The party and election campaign financing in India has been questioned for its opaqueness and the infusion of black money. The Indian political parties have also been accused of collusion with and an influx of criminal elements, a phenomenon that has led to the criminalisation of politics. A major ramification of the process has been the presence of legislators – both at the national and state levels – with criminal records. A large body of research of the phenomenon indicates that the dubious elements with whom individual candidates and the parties sought help and protection during elections have muscled their way into politics and have been elected as lawmakers. A natural progression has been the infusion of black money into politics. There have been several efforts to peg election expenditure, but the parties have attempted to wriggle out even by using the Parliament to enact a new legislation. A quest for legal limits to end the illegal reach is an ongoing process in Indian democracy. One of the causes of corruption and corrosion of values in our polity, as well as criminalisation of politics, stems from the flaws in the electoral process. To ensure free, fair, and fearless elections and to prevent use of money and muscle power, Government will introduce a comprehensive Electoral Reforms Bill for which considerable groundwork has already been done. President K.R. Narayanan, at the beginning of the budget session of Parliament, March 1998 (Chhokar 2017, 92). What the then President of India K.R. Narayanan (1997-2002) said in 1998 so succinctly about the Indian political and electoral processes in his address to Indian Parliament, Jesse M. Unruh stated even more candidly in the 1970s, ‘Money is the mother’s milk of politics’. While Narayanan was stating what he considered a developing anomaly, nay distortion, in Indian politics that was detrimental to the evolving Indian democracy, Unruh was spot on in stating what is possibly a universal truth in politics in most polities. In fact, from the days of the Roman republic to the contemporary democratic polities, the corrosive impact of money on politics has been highlighted by several writers, commentators and analysts. The misuse of money, even from the government’s treasury, has been succinctly described by Chanakya, the 350-275 BCEIndian statesman-philosopher and the mentor Prime Minister of Indian Emperor Chandragupta, the founder of the Mauryan dynasty: Just as it is impossible not to taste honey or poison that one may find at the tip of one’s tongue, so it is impossible for one dealing with government funds not to taste, at least a little bit, of the King’s wealth. Just as fish moving under water cannot possibly be found out either as drinking or not drinking water, so government servants employed in the government work cannot be found out (while) taking money (for themselves). (Kangle 1972, 91). Yet, the shape and dimensions that money has acquired in democratic politics in the contemporary world, it has emerged as an element with tremendous corrosive power despite being an essential ingredient. In democracies across the world political finance – needed for running political parties and for funding elections – is increasingly acquiring gargantuan proportions, compelling parties to look for fresh sources of funds. What Narayanan, who traversed diverse routes of diplomacy and the academia before ascending to the office of the President of India, said was till then assiduously hushed and puffed in the country despite the apparent mismatch between the declarations by candidates and political parties of their electoral expenses due to statutory compulsions and the real conspicuous spending. In fact, in 1993, a committee constituted by the Government of India, headed by then Home Secretary N. N. Vohra, brought out the existing close nexus between politics and crimethat impacted the electoral politics, bringing in the role of black or unaccounted money in the electoral process. It was perhaps in that context that Narayanan referred to a comprehensive Electoral Reforms Bill being contemplated by the government. Electoral Reforms that included the proposals for State (Public) Funding of Elections had a history in the Dinesh Goswami Committee Report, 19904 and the Indrajit Gupta Committee Report, 1998.5 Later, the reference to it also came in the report of the National Commission to Review the Working of the Constitution of India, which was appointed in March 2000 and submitted its report on 31 March 2002. The use of money power brings in the demand for transparency and regulatory regimes in accordance with the constitution and the legal regime of the country concerned, so that leaders and parties do not get trapped with money-bait that leads to mortgaging, or making pliant, the policy regime to the big buck donors. Also, to check the possible entry of persons with ill-gotten wealth to enter the political arena on the strength of possessing stacks of money. The questions, however, are if the legal regimes across the world have been able to bring in transparency that the governments and the civil society are desirous of. And, political finance, i.e. funding of political parties and elections, not only have developed a tendency to invite black money, it has also been turning white money into black, with deleterious effect on civic life and governance. How does it work and are there ways to retrieve this situation? We examine this question by reconnoitring the Indian case. The Context As India concluded its seventeenth general elections in April-May 2019, a seven-phase over five weeklong exercise in which India’s over 600 million voters8 returned Narendra Modi-led Bharatiya Janata Party (BJP), India’s right wing pro-Hindu party, to power with absolute majority (303 seats) in India’s 543 member Lok Sabha (the House of the People) to govern the country for the next five years, the question of campaign finance emerged time and again, reinforcing old questions and underlining new emerging