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[The committee will:-

A. examine the pattern of State funding in other countries where it is in vogue and
suggest concrete proposals for providing State funding to candidates set up by
recognised political parties, and
B. examine, in detail, the following related proposals and make suitable
recommendations on:
1. maintenance of accounts by political parties and audit thereof;
2. ban on donations by companies to political parties;
3. inclusion of expenses of political parties in the election expenses of candidates for
the purposes of ceiling on election expenses; and
4. empowering of the Election Commission of India to fix ceiling on election
expenses before every general election.]1



[The school of thought which is opposed to the very concept of any subvention being given to
political parties is of the view that political parties are voluntary association of citizens of
India and the very purpose of formation of such association is to take up and pursue political
activities with the ultimate objective of achieving or sharing state power, through medium of
elections. Contesting elections, either at the apex levels. is the primary purpose for which
political organisations came into being.

1. Therefore, undertaking that very activity why should the state coffers be made to bear
a burden, either wholly or partially.
2. Political Parties, apart from being politically viable, should be financially viable too.
3. Such financial viability for the parties would come, it is argued, if they are broad
based and that would make them to go for bigger enrolment drives of their
4. It is contended that the State funds should be utilised for the common good of people
and not for the benefit of a few, following political pursuits.
5. It I further argued that any state grant to political parties would make them to look
govt. for financial favours making them depended on Govt. and also accountable to it.
This would erode their independence, as they would be answerable even for their
internal functioning and management of funds.

Ministry of Law, Justice and Company Affairs, Committee on State Funding of Elections, Lok Sabha, (1998),
available at, (Last Visited on
October 15, 2017)
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6. It is also argued that any State funds to them would mean addition to their private
funds and increased capacity to spend on their election campaigns, which are already
very costly and this would be a retrograde step]2


1. [The other school of thought which advocates State funding of elections makes the
counter argument that political parties, though voluntary association of individual
citizens, are performing vital public function of sustaining democracy to which the
country is wedded. And for performing such public function of great importance, they
need to be financed from public funds.
2. They also argue that the State funding of elections would be in great public interest.
3. Political parties require huge funds for carrying out their legitimate
electioneering campaign during elections, apart from the funds from meeting their
running expenses on their day-to-day political activities during non-election period.
Contribution to such funds of political parties from state coffers would make them
less depended on private contributions, which mostly come from big business
houses and industrialists on quid pro quo basis, and this would serve a great public
cause and interest of removing corruption.
4. Public funding of elections would also bring about an equality of opportunity in
electoral contests, even for those parties which represents socially and economically
weaker sections of society and who often have less access to big donors.]3


1. [It is now well recognised in all modern democracies that political party essential
roles in any form of democratic governance and their existence is a sine qua non for
sustaining a representative democracy. They act as channels for participation of
citizens in the governance of their country.
2. Competition among them in political field makes the government of the day
answerable and accountable to the citizenry and provides them with ideological
alternatives at the time of elections to remould their destiny.
3. Such competing political parties, on one hand, inform and educate common people
about the policies and programmes of the government and, on the other hand, point
out the shortcomings and deficiencies in such policies and programmes and echo the
aspirations and expectation of the people. They, thus serve as conduits between the
common people and the government.

Viewed from this angle, they also perform public functions and may even be regarded as
important as important limbs of the administrative structures of the country There is
therefore, every justification for their legitimate activities being financed, if not wholly at
least partially, from public funds.]4

Ibid., at p.12-13
Ibid., at p.13-14
Ibid., at p.14-15
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Indian having [adopted unanimously by the Inter parliamentary Council (represented by 129
Parliament) at its 154th Session at Paris on 26th March, 1994. Para 4 of that the Declaration
(stressing the Rights and Responsibilities of States) laid down, inter alia, that:

States should take necessary legislative steps and other measure, in accordance with
constitutional process to provide for the formation and free functioning of political
parties, possibly to provide for the formation and free functioning of political parties,
possibly regulate the funding of political parties]5


1. Increasing cost of Electoral Process:-

[It cannot be denied that elections have become too costly. There are several factors for
such mounting costs, like, extensive election campaigns owing to keen competition
among political parties rise in the price of essential items of electioneering, particularly
POL and printing costs, use of new techniques and modern gadgets for election
propaganda, and the like.]6

2. Introduction of Political Corruption with Election Expenditure:- A Capitalist


[Big business houses and enterprises and entrepreneurs contribute to funds of political
parties, primarily keeping their own interests in view. They consider these contributions
as investment capable of yielding rich returns in time to come, as that would provide them
with easy access to political powers that be. In many cases, they may even be able to
influence Government decisions because of their political clout. This is giving rise to
Political Corruption].7Thus, going in a way to prove the Marxist theory of State.


