[Editorial Analysis] How to ensure political funding is clean and transparent

Mains Paper 2: Governance

Prelims level: Electoral Bonds

Mains level: Important aspects of governance, transparency and accountability, e-governance- applications, models, successes, limitations, and potential; citizens charters, transparency and accountability and institutional and other measures.


• Despite some solid legislative accomplishments from the goods and services tax (GST), which is slowly improving tax compliance, to the Insolvency and Bankruptcy Code, which is bringing crony capital to heel.

• It is difficult to credit the Narendra Modi government with much progress in one critical area of corruption: corporate funding of political parties.

• The only thing done to prevent cronies from buying policy influence through political contributions is the electoral bonds scheme.


• Since we can’t know who gave which party how much, it is impossible to assert that no political influence was bought with these anonymous bond contributions. This is not real reform, just a placebo.

• In 2017-18, according to information already in the public domain, some 95% of the ₹222 crore of electoral bonds issued landed up with the BJP as anonymous contributions.

• This fiscal year, the State Bank of India revealed in reply to a Right to Information (RTI) query that it had sold ₹600 crore worth of bonds till October 2018.

• These amounts are likely to skyrocket as we head for March-May 2019. No prizes for guessing which party will get the bulk of the contributions.

Measures needed to make electoral bonds a transparent process:

• The funding of political parties, which need to engage in political activity all through the year, whether there is an election or not, and the other is the funding of candidates.

• The electoral bonds scheme makes no sense, and needs replacement with a more transparent means of funding political parties, where both the donor and political recipient are identified clearly.

• Direct funding of candidates, who will be reimbursed according to their final share of the votes cast, will result in three beneficial fallouts:

• It will become possible for new and cleaner candidates from outside the mainstream parties to join politics;

• It will ease the pressure on parties themselves to give tickets to criminals and other rogues primarily because they can manage their own funding; and, three, parties themselves will become more internally democratic, as candidates will not be over-dependent on party bosses for cash.

Is state funding of elections affordable?

• The answer is a decisive yes, even if we set aside qualitative pay-offs coming in the form of better candidates and cleaner party funding.

• If we assume that each Lok Sabha constituency needs ₹5 crore of candidate funding, with the top three candidates sharing this booty in the ratio of their vote shares, 543 constituencies will cost ₹2,715 crore.

• This is an entirely acceptable level of spending for clean politics once in five years.

• It should even be possible to find these resources by stopping another kind of indirect distortion of the political process the availability of ₹5 crore annually for each Lok Sabha and Rajya Sabha candidate from Members of Parliament Local Area Development Scheme (MPLADS).

• The total cost of MPLADS funding for all MPs is nearly ₹4,000 crore every year, and scrapping the scheme even for one year in an MP’s five-year term will be enough to bankroll state funding of Lok Sabha candidates.

• MPLADS was introduced by P.V. Narasimha Rao in the early 1990s in order to keep his flock of MPs in line by giving them money to spend in their constituencies.

• Over the years, the scheme has acquired a momentum of its own, and has been extended not only to Rajya Sabha MPs (who have no constituencies to tend), but also many state assemblies.

• Put simply, this is a legalized way of allowing MPs and MLAs to shower money on their constituencies at state expense.


• It is not going to be easy to prise this lollipop away from the clasping hands of MPs, but it is worth a try.

• However, there is no question that the time has come to experiment with state funding of elections.


Prelims Questions:

Q.1) With reference to the Electoral Bonds, announced recently in the Union Budget, consider the following statements:

1. They are a financial instrument for making donations to political parties.

2. They cannot be purchased by paying cash.

3. They are issued by the Election Commission of India.

Which of the statements given above is/are correct?

(a) 1 only

(b) 1 and 2 only

(c) 2 and 3 only

(d) 1, 2 and 3

Ans: B

Mains Questions:

Q.1) What do you mean by electoral bonds? How to ensure political funding is clean and transparent?

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