challenges. While the conspicuous flush of funds to For a detailed analysis of these aspects see Mehra 2015, 519-70. the BJP since 2014 has been discussed time and again, Congress President Rahul Gandhi mentioned a shortage of funds for his party for an effective election campaign both during the campaign and after resigning as the party President in July 2019 taking responsibility for the party’s loss. It is debatable though whether that would have made a difference to the outcome of the ultimate result. This brings in the key questions of party and electoral funding, which is opaque in India. And, the parties, even the government, are reluctant to make the processes of party and election financing transparent. Moreover, over the past one decade and three elections, the cost of conducting and contesting elections has increased tremendously in India. According to the Delhi-based Centre for Media Studies (CMS) while the 2009 election cost $2 billion, in 2014 the expense on election related activities was $5 billion (Kapur and Vaishnav 2018, 4). The cost of recently concluded seventeenth general elections has exceeded $7 billion. According to the CMS, 2019 elections cost ₹600 billion ($8.7 billion), of which 45 per cent, i.e., ₹270 billion ($3.9 billion) was spent by the winning party – the BJP. This alsoshows a tilting of the political scale with changing party system. The expenditure by the Congress, about 40 per cent of total in 2009, went dramatically down to about 15-20 per cent. This is in contrast to the BJP spending about 20 per cent of the total poll expenditure in 1998, against about 40 per cent spent by the Congress. According to this report, around ₹120 billion to ₹150 billion was distributed directly to voters, while ₹200 billion to ₹250 billion was spent on publicity. Logistics accounted for about ₹50 billion, formal expenditure was between ₹100 billion and ₹120 billion, while miscellaneous expenses were about ₹30 billion to ₹60 billion. Even if we regard these figures as approximations, the scale of spending by parties and candidates in Indian elections is huge. In case it is asked as to why, as also how, so much money, quite a bit of it in cash, is required in Indian elections, we need to look at the ways in which the money is acquired by political parties and candidates and spent. Parties and candidates do not leave any chance to lure the voters by means unimaginable even in most advanced democracies. That the party and election financing in India have been linked to the regulatory regime, as also to corruption and regulation, is widely acknowledged (Kapur and Vaishnav 2018b, 76). In India parties and candidates even look for fresh sources of spending to lure the voters that includes handing out gifts as varied as cash, alcohol, kitchen blenders, television sets and even goats; and these do not complete the list. A former Chief Election Commissioner of India S.Y. Quraishi lists 40 ‘types of illegal expenses [undertaken] during election.’ He is candid in discussing the ‘ever-evolving’ ways of such electioneering, ‘every year more ingenious methods of distributing cash come to light’ (Quraishi 2014, 265-67). When most parties and candidates use such methods, the need for unaccounted cash increases. Obviously, the cost of representative democracy is increasing in India, as it is across the world. ‘But the implications of the costs of democracy can be significant for democracies – new or old, rich or poor.’ It is particularly significant for a young and developing democracy such as India. However, ‘models of political finance from industrialized democracies have limited purchase on the problems developing democracies face’ (Kapur and Vaishnav 2018a, 5). As compared to advanced democracies, where there are ‘well-established systems of monitoring and accounting for political finance and complementary system of prosecuting those involved in alleged improprieties(.)’ (Kapur and Vaishnav 2018a, 5), India presents a paradox of unceasingly using shortcuts to beat the norms while discovering and setting up new norms. Howsoever imperfect, these act on financial improprieties and the transfer of illicit funds to a limited extent as checks. As a result, paradoxical processes of setting legal limits amid extra-legal reach and methods continue. Political Malfeasance The issue regarding the party and campaign financing in India goes beyond the sources, managing and disbursal of finance in managing the party and conducting electoral campaign as well as the rules and regulations that keep impacting it. Interrogating the issues relating to collecting funds and its management in elections by individual candidates and political parties leads to the critical issue of the creeping nexus between crime and politics in India, that has reached a level where criminally tainted persons, with serious cases of crime registered against them, entering politics; from being supporters of politicians, they have emerged as political players themselves. This has naturally impacted both morality among the parliamentarian and the manner of finances collected for and spent in elections. We will briefly outline the issues below. The table below briefly gives percentage of candidates with declared criminal cases, including serious cases against them during the past three, including the current, general elections. There is hardly any party in the country that does not have candidates in elections and legislators at both the levels of the Indian polity with criminal cases of some kind against her/him. An incremental trend is very clearly visible over the three recent elections (including the latest one) in the data given above. In fact, analyses of the earlier elections indicate that what has been discussed as criminalisation of politics in India, has gradually and incrementally been impacting, nay infecting, India’s body politic for a few decades. In 2009, candidates with criminal cases against them, including serious cases, were 23 per cent, a decade later they were