The argument says that in [State funding of political parties and their candidates would also
tend to provide a level playing field even for those weaker political parties which may not
be having easy access to big business or industrial houses or may not be enjoying patronage
of such big donors because of their political ideologies and policies or philosophy which they
seek to pursue.]8

Ibid., at p.16
Ibid., at p.16-17
Ibid., at p.17
Ibid., at p.18
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But a counter argument was raised which stated that the [State funding may give impetus to
mushroom growth of political parties].9 To which reply was given that [every association or
organization calling itself a political party is also not well-founded. It is not that every
association or organisation calling itself a political party will become entitled to financial
support from the State as soon as it is formed. State support has to be confined only to such
political parties as have a REAL BASE among the electorate and they will have to wait till
they demonstrate such electoral support at election.]10 Now, if they are only granting money
to those who have established their base then they are not decreasing the cost of electoral
process as well as not making Election a Participative Process as well as it may be possible
that financial condition is one of the main condition for a party not having a political base.
Thus, making their argument self-defeating. But this was countered by saying that the Public
Funds cant be wasted on any association of individual calling themselves as a political party,
without the verification of credentials and popular base for which elections are only the same


The following countries have introduced State funding in one form or another, in the year
shown in brackets:

[Germany (1959) Austria(1963), France(1965), Sweden (1966), Finland(1967), Denmark

(1969), United States (1976), Japan (1976) etc.]11

Problems in adopting their measures:-

1. Most of the countries where the State funding is prevalent in one form or the other are
following the Proportional Representation System of Elections but in India
elections are held under the First-Past-The-Post system.
2. [The number of Political Parties is also very large with 7 recognised National Parties
and 43 recognised State Parties. In the next place, we have to keep the financial
resources and budgetary constraints in view.]12


State funding should be given to those political parties who [are actively participating in
electoral activities and have a real base among the electorate. Nor can such funds be doled
out to independent candidates, an overwhelming majority of whom, with a very minuscule
exception, just join the bandwagon for personal popularity.]13

Now the question arises that how the popular support could be measured?

Ibid., at p.19
Ibid., at p. 19
Ibid., at p. 22
Ibid., at p. 24
Ibid., at p. 25
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[The only authentic index to Judge the popular that a political party enjoys is its poll
performance at the previous elections. The election commission has fixed certain norms and
yardsticks for judging the poll performance of all political parties registered with it under
Sec. 29 A of the Representation of the People Act, 1951].14


The committee said that, [given the budgetary constraints and financial stringency being
faced currently by the country compounded by the recent economic sanctions imposed by
certain foreign countries sparing or diverting the meagre financial resources of the country at
this juncture will neither be advisable nor feasible].15 But today the scenario has changed and
this opinion need not be taken consideration in toto but financial constraints will always be
present so there is need to see that providing full funds would be feasible or advisable.

State funding should be provided in kind but not in cash.

For electornic communication AIR or Doordarshan should be allowed.

Important things used during Election:-

[The committee has analysed the main items of electioneering campaign on which all parties
and candidates, by and large, incur a main portion of their election expenses, although
individual campaign may vary from state to state, from one constituency to another and from
one candidate to another.]16

[The principal items are:-

a. Motor vehicles used by candidates and their agents for canvassing during election
b. Holding of large public meeting, particularly those with loudspeaker arrangements
c. Arranging Public Processions and demonstrations
d. Various forms of entertainments
e. Display of streamers, and banners, posters, placards and similar form of publicity
f. Paid canvassers and agents
g. Printing of election manifestos, pamphlets and identity slips and distribution thereof;
h. Personal canvassing before and on the polling day, including putting up of booths by
candidates outside the polling stations for issuing identity slips to voters.]17

