JUNE 07, 2024

By TIOL Edit Team

THE new Government at the Centre would have its agenda cup overflowing with plenty of ideas. One invaluable idea that should not spill over is: long-overdue electoral reforms.

In this editorial, we would restrict discussion to fiscal, corporate & related statutory changes as a few key elements of electoral reforms, apart from endorsing the blueprint for One Nation,One Election (ONOE).

The new Government, in any case, would have to take a call on funding of the elections to comply with the Supreme Court (SC) judgment on electoral bonds (EBs). It declared EBs scheme as unconstitutional on 15th February 2024.

The Government has to thus undo the amendments to the relevant laws that in 2018 paved the way for EBs. These bonds can't be issued after SC directive. The relevant laws include Representation of the People Act and the Companies Act. Apart from this, the Government has to decide whether to relaunch SC verdict-compliant EB scheme or opt for other alternatives to tap corporate kitty for electoral purposes.

We urge the Government to seize the verdict as an opportunity for four-tier fiscal reforms that should substantially cleanse the world's largest democracy.The four funding elements that influence the outcome of polls are:

1) corporate donations directly & transparently to parties or opaquely through electoral trusts and via anonymous EBs.

2) Yearly allocation of funds to Members of Parliament (MPs), Members of Legislative Assembly (MLAs) and members of municipal corporations for local area development.

3) Statutory or voluntary Corporate Social Responsibility (CSR) donations to politicians-linked non-government organisations (NGOs) or investment in charity and social infra projects of constituency of ministers/influential MPs and

4) freebies that parties dangle before poor voters as promises (lately pitched as guarantees) in the manifestos as well as during the election campaign.

These four elements contribute to institutionalized corruption of the electoral process in which independent candidates or new parties face herculean task of winning elections. This problem gets sustained by successive regimes' three failures:

A) not enacting the Lobbying Act to regulate & monitor lobbying. The proposed legislation can also help identify, if not prevent, quid pro deals between the rulers and the rich donors;

B) not defining politically exposed person or entities (PEPs) in anti-corruption, anti-money laundering & electoral laws. In fact, the list of PEPs needs periodic updating as PEP dynamics changes the routes through which speed money, extortion money and quid pro deals operate.

C) avoiding enacting a law to regulate and oversee implementation of election manifesto-promised freebies in a fiscally responsible manner.

We now discuss few options to tackle each of the four issues. The first issue of unconstitutional EBs can be resolved by replacing them with a separate tax on companies and high net worth individuals. Let this be called Bhartiya Sanskriti Tax keeping in view popular perception that Bharat is cradle of democracy on the earth with civilisational heritage tag.

If companies including shell companies voluntarily& happily buy EBs, there is no reason why they should shirk from their responsibility to safeguard and sustain democracy in a transparent and accountable way. Alternatively, the proposed tax can be levied as a separate 10% surcharge on income tax of companies and super-rich persons.

The revenue proceeds from this levy should be deposited in a statutory, non-lapsable fund for the funding of elections by the Government. The Government funding of election expenses of recognized parties is the key to reining in dreaded and ubiquitous influence of money power on democratic process and governance. BJP was once a strong votary of this proposal. There was in fact near-unanimity among the political parties on this issue.

Two committees in the past had recommended State funding of elections fought by recognized parties. Even Law Commission had favoured State Funding. Vajpayee Government even prepared a draft Cabinet Note on it. All this information is available in cyberspace and we thus need not quote these documents. Time is now ripe to revive & implement the proposal for State Funding of elections.

This initiative should be accompanied by a total ban on corporate donations to political parties, as was the case before 1985. A lot has been stated on this by the judiciary and by MPs in Parliament debates.

Consider now abuse of EBs for money laundering, an issue that figured prominently in SC verdict. We expect statesmanship from the new Government on this issue. It should not wait for the Opposition to create ruckus in Parliament to demand Joint Parliamentary Committee (JPC) on suspected cases of extortions and money laundering under EBs scheme.

The Government should proactively constitute a special task force whose work should be monitored by the Supreme Court. We hope this would save valuable time of Parliament on protests and adjournments over EBs.

Let the Parliament focus on agenda for attaining Viksit Bharat goal and for implementing mantra called Sabka Saath, Sabka Vikas, Sabka Vishwas and Sabka Prayas. It should also debate the governance deficit in each and every sphere of the politico-socio-economic domain and agree on means to wipe out the deficit.

As regards MPs' Local Area Development (MPLAD) and its state variants MLALAD and municipal variant Corporator LAD, the annual allocation on these discretionary funds aggregate to thousands of crores of rupees.

