Context

• Laws and public policies are essential tools for addressing societal issues and improving conditions for citizens.
• They should possess qualities such as lack of ambiguity, enforceability, predictability, and accountability and one such policy, the Electoral Bond Scheme (EBS), was aimed to reform political funding in India.
• After the Supreme Court verdict on EBS it becomes crucial to analyse the genesis, design, and demise of the EBS, assessing its effectiveness and implications.

Genesis and Evolution of the EBS

• Acknowledgment of a Persistent Issue of Election Funding
  • The genesis of the EBS can be traced back to the recognition of a longstanding problem in Indian democracy: the opacity of political funding and the pervasive influence of black money in elections.
  • The reluctance of donors to contribute through transparent means due to fear of adverse consequences emerged as a significant factor contributing to the opacity in political funding, necessitating urgent reform.
• Proposal of Electoral Bond Scheme: Establishing a Clean Channel
  • In response to the identified challenges, the finance minister proposed the EBS (in her 2017 Budget speech)as a solution to cleanse the system of political funding in India.
  • The primary objectives of the Electoral Bond Scheme were twofold: to enhance transparency and accountability in political financing and to curb the generation of black money.
  • The significance of the EBS lay in its potential to establish a clean channel for the flow of funds, replacing opaque methods with a transparent and accountable framework.
  • Despite its noble intentions, the EBS encountered challenges and criticisms regarding its design, implementation, and efficacy.
  • Concerns were raised about the adequacy of safeguards and the potential for misuse.

Design and Objectives of Electoral Bond Scheme

• Legal Framework and Oversight
  • The EBS was established within a legal framework outlined by the government, with provisions laid down in the Electoral Bond Scheme, 2018.
  • This framework provided guidelines for the issuance, purchase, and redemption of electoral bonds, as well as mechanisms for oversight and regulation.
  • The Reserve Bank of India (RBI) also played a role in regulating the scheme, ensuring compliance with banking regulations and standards.
• Evaluation and Review
  • The design of the EBS incorporated provisions for evaluation and review to assess its effectiveness in achieving its objectives.
  • Periodic assessments and reviews were intended to identify any shortcomings or loopholes in the scheme and make necessary adjustments to improve its efficacy.
• Facilitating Transparent Transactions
  • Central to the design of the EBS was the facilitation of transparent transactions between donors and political parties.
  • By allowing individuals and organisations to purchase electoral bonds from designated banks, the scheme provided a structured mechanism for channelling funds.
  • These bonds could then be donated to political parties of the donor’s choice, thereby formalizing the process of political contributions.
• Anonymity for Donors
  • One of the key features of the EBS was the provision for anonymity for donors.
  • While the scheme required purchasers to provide KYC (Know Your Customer) details to the banks at the time of purchasing bonds, the identity of the donor remained confidential.
  • This anonymity was intended to encourage more individuals and entities to contribute to political parties without fear of repercussions or adverse consequences.
• Curbing Black Money
  • Another objective of the EBS was to curb the generation and circulation of black money in political financing.
  • By formalising the process of political donations and mandating transactions through banking channels, the scheme aimed to reduce the reliance on cash donations and opaque funding mechanisms.
  • The expectation was that by introducing transparency and accountability into the system, the prevalence of black money in elections would diminish.

Reasons Behind the Demise and Criticisms of the EBS

• Confidentiality and Lack of Transparency
  • One of the primary criticisms levelled against the EBS was its provision for donor anonymity, which undermined transparency in political financing.
  • While the scheme aimed to formalize political contributions and channel funds through banking channels, the confidentiality clause prevented meaningful scrutiny of donor identities.
  • This lack of transparency raised concerns about the potential for misuse and the inability to track the sources of funds effectively.
• Potential for Misuse and Corruption
  • The confidentiality clause of the EBS also raised concerns about the potential for misuse and corruption within the political system.
  • Critics argued that the anonymity afforded to donors could be exploited to funnel illicit funds to political parties, circumventing regulations, and oversight mechanisms.
  • This raised questions about the integrity of the electoral process and the susceptibility of the scheme to abuse for ulterior motives.
• Inadequate Safeguards and Oversight
  • Another critique of the EBS was the perceived lack of adequate safeguards and oversight mechanisms to prevent misuse and ensure accountability.
  • The scheme’s design did not incorporate robust mechanisms for monitoring and regulating political contributions, leaving room for manipulation and malpractice.
  • The absence of stringent oversight contributed to doubts about the scheme’s efficacy in curbing black money and enhancing transparency in political financing.
• SC Intervention and Disclosure Mandates
  • The SC’s intervention further highlighted the shortcomings of the EBS and underscored the need for transparency and accountability in political financing.
  • Court-mandated disclosures and directives compelled greater transparency regarding donor identities and the sources of political contributions.
  • However, these measures also exposed the inadequacies of the scheme and the challenges inherent in reconciling donor anonymity with transparency and accountability.

Way Forward

• Parliament Not Court Should Find Solutions
  • Parliament, as the supreme legislative body, possesses the “superior” wisdom necessary to navigate complex issues such as political financing.
  • Just as Parliament is entrusted with appointing Election Commissioners, it is also tasked with devising solutions to challenges in electoral processes.
  • A reasonable path forward can only be achieved through a collaborative and consultative process involving all stakeholders.
• Consultative Process Over Judicial Fiat
  • Court interventions, while sometimes necessary, should not substitute for legislative action.
  • Laws and policies crafted in secrecy or through judicial mandates may lack the legitimacy and effectiveness needed to address complex and multifaceted problems.
  • Instead, an inclusive and transparent consultative process allows for diverse perspectives to be considered and ensures that solutions are grounded in democratic principles.
• Upholding Probity and Integrity
  • At the heart of the argument is the need to uphold probity and integrity in political financing.
  • The essay highlights the importance of political parties accepting clean money rather than relying on funds obtained through dubious means.
  • It is the responsibility of political parties to prioritise transparency and accountability in their financial dealings.

Conclusion

• The EBS aimed to reform political funding in India by promoting transparency and accountability, however, its design flaws, including the confidentiality clause and lack of transparency regarding donor identities, undermined its effectiveness.
• The scheme’s demise highlights the complexities of addressing systemic issues such as black money in politics and underscores the need for comprehensive and transparent reforms in political financing.
• Ultimately, the responsibility lies with Parliament to devise solutions that ensure probity and fairness in electoral processes.