Election Funding Reforms

*Aakash Raj Chauhan

BA.LLB(Hons.), Dr Ram Manohar Lohiya National Law University, Lucknow

Background

Corporate funding of political parties in India and it’s related election expenditure has wide
background starting from freedom struggle movement from early 20th century. The Birla
group were one of the leading financial contributors of the Indian National Congress (INC) and
the business class as a whole secured some say over the shaping of the Congress government's
policy on regulation of the economy after Independence.

Traditionally, political parties in India financed themselves through individual donations or the
membership dues. Originally, the Representation of People Act (RPA) of 1951 introduced the
a limit on expenditure for election campaigns. In the 1960s when the modern democratic
structures 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 traces of black money infiltrating into the Indian political system. In 1968 the
Prime Minister of India Mrs.Indira Gandhi banned the corporate donations to political parties,
this was considered as first major step in curbing the black money in election campaign. In
1974, the Supreme Court (SC) in its judgment “Kanwar Lal v. Amar Nath Chawla” case held
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 to allow corporate donations to political
parties. In 1990, “Dinesh Goswami Committee” on Electoral Reforms recommended partial
state funding of elections for eg - fuel for vehicles used in campaigns, , additional copies of
electoral rolls, rental charges for microphones etc,. These recommendations put up some
questions into consideration like political parties campaign expenditures. In 1996 the
Government passed the RPA amendment bill based on the reprt of theabove mentioned
committee, the main characteristic was limiting 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 recommended partial
state funding and in addition to it free Television and Radio at state owned media only. “The
Gupta Committee” also recommended that parties that have failed to maintain and submit
audited accounts and income tax returns should be denied state funding. Under this
recommendation, all parties receiving a state subsidy for campaigns would compulsorily be
required to file a complete account with the Election Commission in the format prescribed by
the latter. According to the new Companies Act, 2013, the total funding for the political parties
from corporate shall not exceed the limit of 7.5 percent of the net profits earned in the preceding
three years, which is 2.5 percent higher than the earlier regulation of the act. It further directs
that the contribution so made must be authorized by a resolution adopted by the Board of
Directors. The disadvantage 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 gravity of influence of corporate funding of political parties, should
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. Most Importantly, companies should list all
donations and publish their regulation and 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.”

The corporate funding can be made more transparent and democratic by adopting the
mechanism 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 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 folowed 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 as to increase transparency and accountability. All the audited reports
by independent auditors should be made public.

The 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. 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 do away with. 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 depending upon the size and
number of voters available in a particular constituency. The free telecast (TV & Radio) may
also be extended to private news channels also apart from present regulation of government
owned electronic media. While a strong regulatory framework is expected to maintain check
& balance for the flow of black money in election expenditure of political parties but it is not
enough 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.” To
become effective in the process the “oversight bodies” must be comprehensively mandated,
resourced and is subjected to effective judicial system.

The role of media is a kind of force amplifier for the institutions working to check corruption
and scandals in election funding. Even most of the time media is also a part of the whole
corruption: Plenty of share of party spending during elections goes to media campaigns,
making media an important platform for waging electoral contests.

Media forums sometimes even provide in-kind donations to parties by giving discounted or
free airtime to their favoured political party. Regulation on campaign broadcasting (including
a full ban) and the rules of free airtime on public stations are important remedies. Another
aspect of regulation must include a top view of campaign messages masquerading as news
(hidden advertising). This is one of the most negative aspects of the media’s role in electoral
contests and it should be permanently regulated and checked by the broadcasting authority.
The paragraph expresses the need to frame the legal framework for media in context of election
campaigns and even “dos and dont’s‟ can also be framed by association of electronic and print
media themselves.