one-third of the total candidates. Obviously, it is a tenacious and developing anomaly being persisted with by political parties and their top leadership. If we look at the figures for the fourteenth Lok Sabha (House of the People) both national and state parties have preferred candidates with criminal records. Congress, then leading the ruling coalition, had 17.3 per cent members with various levels (in terms of possible punishment) of criminal record and the main opposition Bharatiya Janata Party had 20.3 per cent such members and smaller parties such as Bahujan Samaj Party (39%), Samajwadi Party (30.5%) and Shiv Sena (58.3%) had even higher percentage of members with criminal records (Mehra 2006). In the fifteenth Lok Sabha (2009), 153 members had criminal charges of various kinds against them (Mehra 2014). This shows two things: (i) political parties considering societal toughies, if not criminals, highly useful in electoral game and; (ii) a total disregard for the country’s law among a large section of the potential and elected law makers and political parties that patronise them. The parliamentarians in India have also been found wanting in ethics over other related matters as well that deserve a mention in the context of this discussion. Eleven parliamentarians were caught in a sting operation conducted in 2005 by a web-based news site Cobrapost and a Hindi TV news channel in what came to be known as ‘Cash for Questions’. Fourteen MPs were approached to ask certain questions in Lok Sabha for a price, eleven belonging to different parties agreed. The issue raised quite a bit of political stink (Mehra 2007). Another similar sting operation was conducted on a scheme available to the Indian parliamentarians known as Member of Parliament Local Area Development Scheme (MPLADS) since 1993. Under the scheme an MP, from either house of parliament, is entitled to spend a certain sanctioned amount in her/ his constituency for development work – the amount has been revised from time to time and currently stands at ₹50 million per annum. An MP can recommend work to be done in her /his constituency from the list of work prescribed to the District Magistrate, the senior most bureaucrat at the district level, who will have the work accomplished; MPs do not get the money. However, corruption has been reported and detected in the execution of this scheme. To expose this, sting operations were carried out against six MPs by TV channel Star News in collaboration with Detective Intelligence Guild (DIG), which was aired on 20 November 2005. It captured the MPs on camera seeking commissions while allotting funds under the scheme for developmental works in their respective constituencies. One of these MPs was also exposed in the cash-on-camera sting. The audio records of the sting operation revealed the transaction to establish that money has been paid and that the MP will get ₹20,000 for a ₹500,000 job. Another one negotiated a 20 percent commission was agreed upon for a ₹1 million to 1.5 million project, but when the team offered him only ₹50,000, the MP threw a tantrum (Mehra 2007). These correlate with a large number of MPs facing criminal charges. The sixteenth Lok Sabha had one-third of members facing criminal charges. According to Association for Democratic Reforms, a movement for better governance and political accountability, the seventeenth Lok Sabha elected in 2019 has 43 per cent MPs with criminal charges of varying degrees, which is pretty high and corroborates the point made earlier regarding a high percentage of the lawmakers having disregard for the law, if not being outlaws. The presence of such a large number of politicians with criminal antecedents in the political arena, nay the political market place, both supply (politicians) and demand (voters) side of the market is met. It has serious repercussions from different perspectives. First, despite the reputation and tendency of the criminal politicians to engage in criminal activities, they may not have been convicted (Vaishnav 2017, xii). Second, with so many of them having won the elections and entered the highest portal of the Indian democratic polity, they impact political and electoral financing, as either their parties have had that kind of arrangement with them, or they end up using their networks for the purpose. In any case, their reaching the centre stage of Indian politics (or of their respective states) has serious implications in several ways (Vaishnav 2017, xiii). The working paper on political parties of the National Commission for the Review of Working of the Constitution put it succinctly: A stage has now been reached when the politicians openly boast of the criminal connections…. Earlier in the 1960s, the criminal was only content to play … second fiddle to the politician to enable him [to] win the election and in turn to get protection from him. The roles have now been reversed. It is the politician now, who seeks protection from criminals. The latter seek direct access to power and become legislators and ministers. Apparently, India’s parliamentary politics has developed malfeasance that is stark and disturbing. The literature on corruption and criminalisation of politics in India is vast. Since in vast areas of India’s public life – economy, business, industries, natural resources, infrastructure, education, health, public utilities, and so on – the Indian state plays, and is expected to play, a large role, particularly a regulatory one despite liberalisation of the economy in 1991, corruption creeps in in many ways. Mehra (2015) and Vaishnav (2017) provide an overview and analyses of dimensions of corruption and criminalisation and the possible ways these phenomena impact political finance and India’s electoral process. Vaishnav (2017, 61-62) aptly says, … political finance serves as the glue that holds together India’s dubious system of regulating land, lubricating the well-oiled machine that benefits land sharks, builders, and politicians…. (P)oliticians (and