2019 Polls to Be World’s Most Expensive: How Parties Raise Money

Where is this money raised from? What is it spent on? Is the process transparent? We decode the process.

There is little doubt the 2019 elections will be the world’s most expensive.

(Photo: Harsh Sahani/The Quint)

Did you know that the 2019 Lok Sabha elections could be the most expensive election ever held in any democratic nation in the world?

US-based expert Milan Vaishnav told PTI that the 2019 elections could not only exceed the $5 billion spent during the 2014 Lok Sabha polls, but also surpass the amount spent during the US presidential and congressional elections in 2016.

“The combined US presidential and congressional elections in 2016 cost $6.5 billion. If the 2014 general elections cost an estimated $5 billion, there is little doubt the 2019 elections will easily surpass that – making India’s elections the world’s most expensive.”

Milan Vaishnav, senior fellow and director, South Asia Program, Carnegie Endowment for International Peace

But, where is this money raised from? What is it spent on? Is the process transparent?Here’s a look at how the entire process works.

What Are The Various Avenues To Collect Funds From?

In India, parties largely gather funding from two sources – individual donations and corporate funding.

CORPORATE FUNDING

According to the ADR report, the corporate sector donated Rs 422 crore to national parties between 2017 and 2018. That was 89.82 percent of total donations raised that financial year.

While the BJP accounted for Rs 400 crore of all corporate donations, the Congress received Rs 19 crore from corporate firms.

Prudent Electoral Trust, an electoral trust reportedly run and promoted by Bharti Enterprises, was the top donor of the BJP. It gave Rs 154 crore to the party. This is followed by the Ab General Electoral Trust, with Rs 12.5 crore donation.

Other donors of the BJP included Cadila Healthcare at Rs 10 crore, Cipla Ltd at Rs 9 crore, USV Pvt Ltd at Rs 9 crore, Micro Labs Ltd at Rs 9 crore, M/S Pragathi Groups at Rs 8.75 crore, Rare Enterprises at Rs 8 crore, Mahaveer Medicare at Rs 6 crore and Alembic Pharmaceuticals at Rs 6 crore.

Prudent Electoral Trust was the top donor for the Congress, too, at Rs 10 crore. They were followed by Cadila Healthcare Ltd at Rs 2 crore and Ab General Electoral Trust, Bharatiya Socialist Republican Electoral Trust, Nirma Ltd and Triumph Electoral Trust, all of which contributed Rs 1 crore each.

Loopholes In Corporate Funding

Recently, the government amended the Finance Bill to remove two conditions stipulated for corporates funding political parties.

• The cap on corporate contributions, which previously stood at 7.5 percent of a corporation’s average net profits over the previous three years, has now been eliminated.
• The provision that firms must declare their political contributions on their profit and loss statements has been abolished.

Experts find these amendments problematic.

“The cap of 7.5 percent on corporate donations has been removed. Now, a company can exist to run political parties – 100 percent profits can go there. This is crony capitalism, fully legalised and institutionalised. Political donations made through electoral bonds need not be declared to the Election Commission.”

SY Quraishi, former chief election commissioner

INDIVIDUAL FUNDING

About 10 percent of total donations made to parties in 2017-18 were received from individual contributors, according to the ADR report. At least 2,772 individual donors donated Rs 47 crore.

What Are the Modes of Raising Resources?

Yielding to the Election Commission’s long-standing demand for transparency, the Centre has been pushing to limit donations accepted in cash by political parties. Cheques, electoral bonds and other forms of digital payment are being favoured in a bid to ensure accountability.

CASH

While presenting the Union Budget in 2017, Finance Minister Arun Jaitley announced that political parties could now receive only Rs 2,000 in cash from one person. Thus, lowering the limit for anonymous cash donations from Rs 20,000 to Rs 2,000.

For further scrutiny, the Election Commission also recommended that details of donors who donate above Rs 2,000 be declared in public domain. 

Experts, however, feel the decision to limit cash donations will not help curb black money.

“Originally, it was mainly the big donors’ money received in black<b> </b>that was being shown as cash donations of 20,000 each from different names. Now the effort will be a bit more to convert them to donations of 2,000 each. Even that is irrelevant now as money will now come in electoral bonds which are totally anonymous.”

SY Quraishi

ELECTORAL TRUSTS

Electoral trusts are non-profit in nature and their objective is to receive funds given by corporates or individuals and transfer them to the political party the donation was meant for.

According to Business Today, Prudent Electoral Trust, which is the country’s richest electoral trust, donated Rs 144 crore out of a total income of Rs 169 crore to the BJP in financial year 2017-2018.

