Political parties encashed electoral bonds worth Rs 1,212 crore in the run-up to the recent round of elections in five states, taking the total of such bonds redeemed to Rs 9,187 crore since 2018.

Politicians and rights activists have once again raised the grave concerns associated with anonymous funding through these bonds.
They have also questioned why the Supreme Court has so far not taken up the petitions which challenged the constitutional validity of this scheme.

What are electoral bonds?

A scheme for ‘electoral bonds’ was Announced in the 2017 Union Budget.
These are interest-free bearer instruments used to donate money anonymously to political parties.
A bearer instrument does not carry any information about the buyer or payee, and the holder of the instrument (which is the political party) is presumed to be its owner.

The bonds are sold in multiples of Rs 1,000, Rs 10,000, Rs 1 lakh, Rs 10 lakh, and Rs 1 crore, and State Bank of India is the only bank authorised to sell them.

Donors can buy and subsequently donate bonds to a political party, which can encash the bonds through its verified account within 15 days.

There is no limit on the number of bonds an individual or company can purchase.
If a party hasn’t enchased any bonds within 15 days, SBI deposits these into the Prime Minister’s Relief Fund.

Why have they been challenged?

The point of contention is the anonymity provided to donors of electoral bonds.

Through an amendment to the Finance Act 2017, the Centre has exempted parties from disclosing donations received through electoral bonds.
In other words, they need not disclose these details in their mandatory contribution reports to the Election Commission every year.
This means voters will not know which individual, company, or organisation has funded which party, and to what extent.
Before the introduction of electoral bonds, parties had to disclose details of all donors who have contributed more than Rs 20,000.
According to transparency activists, the change infringes the citizen’s ‘Right to Know’ and makes the political class even more unaccountable.

Concerns:

The electoral bonds could be misused, given the lack of disclosure requirements for individuals purchasing electoral bonds.
Electoral bonds make electoral funding even more opaque. It will bring more and more black money into the political system.
With electoral bonds there can be a legal channel for companies to round-trip their tax haven cash to a political party.
Electoral bonds eliminate the 7.5% cap on company donations which means even loss-making companies can make unlimited donations.
Companies no longer need to declare the names of the parties to which they have donated so shareholders won’t know where their money has gone.

Source: Indian Express