SC to hear plea against Electoral Bonds Scheme

Context

The Supreme Court agreed to take up for hearing a pending plea challenging the Centre’s Electoral Bond Scheme, 2018. 

What are Electoral Bonds?

• Electoral bonds are banking instruments that can be purchased by any citizen or company to make donations to political parties, without the donor’s identity being disclosed.
• It is like a promissory note that can be bought by any Indian citizen or company incorporated in India from select branches of State Bank of India.
• The citizen or corporate can then donate the same to any eligible political party of his/her choice.
• An individual or party will be allowed to purchase these bonds digitally or through cheque.

About the scheme

• A citizen of India or a body incorporated in India will be eligible to purchase the bond.
• Such bonds can be purchased for any value in multiples of ?1,000, ?10,000, ?10 lakh, and ?1 crore from any of the specified branches of the State Bank of India
• The purchaser will be allowed to buy electoral bonds only on due fulfillment of all the extant KYC norms and by making payment from a bank account.
• The bonds will have a life of 15 days (15 days time has been prescribed for the bonds to ensure that they do not become a parallel currency).
• Donors who contribute less than ?20,000 to political parties through purchase of electoral bonds need not provide their identity details, such as Permanent Account Number (PAN).

Who can redeem such bonds?

• The Electoral Bonds shall be encashed by an eligible Political Party only through a Bank account with the Authorized Bank.
• Only the Political Parties registered under Section 29A of the Representation of the People Act, 1951 (43 of 1951) and which secured not less than one percent of the votes polled in the last General Election to the Lok Sabha or the State Legislative Assembly, shall be eligible to receive the Electoral Bonds.

Issues with the Scheme

• Opaque funding: While the identity of the donor is captured, it is not revealed to the party or public. So transparency is not enhanced for the voter.
• No IT break: Also income tax breaks may not be available for donations through electoral bonds. This pushes the donor to choose between remaining anonymous and saving on taxes.
• No anonymity for donors: The privacy of the donor is compromised as the bank will know their identity.
• Differential benefits: These bonds will help any party that is in power because the government can know who donated what money and to whom.
• Unlimited donations: The electoral bonds scheme and amendments in the Finance Act of 2017 allows for “unlimited donations from individuals and foreign companies to political parties without any record of the sources of funding”.