the bureaucrats they control) exercise considerable discretion over the acquisition and allocation of land and what the land is ultimately used for. This provides politicians with a steady supply of favors they can dole out to prospective builders and developers, who must come with a hat in hand to politicians for policy and regulatory favors…. Oftentimes, politicians will use their regulatory leverage to demand a cut of the builders’ investment…. Financing Parties and Political Campaign Corruption in India’s public life, which has over the years led to the criminalization of politics in India (Mehra 2015), needs to be factored in in discussing political finance in the country. Political finance includes the finance involved in both electoral campaigns and the funding of political parties. It is one of the much debated issues in India, not merely due to their nature, manner and scale, but also their impact on public morality. So much so that, along with the government’s discretionary powers in the realm of the economy, which continue to throttle entrepreneurial initiatives, despite liberalization of the economy in 1991, not surprisingly it is considered among the foremost drivers of corruption in India. An estimated $5 billion was the cost of campaign during the 2014 general election (Sridharan and Vaishnav 2018, 15). As mentioned earlier, an estimated $8.7 billion was spent in the 2019 general election, a rise of over 70 per cent. And, 45 per cent of this, i.e., $3.9 billion was spent by the ruling party BJP alone. Not that there have been no effort to check poll expenses in the country. The expenses by a candidate in elections at different levels are fixed from time to time by the Election Commission of India (ECI) under the Representation of the People Act (RPA), 1951. We shall limit ourselves to the Lok Sabha elections, for the arguments emerging from it apply equally to the state legislative assemblies. The limit has been raised from time to time. It began with ₹25,000 in 1951, moved up to ₹100,000 in 1979, to ₹450,000 in 1994, to ₹1.5 million in 1997, to ₹2.5 million in 2003, and to ₹4 million in 2011. It was last raised in February 2014 to ₹7 million (Chhokar 2017, 92). This limit was retained for the 2019 elections.19 Political parties across the political spectrum took up the matter at a meeting with EC held days before the first phase of the Lok Sabha polls to find relief on poll expenses. There was a proposal from political parties to exclude expenses incurred on advertising criminal records from a candidate’s poll expenditure, which the Election Commission turned down. A proposal from the parties to add candidates’ expenses to party expenditure account also did not get the ECI’s nod. All parties and candidates routinely exceed the amount and to that extent all the money spent beyond the limit, which in reports to the ECI is fudged by each candidate and party, is ‘illegal’. The fact that the political parties have been routinely flouting and misrepresenting the limit set for election expenses shows how deep the issue is. We will attempt to understand and review this phenomenon historically, taking into account the efforts that have gone into it. Before we take up an analysis of issues of party and campaign finance, how it has developed and where it stands today, it is worthwhile underlining that party politics in India – elections included – is an expensive and cash intensive affair. Elections, particularly, have become round the year affair, with state Legislative Assembly elections in one of the twenty-nine (reduced to twenty-eight after the bifurcation of Jammu and Kashmir into two Union Territories {UT}; i.e., federally administered region – Jammu and Kashmir and Ladakh on 5 August 2019) states happening in the country between two Lok Sabha elections; and we are not taking into account the local bodies elections. It not only has implications for the public exchequer, but political parties and leaders too have to be cash-ready for contesting elections. Despite the call and effort for digitisation in Indian economy and finance, contemporary Indian democracy continues to be a cash intensive business. Not only there are anonymity and undocumented transfers as political parties still report a large part of their donations as cash gifts and parties and their leaders continue to distribute cash and other material inducements during elections. Indeed, cash reigns supreme in political finance, which willy-nilly facilitates a nexus with black money (Kapur, Sridharan and Vaishnav 2018, 274). The opaque system of political finance in India started almost from the initial years of independence. If we attempt a division of its phases, the first phase since independence would last up to 1990. An opaque and corrupt system gradually emerged, evolved and consolidated during this period. During 1990-2003 a process of reform ensued. The year 2003 witnessed greater transparency in political finance, as during this period efforts were made to bring in greater transparency, but structural changes were few and far between. The demonetisation in 2016 sought to bring about a change in the way cash was used and looked at in India, but somehow it did not impact to bring greater transparency. Following the limit imposed in 1951 under the RPA, the parties were compelled to look for sources for funding elections. The Congress had an advantage over others on two counts –
The report of the N.N. Vohra Committee remains classified to date. It has not been put out fully in the public domain. Parts of the report have been selectively released. A version of the report was published in the Indian Journal of Public Administration, the quarterly journal of the Indian Institute of Public Administration, which is an autonomous institution under the Ministry of Home Affairs, Government of India. The report is available at ‘Vohra Committee Report (Ministry of Home Affairs)’, The Indian Journal of Public Administration, XLI (3), July-September, 1995, pp. 642-43.
