them. In the 2009 Lok Sabha, the figure was 158 (about 30%) of the elected members of parliament. Among the newly elected leaders to the Indian parliament, 112 have declared that they have serious criminal cases, including those related to murder, attempt to murder, communal disharmony, kidnapping, and crimes against women. Interestingly, the report also notes that the chances of winning were higher for candidates with criminal cases as compared to the candidates with a clean record. The report also states that 442 MPs out of 543 MPs are billionaires and the average assets of 442 MPs is Rs.15 crore each.

Why do voters so often choose criminals to represent them? One reason is the government’s failure to provide essential services such as health, education, and safety. According to a political analyst, “What the Indian state has been unable to provide, strongmen have promised to deliver in spades.” There has been a partial privatisation of the functions of the coercive functions of the state. The ADR’s analyses show that every major party in Uttar Pradesh, as well as in almost every other state, displays an unhealthy dependence on criminals for contesting and winning elections. Indian democracy rests on an uncomfortable paradox- while the conduct of state and general elections remains reasonably free and fair, too many of the winning candidates are dirty and dangerous.

Corporate financing of political parties

Earlier, there was a cap on the donation that could be made to a political party. Surprisingly, that cap is now being removed, permitting donation of unlimited amounts.  Under existing laws, a company can contribute up to 7.5% of the average of its net profits in the last three years to political parties. The company is required to disclose the contributions made to parties in its profit-and-loss account along with the names of the recipients. The new scheme removes the limit of 7.5% and also makes it unnecessary to disclose the name of the receiver.

The Election Commission of India (EC) has reacted to this and stated in a letter, “This opens up the possibility of shell companies being set up for the sole purpose of making donations to political parties with no business of consequence.”

A senior official associated with the Comptroller and Auditor General's office informed, “This means, for example, that an infrastructure firm could theoretically pay up to 50% of its net profits to a single party as donation without anyone getting wiser as to which party has been paid. This throws open the possibility that an order to build a highway or a railway bridge could be given to a firm and that firm could pay the donation to the party in power which placed the order with it.”

The Supreme Court has also intervened so as to restrict a law that grants full income-tax exemption to political parties as long as they show all their income, which includes their received donations.

The mystery behind demonetisation

According to the newly formulated government regulations (2016), the amount of money which can be sent abroad was increased from $ 75000 to $ 250000. The government then brought an amendment to the Foreign Contribution Regulation Act (FCRA) in February 2016 through the Finance Bill, 2016, to avoid scrutiny of donations from abroad. This provision was added with retrospective effect. The Representation of the People’s Act bars political parties from receiving foreign funds, but after this amendment, political parties can receive funding from foreign donors, which will bypass government scrutiny. According to reports, rupees nine lakh crores have been given as bank loans till 2016 and demonetisation was a strategy to save banks, who were burdened with rupees nine lakh crores of bad loans. However, now corporates and shell companies can take huge loans without collaterals or security and encash the money abroad and also send secret donations to political parties due to Finance Bill 2016 and 2018. And later, this huge amount of public money can be termed NPA and written off by the banks.  

Strange as it may seem, a government which has been promising not to bring in retrospective tax legislation, has just passed the Finance Bill for 2018 and managed to breathe new life into the Foreign Contribution Regulation Act 1976, which it had scrapped some eight years ago.

The Foreign Contribution Regulation Act, which was enacted 42 years back, banned political parties from accepting donations from foreign firms, including Indian subsidiaries of foreign firms, unless prior permission had been taken for such donations. Officials say the amendment had to be brought to give relief to the country’s two largest political parties from a legal tangle they had managed to walk into. A judgment by the Delhi High Court in 2014 held that both the Bharatiya Janata Party and the Congress were guilty of receiving donations to their party funds from the Indian subsidiaries of a “foreign” company, in contravention of the FCRA Act. Thus, it is found that when it comes to political donations, the BJP and Congress unite to pass legislation which allows them to receive foreign donations from tainted companies / shell companies which was never allowed since 1947.

