Why Did Unused Electoral Bonds End Up In PM Modi's Relief Fund?

NEW DELHI—Electoral bonds worth over Rs 20 crore found their way to the Prime Minister’s Relief Fund instead of the bank accounts of political parties, show official data sourced from the Finance Ministry and State Bank of India, raising fresh questions about the workings of the controversial scheme.  

The use of electoral bonds—often preferred by large corporates as the buyers’ identity remains anonymous—had shot up in the past few months due to the general election. Multiple Right to Information (RTI) applications revealed that donors purchased electoral bonds worth Rs 5,800 crore until May 2019. 

While transparency activists have criticised the scheme’s functioning on multiple levels, not much attention has been paid to why the high value bonds lapse as well as how they are eventually utilised by the Prime Minister’s Relief Fund where, according to rules, they are deposited by the banks once they lapse. 

Though Rs20 crore is a relatively small amount in the world of political funding, especially for national parties, the fact that in an election year, when political parties are eager to raise maximum campaign funds, the bonds were not encashed by them is strange. 

“I found it strange and intriguing because why should one buy an instrument of donating money to a political party and allow it to lapse? If I want to donate to the Prime Minister’s Relief Fund, I can do it directly,” said Prof. Jagdeep Chhokar, founder director of the Association for Democratic Reforms (ADR), which filed a petition in the Supreme Court against the Electoral Bonds scheme. 

The veteran transparency campaigner and former Director of Indian Institute of Management, Ahmedabad, is concerned about the scheme’s continued impact on political funding in India. Some of these concerns were raised by his organisation in a Public Interest Litigation in the Supreme Court . 

Many other campaigners and opposition parties have expressed concerns as well. One of the reasons why concerns were expressed was reflected in an analysis of the BJP’s accounts last year. It revealed that the saffron party had received the lion’s share of the bonds in the scheme’s first tranche. 

As per the rules of the scheme, both the buyers and the recipients of the bonds—which range from Rs1,000 to Rs1 crore—remain anonymous, and political parties don’t need to disclose the source of the money received through bonds in their accounts to the Election Commission .

It was RTI activist Commodore Lokesh Batra (Retd.) who tabulated the Rs20 crore figure from two sources: a) official data provided by the Finance Ministry’s Department of Economic Affairs in an affidavit filed in the Supreme Court in the ADR case in April, and b) from RTI replies by the State Bank of India to Pune-based activist Vihar Dhurve, for the period from April 2018 to May 2019. The exact sum till May that Batra tabulated is: Rs 20,25,32,000.  In the Finance ministry affidavit and the RTI replies to Dhurve by the SBI Bank, there are no details about the donors who purchased the bonds nor the political parties that were their intended beneficiaries. 

Speaking with HuffPost India, Batra indicated that it seems unlikely that the funds were sent to the Prime Minister’s Relief Fund only because political parties failed to encash the amount on time, especially during high-stakes elections.

“Are political parties so rich that they do not even care to encash electoral bonds worth more than Rs 20 crore or is there more to that?” he asked. Batra would not elaborate or speculate on what other factors may be at play. 

The RTI campaigner added, “I feel since amount is coming from anonymous sources, it should go to the Consolidated Fund of India. The PMRF is not a good option.” 

Akhilesh Kumar Mishra, Director in the Department of Economic Affairs in the Finance Ministry, who authored the government affidavit from which Batra used data for his calculations told HuffPost India that he would comment only after the budget was presented.

Why the Electoral Bonds Scheme is Controversial

The Electoral Bonds scheme was notified by the Modi government on January 2, 2018, though it had been introduced along with several mutually related and controversial legal changes made to the norms about donations received by political parties through the Finance Act 2017. The other changes included: removal of the limit of 7.5% on a given company’s average three-year net profit for donations to a political party, and companies not being mandated to disclose the names of the political parties to which they have donated their money, among others. 

The electoral bonds scheme itself involves purchase of promissory notes called bonds of various denominations from Rs 1,000 to Rs1 crore through any of the authorised branches of the State Bank of India. It promises complete anonymity to both the donor and the political party about the funding and the latter do not need to disclose the names of their donors while reporting funding details to the Election Commission . So the presumption is that the government of the day and the ruling party would not be aware about who has donated how much to other parties. However, there has been criticism that this is not foolproof and the government may have access to information about donors to opposition parties.  

Crucially, section 12 of the notification also states that if an electoral bond is not encashed by political parties within 15 days of purchase, it lapses and the bank must deposit the sum in the Prime Minister’s Relief Fund. But, as stated earlier in this report, the fact that the political parties did not encash electoral bonds in an election year is unusual.

Concerned by the obviously problematic provisions of the scheme, ADR filed a Public Interest Litigation in the Supreme Court , seeking to scrap all the changes made to the existing norms for political funding through the Finance Act 2017.  The Communist Party of India (Marxist) also filed a petition in the SC for similar reasons.  

In its petition, the ADR criticised the electoral bonds scheme, saying that “allowing electoral bonds on the donor’s side and removing the name of the recipient brings in complete opacity in political funding.” Further, it also stated that removal of the 7.5% limit on a given company’s net profit for the past three financial years “will not only heighten the odds of conflict of interest but will also drastically increase black money and corruption”. 

The Election Commission also criticised various provisions of the scheme, particularly the one by which political parties would no longer need to declare the identity of their donors in ‘contribution reports’ which are essentially about funding details. The EC termed the relaxation as a “retrograde step”which needs to be withdrawn. 

The Modi government justified the scheme, saying it has, contrary to assertions, brought in transparency by eliminating non-transparent cash donations to political parties. 

In an interim order on April 12, the SC asked all political parties to file details of donors donating money through bonds in a sealed envelope to the EC though it did not scrap the electoral bonds scheme. 

RTIs and Electoral Bonds

RTI activist Batra feels one of the fears that critics expressed in the past about the scheme may be “coming closer to certainty”. The fear: that the government and ruling party would know, through the SBI, the details about election funds received by other parties who received funds through the bonds. 

He cites his own experience to explain why he thinks so. In April, the Finance Ministry, in its detailed affidavit in the SC , revealed data about the number of bonds purchased, redeemed and forwarded to the relief fund. Two months later, in early June, Batra filed an RTI with the Finance Ministry, asking it to provide the same data by updating it till the most recent month for which it is available. However, he was told that the ministry did not have the information in its possession and his application was forwarded to the State Bank of India which is yet to respond. This, Batra told HuffPost India, indicates that the “SBI has been regularly and phase-wise sharing information with the Department of Economic Affairs”. 

Vihar Dhurve, the Pune-based RTI activist whose applications also helped disclose electoral bonds data from the SBI for the past two months, was unsparing in his criticism about the scheme. 

“Electoral Bonds scheme is totally flawed and a threat to the nation due to the possibility it creates for shell companies to fund political parties,” he said.