Reforms in Election Funding in India

Dr Manu Chaudhary
Manoj Kumar
Abstract: This paper deals with the corruption in Indian political system in context of election
campaign expenditures. The issue has caught public attention due to the efforts by Prime
Minister of India against corruption in public life. Now there is debate in India about the
modalities by which greater transparency can be exercised by institutions both political and
governmental which can curb use of black money in the election expenses. The paper has
discussed shortly about the history of various steps taken by previous national governments in
this context, in addition to it the role played by national and corporate financial and legal
institutions. The paper has, in short discussed about the prospective changes that can be made
by different stakeholders and has also described the various models of election campaigning like
‘state sponsored campaigning’ and ‘national electoral fund’.
Keywords: Elections, Corruption, Funding, Campaigning, Media, Audit.

After the bold decision on November 08, 2016 the government has shown the resolution to fight
the menace of black money and to curb corruption in public life. The discussion/expectation has
now started in second phase of „surgical strike‟ on corruption in public life and the most probable
is the context of „comprehensive electoral reforms‟. As per Pavan K Varma, “India is amongst
the lowest scoring countries on political finance regulation according to Global Integrity Report.
India scored zero out of hundred on implementation and disclosure of political party and
candidate financing.” 1

Background

Corporate funding of political parties and related election expenditure has history starting from
freedom movement from early 20th century. „The Birlas were one of the leading donors of the
Indian National Congress and the business class as a whole secured some leverage over the
shaping of the Congress government's policy on regulation of the economy after Independence.‟2
Customarily political parties in India financed themselves through individual donations and
membership dues. Originally the Representation of People Act (RPA) of 1951 introduced the cap
on expenditure for election campaigns. As early as 1960s when the modern democratic
institutions in India were still evolving the reports of the Santhanam Committee on Prevention of
Corruption 1964 and the Wanchoo Direct Taxes Enquiry Committee 1971 both mentioned
emphatically presence of black money infiltrating into the political system.

In 1968 the Prime Minister of India Indira Gandhi banned the corporate donations to political
parties, this was seen as first major step in curbing the black money in election process but this
move was most probably due to increasing influence of Swantantra Party which was main
beneficiary due to advocacy of „free market economy‟. The ban was not followed by any

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substitute mechanism for political funding like option of „state funding‟. This further
complicated the involvement of black money in election campaigns due to absence of adequate
and legal source of funds. In 1974 the Supreme Court in its judgment Kanwar Lal v. Amar Nath
Chawla case that, “part spending on behalf of a candidate should be included in calculating that
candidate‟s election expenses. In the context of this judgment the erstwhile Parliament amended
RPA in 1975 that, “party and supporter expenditures not authorized by the candidate did not
count towards the calculation of candidate‟s election expenses.” Than in 1985 the process of
electoral moved full cycle when the Company Act was amended and once again corporate
donations were allowed to political parties.

In 1990 Dinesh Goswami Committee on Electoral Reforms recommended partial state funding of
elections like fuel for vehicles used in campaigns, rental charges for microphones, additional
copies of electoral rolls etc,. These recommendations left some questions unanswered like
political parties‟ campaign expenditures. In 1996 the Government passed the RPA amendment
bill based on above mentioned committee, the main feature was bringing down of campaign
period from 21 days to 14 days so that the expenditure can be minimized. The Indrajit Gupta
Committee on State Funding of Elections in 1998 advocated partial state funding and in addition
to it free TV and Radio broadcast of state owned media. „The Gupta Committee also
recommended that parties that failed to maintain and submit audited accounts and income tax
returns be denied state funding. Under this recommendation, all parties receiving a state subsidy
for campaigns would be required to file a complete account with the Election Commission in the
format prescribed by the latter.‟3

As per the new Companies Act, 2013, the total funding for the political parties from corporate
shall not exceed 7.5 percent of the net profits earned in the preceding three years, which is 2.5
percent higher than the earlier provision of the act. It further states that the contribution so made
must be authorized by a resolution adopted by the Board of Directors. The shortcoming of this
provision is that on a very small number of people can decide how and to whom the funds are to
be distributed.

Expected reforms in funding of elections

Considering the role and magnitude of influence of corporate funding of political parties, are to
be subjected to greater transparency and accountability standards. As per Transparency
International:

“Any political contribution made should be subject to transparency, i.e., they should be publicly
disclosed by the company. Importantly, companies should list all donations and publish their policy
on political donations (defined broadly to include donations to parties, candidates, and third
parties). The irony, however, is that most companies are opting out of handing over controls and
decisions on political financing. A review of Standard & Poor's 100 companies revealed that only
one-third had board oversight of their political spending.”4

The corporate funding can be made more transparent and democratic by adopting the procedure
which is being followed in United Kingdom (UK), in UK the shareholders of a company have a
definite say over how much funds are to be spent on political parties which is commonly termed

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as “shareholders approach”. The Company Act itself has got no mention of the demands of
shareholders in distribution of corporate donations.