The two subsidiaries were Sterlite Industries India and Sesa Goa, companies registered in India whose controlling shareholder was London-listed Vedanta. Interestingly, the FCRA 1976 law deemed Indian companies as “foreign” if overseas residents held more than 50% of the shareholding in such firms. As a result, any donation received from such a company was also treated as a foreign contribution. Here lies the curious tale of why the law had to be amended not once but twice. The implication of the judgment, which asked the government to “take action as contemplated by law”, was that the two political parties could face action for violating the FCRA 1976 and FCRA 2010 Acts.

Remedial measures

A study jointly done by Carnegie Endowment for Peace (Washington) and the Center for Media Studies, Delhi, informs that the 2014 election witnessed a total spending of  around Rs. 37000 crore by the  political parties. To meaningfully combat black money, income tax should be abolished and simplification of the indirect tax system is needed. Audits of candidates’ and parties’ accounts must be made mandatory and the tax exemptions they now receive must be limited to funds that are traceable and tax-compliant. Most importantly, the EC’s powers must be enhanced to enforce such audits, along with punitive powers. Rather than expense caps, it is far more important to ensure that campaign funds are from traceable, tax-compliant sources. Thus, the floor of Rs. 20,000, below which political contributions can be received anonymously must be lowered drastically. This is the single greatest window of abuse, with huge sums of black money being transacted without any traceability. It is surprising that the anti-corruption Lokpal Act of 2014 has not been implemented by the central government. The Supreme Court has censured the government for deliberately delaying the setting up the Lokpal.

Ultimately, we have to carry out tax reforms to simplify and streamline taxes. We also need trust – people need to feel the money they pay the government will not be eaten up, but will be used for the country. Among other initiatives, the EC wants political parties to maintain specific accounts for donations, get the accounts audited, and then submit the results of the audit to the commission. According to Venkatesh Nayak who co-ordinates the Access to Information Programme at the Commonwealth Human Rights Initiative, parties are even now expected to file IT returns within a stipulated time but there has not been a single instance of any penal action against a party that fails to do so.

The government claims that it has introduced tough new amendments in the Benami Property Act and brought in an Insolvency and Bankruptcy Code to enable actions against swindlers. But who will implement these tough laws if administrators and institutions are rendered irrelevant? The government has not instituted a single Lokpal in the last four years and as many as four posts in the Information Commission are lying vacant. The CBI, described as a ‘caged parrot’ during the UPA, has still not been set free. That the Centre determinedly pushed through a controversial appointment of a Gujarat IPS officer as special director despite complaints of serious irregularities is evidence of a political system that is unwilling to create a truly independent federal police.

Election funding, arguably the most visible source of political corruption, remains unchecked. The introduction of electoral bonds (now challenged in court) has failed to address the core issue of promoting transparency in funding. The Indian people’s interests are best served when the government takes urgent steps to ensure that institutions – CVC, CBI, judiciary, RTI, CIC, bank watchdogs – are not attacked or weakened or marginalised or bypassed but made vigorous, independent and staffed by persons of courage and integrity. These institutions are India’s real chowkidars.

All payments made by political parties must be made digitally or through banking channels. This has been recommended by the Core Committee on Electoral Reforms sponsored by the EC and its implementation would usher in transparency. The CEC and the CAG must be given powers to scrutinise and monitor a party’s financial transactions. Currently, political parties merely obtain a certificate from the EC that they have submitted their annual audited statements of accounts. The EC should have powers to take action against parties that are found culpable of illicit financial transactions, including deregistering those that are repeat offenders. All candidates for elections must show, as the EC has now directed, the source of their incomes, and not merely their assets and liabilities under Form 26 of the Conduct of Election Rules 1961. Additionally, the EC’s recommendation that Section 125 (A) of the Representation of the People Act must be amended to provide for more stringent punishment to those who conceal or provide wrong information. In a pathbreaking milestone judgement, the Supreme Court in PUCL vs. Union of India has upheld the constitutional right of citizens to cast negative vote through the option of NOTA which allows for Right to Reject and Right to Recall.

— The author is a Kolkata-based IPS officer.

[The views expressed by the author in this article is his own.]