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ASSOCHAM VIEWS ON

ELECTION FUNDING






















The Associated Chambers of Commerce and Industry of India






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FUNDING OF POLITICAL PARTIES FOR ELECTION PURPOSES

The core of democracy is the free and fearless choice by the people
of a government they want. This choice to be truly free and fearless
involves some basic requirements. These include multiple political
parties with their own distinct agendas and identifiable leadership,
facilities to access far flung populations with their message and
opportunity to the public to challenge the parties on their agenda and
get clarifications on them.

There has to be a level playing pan-Indian field for all recognized
national parties and pan-regional field for regional parties so far as
Parliamentary elections are concerned. Individual contestants for
public office cannot be accommodated within this system and would
have to fend for themselves.


Funding through Budgetary Provisions

It has been recognized for quite some time that political parties must
be funded from a national fund created through budgetary provisions.
This should be supplemented by corporate and individual donations
raised by the political parties on their own initiative. The problem
however was to work out some ground rules for facilitating such
funding.

Corporate Funding

In the absence of an all party agreement on these ground rules, the
idea of public funding has been kept in abeyance for over two
decades now after the proposal was first mooted. (Please see historic
detail of these moves and international practices in the attached
document). As for corporate donations they were first banned in the
70s and then allowed within sharp limits. The net result has been
that political funding has always been a hush affair. Like the iceberg
the public only sees what is revealed at the top through the
restrictions on election spending by candidates. How much the
political parties are spending is yet unknown. This provides excellent
opportunities for inflow of funds from illegitimate and even criminal
sources. The Election Commission no doubt enforces the ceiling on
expenditure by individual candidates but is unable to exercise any
control on the actual amount parties spend. The public is completely
in the dark about the funding by political parties and the source of
these funds.

Good Electroral Practices

ASSOCHAM considers this situation not at all conducive to promotion
of good electoral practices. The unfortunate outcome of enforcing
ceiling on expenditure by individual candidates while not subjecting
spending by parties to public scrutiny, is that gates are opened for
anti-social elements with unaccounted money to influence our
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politics. This is a wholly undesirable situation. ASSOCHAM hopes to
revive the public discourse on political funding and thereby compel
authorities to enact suitable legislative and other measures to cleanse
public life and protect democracy.

We must first accept the ground realities of conducting a national (or
state level) electoral campaign. Once that is recognized, the next
step should be to facilitate such a campaign and enable political
parties to get such funds as are needed for this conduct. While
support to recognized political parties through share of a public fund
created by the government is necessary to create a level playing
field, the real level of public support for any party would be the funds
it could itself raise from public and corporate donations. So the
election expenditure should be part financed from the public fund and
part from public and corporate donations.

While ceiling on expenditure is desirable the ground reality is that
such a ceiling is not practicable. It is widely known that the existing
ceiling on expenditure for candidates is bypassed by various means.
Actual expenditure is many times the ceiling set by law. The most
important thing is to prevent flow of unknown funds from entering the
electoral battle and thereby seek to influence Indian politics in
undesirable ways. So the more practical idea is to make both income
and expenditure transparent and without any limit. Let the public
know how much each party spends and from where the funds come.
If an effective tracking system is set up by the EC on all expenditures
during the election period, it would be possible to prevent parties from
hiding expenditures thereby compelling them to disclose source of
these expenditures.

Norms for Funding

Regarding share of public fund from the government, norms should
be evolved on the basis of total votes received in the last election.
Weightage has to be given to the national versus state level of
parties. For instance, a state level party which has considerable
support in one state alone (like the DMK or AIDMK in TN) should not
get less than a national party (like the Janata Party) merely because
the latter sets up more candidates each one of whom hardly get a
winning vote.

A new party that has come up during the interval between two
general elections should not be eligible for public funding but can
raise corporate and individual donations. If a party receiving share
from the government operated public fund fails to receive less than
five per cent of the total vote, it should be asked to return the money
received or be disqualified for future share. The entire set of
regulations for this purpose would have to be fine tuned to
accommodate the fact that there are strong state level parties with
appeal limited to the state only that compete with national parties in
national elections and that several parties might enter into alliances
that could distort the per centage of votes they receive at macro level.

Role of the Regulator
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All corporate entities should be enabled to donate for electoral
purposes to political parties of their choice. A ceiling on the net profit
for such purpose could be set but all listed corporations should inform
the SEBI about the donations they intend to make. All such
donations should be approved by the respective corporate boards.
Unlisted corporations and partnerships should inform the IT Dept
about their decisions to contribute with a proviso that these be
published. In one sweep this alone would cleanse our public life, help
businesses to resist pressure for unaccounted donations and enable
public to know who is financing whom.

Political parties must be compelled by law to publish week by week
the donations they receive from corporates and the public. They
should also give a consolidated list of donors within three months of
the end of election process. All individual donations exceeding Rs.
one lakh should be open to public scrutiny.

Punishment for hiding Expenditure

As a counter to the lifting of all ceiling on expenditure, there should be
provision for penalty and punishment for hiding any expenditure by
either individuals or political parties and also for hiding of corporate or
individual donations. As there are no ceilings on expenditures the
political parties/individual candidates would be less tempted to hide
expenditures for fear of detection and disqualification. Again we must
stress this would be effective only if EC has a means of tracking most
expenditures during the election period. This is not impossible now
that many transactions are electronic. The government may give
income tax exemption for all donations to political parties for election
purposes. Towards this all parties should be asked to open a
separate election fund account into which donations should be
canalized.

Need for enactment of Legislation

ASSOCHAM strongly urge the government and other concerned
authorities and political parties to consider these suggestions and
enact appropriate legislations and rules so that we could have
cleaner, freer and transparent elections from the coming general
election onwards. Similar steps could be considered for state level
elections too.