It is also expected that all political parties must make their audit reports available to public. The
audit may be made by independent auditors and even the audited accounts may be brought under
the ambit of Right to Information Act (RTI). As per practice in vogue the political parties merely
obtain a certificate from Election Commission that they have submitted their annual audited
statement of accounts. The Election Commission and various members of civil society have
argued that funding and donations by companies to political parties should be made subject to
audits and disclosures. All the audited reports by independent auditors should be made
public.5The practice of rotation of the appointed auditors (as practiced for companies in India)
must be duly instituted for all political parties—something which the Indrajit Gupta Committee
on State Funding of Elections and the Standing Committee of Parliament on Finance, curiously
enough, refused to accept.6 All payments received or made by political parties must be made
digitally or through banking channels, even the current practice which allows parties not to
identify donors contributing less than Rs 20,000/- must be scrapped.7 (Pavan)

Another step which is yet to be explored in Indian context is the State funding as suggest in
various Committees mentioned above. The State funding can be allotted as per the proportion of
votes that a particular party obtained in elections and may also possibly the number of
prospective candidates that a party wishes to field in elections. The funding proportion may also
be made depend upon the size and number of voters available in a particular constituency. The
free telecast may also be extended to private news channels also apart from present provision of
State owned electronic media.

While a strong regulatory framework is expected to check the flow of black money in election
expenditure of political parties but it is not sufficient to counter the corruption in public finance.
Even the countries who have very exhaustive regulations continue to suffer from scandals. The
main reason is, “Oversight bodies may be inadequately equipped, laws may be too complex and
cumbersome to be practicable, or there may be a lack of political will to allow enforcement
bodies to carry out their functions independently and free from political interference.”8 To
become effective the „oversight bodies‟ must be comprehensively mandated, resourced and is
augmented by effective judicial system.

The role of media is a kind of force multiplier for the institutions working to check corruption in
election funding. Even most of the time media itself becomes part of the whole corruption:

A large, if not the largest, share of party spending during elections goes to media campaigns,
making media an important platform for waging electoral contests. Media outlets sometimes even
provide in-kind donations to parties by giving discounted or free airtime to their favoured
contender. Controls on campaign broadcasting (including a full ban) and the provision of free
airtime on public stations are important remedies. Another area of regulation must include
oversight of campaign messages masquerading as news („hidden advertising‟). This is one of the
more negative aspects of the media‟s role in electoral contests and it should be permanently
regulated by the broadcasting authority.9

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The paragraph expresses the need to frame the legal framework for media in context of election
campaigns and even „dos and don‟ts‟ can also be framed by association of electronic and print
media themselves.

Conclusion

The quality and efficiency of government are adversely affected when corruption distorts and
damages political parties and campaigns as the corrupt practices in campaigning may unduly
influence the electoral behavior. Political parties and candidates may also distort the process
when they resort to buying votes rather than focusing on the content and quality of campaign
messages. The larger damage may be witnessed by the quality of government so evolved, when
decisions made by elected politicians are made for the interest for those who have funded them.
The whole issue of corruption in elections is directly connected with the quality of governance
which we will be subjected to and the kind of welfare State that will be evolved there with.

References

1. Varma, Pavan, „Let‟s Clean Political Cesspool‟, Times of India, January 07, 2017, p.10.
2. Venkatesan, V., Chequered Relations, Frontline, available at
http://www.frontline.in/navigation/?type=static&page=archive , Volume 16 - Issue 16,
Jul. 31 - Aug. 13, 1999, accessed on January 03, 2017.
3. Report of the Committee on Electoral Reforms (Indrajit GuptaCommittee), Ministry of
Law and Justice, Legislative Department, Government of India, Delhi, 1998.
4. Transparency International Policy Position, „Standards on Political Funding and
Favours‟http://www.transparency.org/whatwedo/publication/policy_position_no._01_200
9_standards_on_political_funding_and_favours, accessed on January 07, 2017.
5. Chattterjee, Samya & Sahoo, Niranjan. „Corporate Funding of Elections: The Strengths
and Flaws‟ ORF Issue Brief # 69, February 2014 www.orfonline.org/wp-
content/uploads/2014/03/IssueBrief_69.pdf, accessed on January 05, 2017.
6. Ibid.
7. Varma,Pavan. „Let‟s Clean Political Cesspool‟, Times of India, January 07, 2017, p.10.
8. Tranparency International, „Political Finance Regulations: Bridging the Enforcement
Gap‟, Policy Position No. 02/2009 (Berlin, Germany: TI, 2009)
www.transparency.org/publications/publications/policy_positions/ti_pp_pol_finance,
accessed on January 09, 2017.
9. Transparency International Policy Position, „Standards on Political Funding and
Favours,http://www.transparency.org/whatwedo/publication/policy_position_no._01_
2009_standards_on_political_funding_and_favours , accessed on January 07, 2017.

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