Name’s Bond, Elec­toral Bond

Govt in­tro­duces alternative fund­ing mech­a­nism of elec­toral bonds which will also have a de­gree of anonymity; anony­mous cash fund­ing now capped at 2,000

The Economic Times - - Front Page - Anub­huti Vish­noi & Saikat Das

New Delhi | Mum­bai: The gov­ern­ment an­nounced mea­sures in the Bud­get to bring in greater trans­parency in fund­ing of po­lit­i­cal par­ties, cap­ping cash fund­ing by a sin­gle anony­mous donor at a tenth of the cur­rent limit and propos­ing elec­toral bonds that are likely to re­veal the iden­tity of the donor while keep­ing the name of the party hid­den. Both pro­pos­als will re­quire amend­ments to ex­ist­ing laws, of­fi­cials said. While in­tro­duc­tion of elec­toral bonds will need an amend­ment to the RBI Act, the low­er­ing of limit for anony­mous con­tri­bu­tions to ₹ 2,000 from ₹ 20,000 could ne­ces­sit a t e a n a me n d me n t to the Rep­re­sen­ta­tion of the Peo­ple Act. Ac­cord­ing to a gov­ern­ment rep­re­sen­ta­tive, the idea of bearer bonds for elec­toral fund­ing came from de­fence min­is­ter Manohar Par­rikar.

ELEC­TORAL BONDS

It is ex­pected that RBI will is­sue such bonds on be­half of the gov­ern­ment like any other sov­er­eign bond to which a donor may sub­scribe from bank branches and take cer­tifi­cates against it. Later, the bonds can be given to any po­lit­i­cal party, which will be able to re­deem these se­cu­ri­ties at its bank ac­count. So, the bearer’s iden­tity is un­likely to be re­vealed in the books of the party and the re­cip­i­ent party will also re­main un­known.

“Anonymity is pro­tected as iden­ti­ties of bond bear­ers would not be re­vealed,” said Ajay Man­glu­nia, ex­ec­u­tive VP (fixed in­come) at Edel­weiss Fi­nance. “It is go­ing to be a cleaner process as ev­ery­thing will be through cheque or dig­i­tal pay­ments. We will come to know the fi­nal con­tours of the­mech­a­nis­mon­cethe­gov­ern­ment clar­i­fies on this.”

Ex­perts dif­fered on the likely in­ter­est rates of these bonds. While some said these bonds will not yield any in­ter­est rate to limit their mis­use, oth­ers said these bonds may yield rates lower than the av­er­age range, which may the help the is­suer, the gov­ern­ment, to earn some in­ter­est in­come.

“Bond­sare­un­like­ly­toof­fer­anyrate, al­though the gov­ern­ment will take the fi­nal call as and when it fi­nalises the reg­u­la­tions,” said a part­ner from a large con­sul­tancy firm.

Fi­nance min­is­ter Arun Jait­ley said while presenting the Bud­get that an amend­ment­wouldbe­madetotheRBI Act to in­tro­duce elec­toral bonds. The EC had ear­lier pro­posed a new Sec­tion 29C to be in­serted in the Rep­re­sen­ta­tion of the Peo­ple Act to en­sure full dis­clo­sure of amounts re­ceived by a po­lit­i­cal party and its ex­pen­di­ture in­curred, a pro­posal that the Law Com­mis­sion en­dorsed in March 2015. Amid ques­tions on why the pro­vi­sion of anony­mous cash fund­ing should be re­tained at all, an EC of­fi­cial said the com­mis­sion pro­posed low­er­ing of the cap be­cause po­lit­i­cal par­ties had ear­lier ar­gued that they re­ceive quite a few small dona­tions in the ‘hundi’-like sys­tem which are very dif­fi­cult to ac­count for.

PM’S PUSH

Jait­ley­saidPMModi­par­tic­u­lar­lyem­pha­sised on clean­ing up of po­lit­i­cal fund­ing since de­mon­eti­sa­tion. “We can­nothavethe­w­hole­po­lit­i­cal­sys­tem funded by shadow econ­omy,” he said, re­spond­ing to queries from the me­dia fol­low­ing his Bud­get pre­sen­ta­tion.

CUR­RENT STA­TUS

The mea­sures are ex­pected to force par­ties to put out de­tails of the bulk of their donors in pub­lic do­main. A re­port re­leased by the As­so­ci­a­tion of Demo­cratic Re­forms last month re­vealed that 69% of funds of po­lit­i­cal par­ties in In­dia from 2004-05 to 2014-15 came from “un­known” re­sources. As per the re­port, 83% of to­tal in­come of Congress,65%of BJP,94%of SP,100% of BSP and 86% of Akali Dal was through anony­mous sources.

Imag­ing: ARINDAM

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