Funding in Election System

Funding in Election System

(GS PAPER-2,  Functions and Responsibilities of various Constitutional Bodies, Transparency, and Accountability

Source- The Hindu)


  • In a democracy, power is supposed to flow from popular or people’s approval, as a mandate given in elections.
  • However, in practice, it has been observed, this system is often distorted by a number of factors, financial power, and muscle powers being the most prominent of them.
  • This leads to the case, where the Political parties are seen to shape policy not as per the desires of their voters but their funders.
  • Moreover, the government has brought many legal changes in the foreign Contribution and Regulation Act (2013), which is increasing the influence of anonymous corporate funding in the elections.
  • Further, lack of transparency in political funding is a prime concern and experts believe that electoral bonds have made it worse.
  • Unfortunately, these changes in India’s election funding system are creating more loopholes that allow moneyed interest groups to surmount influence on political parties.

Issues In India’s Election Funding System-

Electoral Bonds:

  • In 2017, the Government has introduced electoral bonds, a new form of anonymity to thousands of crores of donations.
  • Under this scheme, only the ruling party via the State Bank of India (SBI) has a sole account of all donations being made via electoral bonds.
  • Neither Parliament, the Election Commission, and the Opposition parties do not have this information, nor do the public.
  • Electoral bonds provide political power to get funds from companies, wealthy individual donors, and foreign entities, thus diluting the universal franchise of one voter-one vote.

Amendments in FCRA, 1976:

  • In 2014, the Delhi High Court gave a verdict that two national political parties were guilty of illegally accepting donations from two companies registered in India but whose operating their shareholder via the foreign company.
  • In 2016 and 2018, the government of India has amended the FCRA through the annual Finance Bills, to retrospectively legalize all the violations.
  • According to the amendment, earlier, foreign companies or companies where the controlling stake was taken by a foreign company couldn’t contribute; now they can.
  • According to the Election Commission of India, this can allow unchecked foreign funding of political parties in India, which could lead to Indian policies being influenced by any foreign companies.

Amendments in Companies Act, 2013:

  • The Finance Bill of 2017 amended Section 182 of the Companies Act 2013 to remove the need for declaring disaggregated donations to any political parties.
  • In the past only profit-making domestic companies were able to contribute to political parties; now loss-making companies can too.
  • Further, the limit of 7.5% for corporate donations to political parties has been completely removed.
  • With this amendment corporations are free to donate whatever amount of money and are not liable to tell the recipient of their donations.

Nullifying RTI Effect:

  • The Right to Information Act, 2005 is enabling easier access to information held by public authorities.
  • However, the above changes could in effect nullify the overall impact of transparency provisions even if political parties come under the ambit of Right to Information (RTI).

Election Commission of India-

  • The Election Commission of India is an autonomous constitutional authority of India which is responsible for administering Union and State election processes in India.
  • The body administers elections to the Lok Sabha, Rajya Sabha, and State Legislative Assemblies in the country and the offices of the President and Vice President.

Structure of the  Election Commission-

  • Originally the commission had only one election commissioner but after the Election Commissioner Amendment Act 1989, it has become a multi-member body.
  • The body consists of one Chief Election Commissioner and two Election Commissioners.
  • The secretariat of the commission is situated in New Delhi.
  • At the level of the state, the election commission is assisted by the Chief Electoral Officer.
  • In India, the President appoints the Chief Election Commissioner and Election Commissioners.
  • The body has a fixed tenure of six years, or up to the age of 65 years, whichever is earlier.
  • They enjoy the same status and receive salary and perks as available to Judges of the Apex court of India.
  • The Chief Election Commissioner can be removed from office only through a process of removal similar to that of a Supreme Court judge by Parliament.

Measures were taken for Electoral Reform-

Legislative Measures-

  • Put a Limit on the spending of candidate
  • Under Rule 90 of the Conduct of Election Rules, 1961, a candidate who is contesting in Lok Sabha polls can spend up to ₹70 lakh and in an assembly election up to ₹28 lakh, depending on the state in which the person is contesting polls.
  • A private member bill was presented in the Parliament which intended to do away with the limit on election spending by candidates.
  • The move was taken on the grounds that the ceiling on election expenses ends up being counterproductive by encouraging candidates to under-report their expenditure.
  • In 2003, a law was passed by the Parliament of India after the Tehelka scam took place.
  • According to the report donations to political parties will receive 100% income tax exemptions for donors.

2. Measures by ECI-

  • Political Parties Registration Tracking Management System: To permit an applicant to track the progress of his/her application.
  • Systematic Voters’ Education and Electoral Participation Programme (SVEEP): ECI organizes voter awareness campaigns in order to educate and aware voters.

3. Measures by Judiciary-

Supreme Court in the following cases recommended various reforms:

  • In the Union of India versus Association of Democratic Reforms 2002 case: Contesting candidates need to disclose their assets and liabilities, criminal convictions, etc. in a holistic way at the time of filing their nomination paper for the election.
  • In the Ramesh Dalal versus Union of India 2005 case: A legislator will be disqualified from contesting elections if, on the day of filing the nomination papers, he/she stands convicted in a Court of law.
  • In Lily Thomas versus Union of India 2013 case: The nature of disqualification for being a member of the Parliament or assembly as provided under Article 101(3) & 190(3) is automatic and takes place with immediate effect.
  • In the People’s Union of Civil Liberties versus Union of India 2013 case: Voters enjoy “Right to Negative Vote” or Right to not to use in the election process and directed the ECI to include the choice of “NOTA” in the ballot paper.

Way Forward-

  • Transparency in Electoral Bonds: Even though the Supreme Court upheld the constitutionality of electoral bonds in India, it could order full and real-time disclosure, to the actual benefit of transparency and accountability.
  • Moral Leadership: Companies and political parties could exercise moral leadership and voluntarily disclose the identity of recipients and donors, as the Jharkhand Mukti Morcha recently did.
  • State Funding of Elections: In many advanced countries, elections are funded publicly. This ensures principles of parity, equality and there is not too great a resource gap between the ruling party and the opposition.
  • Transition Towards Civic Culture: India has been a democracy for nearly 75 years. Now in order to make the government more accountable and transparent, the voters should become self-aware and reject candidates and parties that violate the principle of free and fair, and neutral elections.


  • Every vote is not equally valuable if companies will be able to influence policies through hidden donations for their self-benefit.
  • The winner of this arrangement is the ruling party, whether at the Centre or in a State, and the loser is the average voter or the person sitting in the middle of the road.

-Khyati Khare

Download Daily Current Affairs of 19th June 2021

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