[The candidate should be supplied with certain quantity of petrol for vehicle used by him
during electioneering campaign and as such he is required to get the no. of vehicles registered
with returning officer. He shall also be provided with a certain quantity of paper for printing
their election literature. He should be supplied with postal stamps, copies of electoral roll of
is constituency. He should also with supplied with one set of loudspeakers 1 micro phone and

Ibid., at p. 25-26
Ibid., at p. 28
Ibid., at p. 32
Ibid., at p. 32-33
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2 loud speakers. He shall also be provided with telephone during his main office in
constituency during election campaign. Though no uniform standard or scales can be laid
down in this behalf which may vary from constituency to constituency, depending upon its
territorial extent. This task maybe entrusted to the ECI, who may accomplish it in
consultation with recognised political parties and the Government. ]18 All recognised
National Parties may be treated at par in this behalf.19

This part provides the help to be given to the political parties but it doesnt restrict the
political parties to promote their agenda using their own private resources which has no
connection with state funding. Thus, it has no use, even though state is granting funds and it
would prove to be burden on the state itself.

Chapter IV of the Committee report dealt with the one of the most important issue of
Regulatory Measures so as to bring transparency and monitoring of excessive expenses

The committee suggested that

1. Every Recognised Political Party must be compulsorily required to maintain and

submit its annual return and expenditure to the Income Tax authorities by the
prescribed due dates. No political party which has failed to submit its annual return
for the previous assessment year under the Income Tax Act should be eligible for any
State funding.
2. Such annual return should be duly audited and certified to be correct and complete in
all respects by C.A who may be selected by the Political Party itself.
3. All subscriptions, donations received by a political party above the amount of Rs.
10,000 should be accepted only by means of cheque/bank draft.

Chapter V deals with POLITICAL DONATIONS BY COMPANIES, wherein the

committee observed that:-

There are two different views on this issue:-

One of the views is that there should be complete ban on funding of companies which are the
root cause of corruption. But the other view is that [political parties require huge funds for
managing their day to day affairs and for contesting elections. Subscriptions and
contributions by their own members alone may not suffice to meet the huge expenses that the
political parties have now to incur to sustain their political activities during non-election
period and to carry out their election campaigns during the election period. Therefore,
imposing complete ban on corporate funding for political purpose would equally be turning
blind eye to the ground realities].20

Even though the donations by the big corporate houses are completely banned, Political
Parties were being funded through indirect means. Due to which law was changed in 1985 by

Ibid., at p. 34-35
Ibid., at p. 36
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Act 35 of 1985 and the amended section 293A of the Companies Act now permits corporate
donations for political purposes but subject to certain prescribed restrictions.

Thus committee said that it would like to leave the matter to the collective wisdom of
Government and Parliament to take appropriate decision in the matter.21

[Further, the committee didnt deal with the question whether election expenses of political of
political parties and other bodies or associations and individuals should be included or not in
the accounts of election candidate to be decided by the collective wisdom of Government.

It also suggested for the creation of Election Fund.]22


The committee left the most important matter to be decided by the Govt. i.e. funding of
money by Big Corporation. It didnt take out a way for restricting the amount to be donated
by corporate houses to political parties which are source of corruption. It also said that there
should be state funding but it didnt says that how the state funding will stop the
incorporation of black money during the electoral process. It also said that State cant grant
money in toto because of budget constraints. So, it will provide partial amount and remaining
amount could be granted by the political parties thus, this recommendation would prima facie
is counter-productive because it didnt decide the ceiling limit of money to be used by
political parties and as such

1. It would add burden to the state treasury

2. Since, the state funding will be partial then the for rest (having no ceiling limit) would
always provide a way to major corporate houses to incorporate money in the political
fund of the parties
3. The committee also said that the corporate houses even if they are stopped from
giving money to the parties completely, they are helping the political parties in an
indirect manner by producing the pamphlet etc. Thus, the committee didnt put any
reform for stopping the incorporation of black money by Big Business Houses.
4. Since, there is ceiling limit on the expenditure to be occurred during election in the
candidates name then if the expenditure incurred by the Political Parties or by their
agents could be included in the expenditure of candidates name then the
expenditure incurred by Political parties would be limited. But whether it should be
included or not, the committee left it to be decided by the Govt.
5. The committee thus only went for a review and didnt suggest the way for
implementation of reforms and if suggested was for a small amount and that reform
didnt restrict the incorporation by Political Parties.

Ibid., at p. 44
Ibid., at p. 63