Electoral trusts were introduced in 2013 to bring more transparency into funding as donations, in this case, are accepted only by cheques, demand drafts or account transfers. This coupled with tax benefits have prompted many organisations to set up electoral trusts to initiate funding for political parties.

Referring to a report by the ADR, India Today reported that the BJP received Rs 251 crore – or 70 percent of the total Rs 365 crore received by 10 political parties. The party spent more than Rs 131 crore – or 80 percent of the total expenditure of the 10 parties – in the Gujarat and Himachal Pradesh Assembly elections last year. The report found that the Congress stood second with collections worth Rs 71 crore and an expenditure of over Rs 20 crore in the two elections.

Electoral trusts, however, could soon be a thing of the past as corporates are now switching to electoral bonds, where donations can be made without disclosing the contributor’s identity.

What Are Electoral Bonds?

Another key scheme announced by Jaitley in the 2017 Budget to fund polls were electoral bonds. The bonds issued in multiples of Rs 1,000, Rs 10,000, Rs 1 lakh, Rs 10 lakh and Rs 1 crore, is like a bearer bond that can be bought by organisations incorporated in India and any citizen of India.

Donors can contribute the bonds to a party of their choice, this will then be encashed by political parties. Electoral bonds have been made available only at specific branches of State Bank of India. But what perked public interest about these bonds was the government’s claim that the identity of electoral bond donors would be kept a secret.

“This will bring in transparency. The balance sheet of the purchaser of electoral bond will reflect that he/she has bought an electoral bond. It is obvious that since he/she has purchased a bond, he/she will donate it to a political party but which specific political party, will not be known.”

Arun Jaitley

The names of donors cannot be revealed even through an RTI query.

An investigation by The Quint, however, revealed that electoral bonds have hidden alphanumeric numbers printed on them to track down the link between donors and political parties. After purchasing two electoral bonds worth Rs 1,000 each, tests conducted at a reputed forensic lab revealed a hidden serial number was “visible on the right top corner of the original document showing fluorescence when examined under Ultra Violet (UV) light”.

Quraishi points out that contrary to belief that electoral bonds will make the system more transparent, electoral bonds will finish whatever transparency that existed.

“Donor anonymity has trumped democratic accountability, and that is sad,” he said.

“The exposé by <b>The Quint </b> has resulted in questions being raised about the motives behind the introduction of electoral bonds, a step which has not found many supporters since the very beginning. Secret numbers on electoral bonds compound the problem manifold, as the ruling party can find out about the donors but the other parties and citizens cannot.”&nbsp;

Quraishi

Annual audit report of the BJP for financial year 2017-18 revealed that the party received electoral bonds worth Rs 210 crore out of the total Rs 228 crore worth bonds sold in March 2018.

That’s a whopping 95 percent of the total electoral bond donations made in March 2018.

“It is not a coincidence that in 2017-18, 95 percent of donations through electoral bonds have gone to one party – the ruling party!” Quraishi added.

How Rich Are Political Parties?

The electoral reform body ADR released a report in April 2018 stating that the BJP is by far the richest political party in India.

During financial year 2016-17, BJP declared an income of Rs 1,034 crore – Rs 463 crore more or 81 percent increase from its previous submission. The party filed an expenditure of Rs 710 crore during the same period.

The income of the Congress decreased by 14 percent from Rs 262 crore during financial year 2015-16 to Rs 225 crore during 2016-17. The party, meanwhile, submitted an expenditure of Rs 322 crore.

The report also stated that seven national parties – the BJP, Congress, NCP, CPI-M, CPI, BSP and TMC declared a combined income of Rs 1,559 crore and expenditure of Rs 1,228 crore.

Where Is All This Money Spent?

The Election Commission places a cap on how much individual candidates can spend, which is between Rs 50 lakh and Rs 70 lakh for a Lok Sabha candidate, depending on the constituency they are representing, and between Rs 2 lakh and Rs 2.8 lakh for state Assembly candidates. However, they are yet to cap the expenditure made by a party. But where do parties end up spending these funds?

According to an analysis by ADR with regards to spending habits of political parties, the watchdog found that out of a total Rs 1,034.27 crore accumulated in FY 2016-17, the BJP spent the highest on election/general propaganda, which amounted to Rs 606.64 crore. This was followed by Rs 69.78 crore on administrative costs. 

The Congress, meanwhile, spent Rs 149.65 crore on election expenditure and Rs 115.65 crore on administrative and general expenses.

Another ADR study found that out of 1,503.21 crore collected by 7 National and 16 Regional parties before the five state Assembly elections held in the first half of 2017, Rs 494.36 crore was spent on the election campaign. Out of this, parties spent 56 percent on publicity and 21 percent on travel. National parties spent an overall Rs 189.46 crore on publicity and ads.