3 The reports submitted to the Committee by the Directors of the two of the premium security agencies of the Government of India – the Intelligence Bureau and the Central Bureau of Investigation – are particularly significant in the context of the discussion here. Both the Directors of the Intelligence Bureau and the Central Bureau of Investigation unambiguously reported the presence of organised criminal syndicates across the country, several under political patronage. The DIB wrote, ‘In certain States, like Bihar, Haryana and UP, these (criminal) gangs enjoy the patronage of local level politicians, cutting across party line and the protection of Governmental functionaries. Some political leaders become the leaders of these gangs/armed senas (armies) and, over the years, get themselves elected to local bodies, State Assemblies and the national Parliament. Resultantly, such elements have acquired considerable political clout….’ Referring to the 1993 bomb blast in Mumbai (then Bombay) he said, ‘…
The investigations into the Bombay bomb blast cases have revealed extensive linkages of the underworld in the various governmental agencies, political circles, business sector and the film world.’ The DCBI said, ‘…all over India crime Syndicates have become a law unto themselves. Even in the smaller towns and rural areas, muscle men have become the order of the day. Hired assassins have become a part of these organisations. The nexus between the criminal gangs, police, bureaucracy and politicians has come out clearly in various parts of the country. The existing criminal justice system, which was essentially designed to deal with the individual offences/crimes, is unable to deal with the activities of the Mafia; the provisions of law in regard to economic offences are weak; there are insurmountable legal difficulties in attaching/confiscation of the property acquired through Mafia activities.’
Civil Society Intervention
The ADR, 25 a civil society institution, has been raising the issues regarding party funding and electoral reforms along with a number of other issues relating to governance of the country since the early years of the millennium. Among the major issues that they focused on is where were the political parties getting their funds from. Their experience in seeking information regarding the IT returns of the political parties is revealing. On 28 February 2007 ADR filed a Right to Information (RTI) application with the Central Board of Direct Taxation (CBDT) seeking the following information:
(i) Whether the political parties mentioned in the RTI application have submitted their Income Tax Returns for the years 2002–03, 2003–04, 2004–05, 2005–06, 2006–07.
(ii) Permanent Account Number (PAN) allotted to these parties.
(iii) Copies of the Income Tax Returns filed by the political parties for the aforementioned years along with the corresponding assessment orders, if any.
They did not have much success, as the CBDT sent the application to nine regional Chief Commissioners of Income Tax (CCITs). Only two responded, the rest cited the following reasons for their inability to give the information sought:
(i) Information is exempt under Section 8(1)(d) of the Right to Information Act, 2005 since it contains details and particulars of commercial activities of the political parties. The CPIO, Mumbai stated that information has been submitted by the assessees in commercial confidence.
(ii) The returns are submitted by the assessees in fiduciary capacity and they are confidential in nature and, as such, disclosure thereof is exempted under Section 8(1)(e).
(iii) The disclosure of information has no relationship with public activity and no public interest is involved and, as such, it cannot be disclosed under Section 8(1)(j).
(iv) PAN is a statutory number which functions as a unique identification of each taxpayer. Making PAN public can result in misuse of this information by other persons and could compromise the privacy of the financial transactions linked with PAN.
(v) Information relates to third parties who have objected to the disclosure of this information.
(vi) Information is subject to confidentiality under Section 138 of the Income Tax Act, 1961.
(vii) Sections 8(1)(g), 8(1)(h) and 8(1)(j) of the Right to Information Act, 2005 make it amply clear that there is no obligation to give any information which had been tendered in confidence for law enforcement or information which would impede the process of investigation or prosecution of offenders or information the disclosure of which would cause unwarranted invasion of the privacy of the individual (Chhokar2017, 93).
The Latest
In the 2017-18 Union government budget the Finance Minister hailed political parties in the world’s largest democracy, in ‘a multi-party Parliamentary democracy’ at that, as ‘essentialingredient’ and discussed the unresolved issue of party funding. He admitted that ‘Political parties continue to receive most of their funds through anonymous donations which are shown in cash.’ He spoke of cleansing the system. He proposed the following scheme:
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