These allocations are the most potent tool for vote bank politics, apart being source of corruption and misuse of funds as repeatedly brought out by Comptroller & Auditor General in its reports over the decades. (see: Scrap MPs & MLAs-led 4th governance tier for Capital Expenditure 18th March2019)

An elected representative consolidates his/her hold over different localities that voted for him/her by allocation of a few lakh rupees for the development of park, gymnasium, etc. A survey of political bias of housing societies & localities benefitting from MPLAD and/or MLALAD would show how they have become vote banks for local MP/MLA/corporator.

To understand how MPLAD and its state-level and municipal-level variants are used for deadly vote bank politics, we should recall what Mr. Narendra Modi as Chief Minister wisely stated at a rally in Delhi during November 2013.

Mr Modi observed: "Vote bank politics is not an issue of Hindu or Muslims, it has become the major reason for the misery of the nation..! I will tell you how does it happen."

Mr. Modi continued: "Usually 60-65% voting takes place in our country, out of which from 5 to 15% is taken over by the people who contest independent etc, leaving 50%, for which the major parties fight and the one which gets 26%, it wins..! There is no hearing for 74% people, so what these shrewd leaders do, they calculate and say that let's encash these two areas and our 26% is in our hands, make hold of these two wards and our 26% is made, capture these two mohallas and our 26% is made,...and that is why, they are always looking for opportunity that if we have to win, we just need to take care of 26%, and not the other 74% ..!"

He added: "In this condition, if they will get roads constructed, it will be for only those 26%, if they offer employment, it will be only to those 26%, if they get electricity poles installed, it will be in that 26% area, if they will get water tap fitted, it will only be for those 26% and in this manner 74% people are completely left deprived of the journey of development ..!"

After scrapping MPLAD, the annual allocation for this can be put every year into special fund for Government funding of elections. An experts' committee can be formed to suggest guidelines for disbursement from this fund to each candidate of political party. The guidelines should provide for statutory audit of each candidate's expenditure and stringent penalty for misuse of government money or use of black money by any candidate.

This initiative should ideally be accompanied with political consensus for ONOE. The High-Level Committee (HLC) on Simultaneous Elections, in its report submitted in March 2024, has recommended implementation of simultaneous polls in two steps: First, holding the simultaneous elections for Parliament and SAs. In the second step, holding the simultaneous polls for municipalities and panchayats 100 days after elections for Parliament and SAs.

We urge the Opposition parties to accept this proposal in the national interest as its implementation can help catalyse economic growth and good governance.

ONOE can reduce disruptions in all walks of life and save annually thousands of crores including the value of time saved.

As put by HLC, "The most important factor is that frequent elections create an atmosphere of uncertainty. This uncertainty slows down the government machinery, months before each election. The political parties are prompted to take decisions keeping in mind the impending elections. When elections are held repeatedly, then quite often half of the time of five years is spent in electioneering."

As for the flow of CSR funds through PEPs, the Government should define PEPs statutorily as envisaged by G20, United Nations Convention Against Corruption (UNCAC) and Financial Action Task Force on Money Laundering (FATF).

The national list of PEPs should include NGOs, charity trusts and diverse institutions with people in power are connected. (See Set up Probe Panel to unmask dealings of Vadra & all such VIPs 27th April,2014).

As for freebies that might push the country into debt crisis, this institutionalized mechanism of voters' corruption requires new regulatory framework. We hope Supreme Court verdict, on bunch of PILs on this issue, would serve as beacon. The regulatory framework should include limiting freebies to level of statutory deficit, say 3% of GDP in an year. If the cost of promised freebies exceeds this, then ruling party/regime should disclose how it would mobilize additional revenue to finance additional expenditure without cutting capital expenditure, which is vital for economic growth.

(See: Decode Freebies Maze to free Growth Genie 3rd December,2022).

The suggested regulations should also envisage connecting freebies with the relevant provision of Directive Principles of the State Policy (DPSP) under the Constitution. This would help public understand the challenges in doling out and sustaining freebies.

DPSP, running into several pages, requires the Government to strive for socio-economic welfare of the public in all walks of life. These and other provisions of DPSP are mere wish-list of constitution's architects. These are not enforceable in any court.

The suggested regulatory framework should provide for annual CAG audit of implementation of freebies mentioned in the election manifesto of ruling party. This would serve as pressure on the regime to perform and act against corruption and siphoning of funds that is inherent in any freebies ecosystem.

As put by the Supreme Court in its 2013 verdict on PIL against TN polls freebies, "Although, the law is obvious that the promises in the election manifesto cannot be construed as 'corrupt practice' under Section 123 of RP Act, the reality cannot be ruled out that distribution of freebies of any kind, undoubtedly, influences all people. It shakes the root of free and fair elections to a large degree."