Why electoral bonds failed to fix political funding mess

Earlier this month, the Supreme Court concluded its hearings on the issue of legality of electoral bonds. The Union government, represented by solicitor general Tushar Mehta, opposed citizens’ right to know about who supplies money to political parties, citing political donors’ right to privacy.There is a strong case to be made in favour of the right to know. Transparency is not only a right of citizens to know about who funds parties, but also the most effective mechanism to regulate political funding.As lawyer Gautam Bhatia argued two years ago, transparency is necessary to avoid the purchase of policies and regulatory capture, and to ensure some fairness in the allocation of resources between political parties.Watch: Lack of transparency worries apex court medium nocaption104915981On the other hand, full transparency would create its own problems. It may deter corporations from using legal pathways and resort to even more obscure or illicit ways of donating. Even banning corporate donations altogether would not stop the flow of money, given the centrality of money in politics.The question of which right ought to prevail over the other is not merely philosophical or normative, but also a practical one. The solicitor general was not wrong when he stated that full transparency of donors’ identity might expose them to retribution.In its early years, the Aam Aadmi Party (AAP) sought to establish transparency of its funding by publicising its donors’ list. It converted them into targets for investigation agencies, and AAP had to quickly let go of its transparency ambitions.Selective anonymityOne of the many problems associated with electoral bonds is that they provide selective anonymity, something that the Supreme Court bench itself noted in its remarks. While citizens and opposition parties do not have access to any information regarding who donated to whom, the government and, therefore, the party in power may have access to some information by virtue of their oversight of investigation agencies.The fact that the State Bank of India (SBI) is under no obligation to disclose to the government the details of funding received doesn’t mean that access to that information is prohibited. Absence of obligation to disclose information does not constitute a firewall. And given the degree of instrumentalisation of public institutions for political gains, citizens can be rightfully suspicious about such claims. medium105179210Selective anonymity also works for donors. After all, where is the benefit of donating to a political party if the gift is to remain completely anonymous?Full transparency may be impractical and create its own problems. But its opposite is worse. The current system legalises limitless anonymous donations by corporations to parties, with virtually no regulatory oversight. It offers no protections against the use of shell companies to funnel money into politics, and even allows for Indian subsidiaries of foreign companies to make donations.Public institutions are not currently equipped to exert regulatory oversight. There is no cost to political parties for not complying with extant rules. The Election Commission, while powerful, does not have the legal teeth to effectively regulate political funding. It does not have the power to sanction parties that fail to produce their financial disclosures in time, or sometimes at all. The Supreme Court hearings also informed us that it is not even keeping the data up to date, as it should be doing.European modelAs a response to this situation, some advocate for the adoption of a public funding system, as practised mostly by European democracies. While attractive, this idea does not stand a chance of adoption in India since no party will ever agree to it.That said, a fully public system is not required to create more regulation and accountability. Even nominal public funding, in proportion to parties’ electoral weight, can help achieve that.The problem now is that there is no independent authority empowered to cap donations, or to ensure that electoral bonds aren’t used as a vehicle for money laundering, or as an instrument to purchase favours. medium105179232While the debate goes on and waits for its judicial conclusion, it is useful to remember that electoral bonds represent only a fraction of the money injected into politics. According to the Association for Democratic Reforms, a non-profit organisation, parties redeemed bonds for a total value of ₹7,360 crore in the 2019 general election, while the Centre for Media Studies pegged total expenditures for the same election at ₹60,000 crore.As such, electoral bonds have provided a new legal way to donate to political parties. But they have not been the substitute for old illicit forms of political funding that was promised. Anecdotal accounts also reveal that it did not put an end to practices of financial extortion of corporations.At any rate, electoral bonds have done nothing to curb down the financial arms race that has taken place in Indian elections. Campaign costs increase exponentially, creating further disincentives to regulate political funding.What electoral bonds have done ultimately is to create the illusion that political funding in India has become somewhat clean. And it is in that way that they may have had the most pernicious effect on political funding in India.