Explained: What are electoral bonds, who benefitted, what happens after SC order?
According to an ADR report, EBs have become the primary method of political funding in India since their introduction, with 56% of all funding coming through EBs
In a judgment that is being hailed by the Opposition and activists alike as momentous for Indian democracy, the Supreme Court on Thursday (February 15) scrapped the Electoral Bonds Scheme that allowed political parties to raise funds via anonymous donations. Incidentally, the lion’s share of these funds was raised by the ruling BJP since the scheme’s inception.
The scheme, which was notified by the government on January 2, 2018, had been a subject of controversy since the very beginning. Right after it was implemented, the CPM, Congress leader Jaya Thakur, and NGO Association for Democratic Reforms (ADR) had challenged it in court.
So, what are electoral bonds and why did multiple petitioners challenge it in court? Which parties have benefitted the most from electoral bonds? What did the Supreme Court say and what happens to the money raised by parties via the Electoral Bond Scheme? Here are some answers.
What are electoral bonds?
An electoral bond (EB) is a bearer bond instrument through which companies and individuals can donate funds to political parties. It is like a promissory note, with the money payable to the bearer on demand.
In India, EBs are sold in denominations of Rs 1,000, Rs 10,000, Rs 100,000, Rs 1,000,000 Rs 10,000,000 only by the State Bank of India (SBI). Any individual, group, or corporate organisation can buy these and donate these to the political party of their choice. The parties can redeem these after 15 days, free of interest, but only through an account with an authorised bank.
While parties, by law, have to reveal the identities of those who donate more than Rs 20,000 in cash, the rule did not apply to electoral bonds, no matter how large the sum donated.
What was the controversy about?
The petitioners who challenged the scheme in court argued that its confidentiality clause came in the way of the citizen’s right to information. Besides, the Reserve Bank of India (RBI) had warned the Centre in 2017 that shell companies could misuse EBs for money laundering.
How much has each party raised through EBs?
According to an ADR report, EBs have become the primary method of political funding since their introduction, with 56% of all funding in Indian politics coming through EBs.
The period studied by the ADR was from FY 2016-17 and FY 2021-22. During that period, the total donations received by the 31 political parties analysed was Rs 16,437.635 crore. After the introduction of EBs in 2018, there was a mammoth 743% rise in donations made through these, with the total amount raised being Rs 9188.35991 crore.
While the BJP raised Rs 5271.9751 crore (52% of its total donations), the other national parties together raised only Rs 1783.9331 crore through EBs. The Congress came next, with a figure of Rs 952.2955 crore (61.54% of its total donations). The TMC raised Rs 767.8876 crore (93.27%), the BJD raised Rs 622 crore (89.81%), the DMK Rs 431.50 crore (90.703%), the BRS Rs 383.6529 crore (80.45%), and the YSRCP Rs 330.44 crore (72.43%).
In 2022-23, the BJP received nearly Rs 1,300 crore through electoral bonds, seven times more than what the Congress got in the same period through the same route. According to the BJP’s annual audited report submitted to the Election Commission, 61% of its donations came as electoral bonds.
The Congress’s earnings from EBs went down from Rs 236 crore in FY 2021-22 to Rs 171 crore in 2022-23 from electoral bonds.
What the SC said in its ruling
The Supreme Court on Thursday (February 15) struck down the EB scheme, calling it unconstitutional. A five-judge Constitution Bench headed by Chief Justice DY Chandrachud delivered two separate and unanimous verdicts on the pleas challenging the scheme. The top court held that:
- Such anonymous donations violate the Right to Information and Freedom of Speech under the Constitution.
- The fundamental right to privacy also includes citizens’ right to political privacy and affiliation.
- The amendments made in various laws, including the Representation of The People Act and the Income-Tax laws, are invalid.
In November, the apex court held that EBs can be “misused for money laundering”.
What about the money raised through EBs?
The apex court has instructed SBI to:
- Stop issuing EBs at once
- Disclose to the Election Commission the names of all buyers of EBs since April 12, 2019 (when it passed an interim order) to date
- Disclose the date of purchase of each EB
- Disclose the denomination of the EB purchased
- Disclose the details of the political parties that have received donations through EBs since April 12, 2019 to date
- Disclose details of each EB encashed by the political parties
It is not immediately clear what will happen to all the money political parties have raised through EBs.
(With agency inputs)