Electoral Bond is basically an important topic for the IAS exam.
UPSC aspirants must be well prepared for this topic which comes in the General Studies Paper-II.
To avoid the problems of black money and corruption, the proposition of political funding through electoral bonds has been introduced. Electoral bonds are instruments that are used to donate funds to political parties.
This was introduced in 2017 along with the Finance Bill.
Why electoral bonds have been introduced?
Our Government has been facing two very serious issues for quite a long time now.
- The problem of black money.
- Corruption.
To eradicate these problems, many propositions have been made.
Demonetization removed quite the problem but not from all angles. There is no transparency in the procedures of funding political parties. The then Finance Minister, Arun Jaitley said, “Even 70 years after Independence, the country has not been able to evolve a transparent method of funding political parties which is vital to the system of free and fair elections…Political parties continue to receive most of their funds through anonymous donations which are shown in cash. An effort, therefore, requires to be made to cleanse the system of political funding in India.” in the Union Budget Speech on February 1, 2017. So he proposed two new notions of funding political parties. One is that, in a fixed range between rs.2000 to rs.20000, a donor can fund the political parties, and the other is the Electoral Bonds.
Who can issue Electoral bonds and funds in India?
Electoral bonds are sold in multiples of Rs.1000, Rupees 10000, Rupees 1 lakh and so on.
These bonds are issued only by the State Bank of India.
The authorized branches of the SBI bank can issue and encase these bonds, which are valid for fifteen days from the date of issuance.
The donor is allowed to pay the required amount of donation (in the multiples of 1000) through check or digital mechanisms to an authorized SBI branch and then the donor can give the bonds to a political party or parties of their choice.
The political parties can encase the bonds within fifteen days of receiving the bonds.
In that process, the name of the donor is kept anonymous. The electoral bonds can be bought only during a specific window of time. These bonds can be redeemed from the designated account of a registered political party.
How many have been sold?
According to a written reply in Rajya Sabha in March-April, Minister of State for Finance Pankaj Chaudhary gave the numbers of the yearly sale of electoral bonds. Rs 1056.73 crore in 2018; Rupees 5071.99 crore in 2019; 363.96/- crore in 2020; Rs 1502.29 crore in 2021; and Rs 1213.26 crore in 2022 have been sold till now.
Since 2018, bonds worth Rs 9208.23 crore have been sold. Of these, bonds worth Rs 9187.55 crore have been uncashed by political parties.
Why are ELECTORAL BONDs important?
Firstly, the assurance of clean money is given by the electoral bonds, that the funds raised by the political parties can be counted for clean money.
Secondly, the name of the donor is not obligated to be revealed in the system.
Thirdly, it brings out transparency in the funding procedures.
SOME POINTS ARE POINTED OUT IN THE FAVOUR OF CRITICISM OF ELECTORAL BONDS.
There are methods in which funding can be channeled for black money through electoral bonds. For example, the companies donating funds do not reveal their profit and loss statements.
As the bonds are bought through the State Bank of India (SBI), the government is always in a position to know who the donor is and there is a chance of the ruling party stealing the bonds since it is not obliged to reveal the donor.
But on the good side, there is an eligibility criterion that the companies have to meet before donating to the political parties, that is, the company donating funds has to exist for at least three years from the year of donation which makes it very effective method.
Also, the cash amount has been reduced from rs20000 to rs2000 to bring out more transparency.
What are the drawbacks of electoral bonds?
Representation of People Act of 1951 makes it mandatory for the political parties to reveal the name of donors over Rs 20000 but there are no law donations below Rs 20000 need revelation.
There has been a noticeable delay in the submission of audited reports to the ECI by the political parties.
As per ADR, between 2011-2015,
- BJP has delayed the submission on an average by 182 days
- Congress by 166 days
- NCP by 87 days
As per T S Krishnamurthy (Former CEC), it is not known how many times the bonds has been sold before being uncashed by political parties. So a suggestion has been made by Indrajit Gupta that donations be collected with compulsory PAN numbers by ECI.
What is ELECTORAL TRUST?
Electoral Trust is a section 25 company that collects donations on behalf of a political party and routes it to the concerned political party.
The operational guidelines issued by the CSBT for the Electoral Trust in 2013 will not only bring transparency from the donor side but will also from the receiver’s side that is the political parties.
Advantages of electoral trust:–
- It is very easy to set up and even easier to run.
- There are no minimum capital requirements for setting up an electoral trust.
- Tax benefits are provided.
Why are electoral bonds in the headlines?
As per Drishti IAS, the Supreme Court flagged the possibility of misuse of money received by political parties through electoral bonds for ulterior objects like funding terror or violent protests.
PREVIOUS YEAR’S QUESTIONS OF THE UPSC EXAM RELATED TO ELECTORAL BONDS.
UPSC GS-II 2017
To enhance the quality of democracy in India, the Election Commission of India proposed electoral reforms in 2016. What are the suggested reforms and how far are they significant to make democracy successful?
These were some of the reasons and questions raised due to which electoral bonds were in the headlines.
Frequently Asked Questions (FAQs)
1. What are Electoral Bonds?
Electoral Bonds are a financial instrument introduced by the Government of India to enable political donations to be made to political parties anonymously. These bonds are issued by authorized banks and can be purchased by any individual or entity, allowing them to make donations to their preferred political party.
2. How do Electoral Bonds work?
Electoral Bonds function like promissory notes that can be bought in specified denominations from authorized banks. These bonds can then be donated to a registered political party, which can encash them through a designated bank account. The identity of the donor is kept confidential, ensuring a degree of anonymity in political contributions.
3. What is the significance of Electoral Bonds in Indian politics?
Electoral Bonds aim to bring transparency to political funding by reducing the use of cash in political transactions. By channeling political donations through banking instruments, the government aims to curb black money and promote a cleaner, more accountable electoral funding system.
4. Why is the knowledge of Electoral Bonds crucial for the IAS exam?
Electoral Bonds are a critical aspect of Indian governance and politics. Understanding their functioning and implications is essential for IAS aspirants as it reflects the broader issues related to electoral financing, transparency, and the role of money in politics. Questions related to electoral reforms, political funding, and good governance often feature in the IAS exam.
5. What are the criticisms and controversies surrounding Electoral Bonds?
There have been concerns raised about the anonymity provided by Electoral Bonds, as it can potentially lead to unaccounted and opaque political funding. Critics argue that the lack of disclosure compromises transparency and can be misused for illicit purposes. Familiarity with these criticisms and debates surrounding Electoral Bonds is crucial for IAS aspirants to provide a well-rounded perspective on the topic.
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