Electoral Bonds and Black Money: Living in denial about how our polls are, and were, funded isn't solving much. It's mirroring the frustrations of a few

In the din surrounding the Supreme Court order on electoral bonds, a small news item was buried in the inside pages of newspapers. A senior journalist tweeted, the total seizures in this election till April 10 was Rs 2,426 against Rs 1,200 crore in the same period before the 2014 polls.

Total progressive seizures so far in this poll at Rs 2426 crore. This is more than double of Rs 1200 cr seizures in 2014 LS polls

— Bharti Jain (@bhartijainTOI) April 11, 2019

As per latest statistics on the Election Commission of India (ECI) website, the figure has now touched Rs 2,519 crore, of which Rs 655 crore is in cash. The rest is in liquor, precious metals (gold, etc.) and freebies. But, in addition to all this, there is a whopping Rs 1,105 crore in drugs and narcotics. Tamil Nadu takes the top spot in cash (Rs 186 crore) and gold (Rs 285 crore) recovery. But Gujarat, Delhi-NCR and Punjab vie for honours on drug hauls with individual tallies of Rs 500 crore, Rs 348 crore and Rs 153 crore respectively.

Everyone understands that this is barely the tip of the iceberg. A factor of many hundreds will have to be applied to estimate what political parties spend to ‘buy’ votes. Newspapers from across the country report daily hauls — running into several crores — in every state.

The value of the inducements constitutes only a part of the electioneering expenses. What is spent by candidates individually and political parties centrally has reached astronomical levels. The Presidential and Congressional elections of 2016 in the United States were estimated to have cost $6.5 billion — the Lok Sabha election of 2015 was pegged at $5 billion. In 2019, it is expected to exceed $7 billion. Some estimates put the number higher in the region of $10 billion.

However, it does not require an NRI expert working in a US think tank to say that a major part of election expenses are paid in cash. With a ridiculously low ceiling on expenditure for campaigning set (for the Lok Sabha, it is Rs 70 lakh in large states, lower in smaller states and Union Territories) by the Election Commission per candidate, the rule is followed only by default. Although it may not be rocket science, Indian politicians have found ingenious ways of subverting the Election Commission spending limit.

Thus, the elephant of black money has been living on the premises of Nirvachan Sadan right from inception. Over the years, with political stakes going up exponentially, it has only grown in size. There has been little effort or inclination to tame it. As a result, it has gotten spoilt, if not gone completely rogue.

Now, candidates in Panchayat elections are known to invest crores for votes. I recall someone telling me before the 2014 National Elections that candidates, in some cash-rich states of southern India, are known to pour anything between Rs 25 and Rs 30 crore per Lok Sabha seat.

The scale has become mind-blowing.

All experts, from politicians to economists, lawyers to accountants, policy makers to revenue officers, recognise election funding to be the biggest bane of Indian democracy. Many recommendations from utopian to outright impractical have been made that never saw light of day. Reforms have been at best incremental, such as legalising corporate political donations and making it tax deductible, with no material impact.

The industry-business political nexus has been around from time immemorial, but people chose to turn a blind eye. Every party and politician had its bench of sponsors. Only a fraction of contributions came from the public.

The BJP had its large base of donors among traders. The communists relied a great deal on retail contributions of the proletariat. Real estate companies and builders have been the traditional milch cows. Whispers of foreign funding of elections made the rounds during the Cold War era — in recent times, speculation about the invisible hand of the underworld could be heard in some circles.

It stands to reason that parties and politicians who have been in power longer would have a larger war-chest and corpus. There lies the importance of the legendary treasurers and fund-raisers of political parties. They systematically built a collection machinery for channels and conduits to replenish the fuel needed to run the gigantic election juggernaut.

That by itself acted as entry barriers for new players — or even dissidents and breakaway groups. It was truly the 'winner takes all' principle at work.

Thus, the BJP became a serious challenger at the national level, only after it had a number of states under its belt. The party’s senior leaders, such as Atal Bihari Vajpayee, LK Advani or Murli Manohar Joshi, were not known to be financially savvy. Business-friendly leaders like Pramod Mahajan thereby found prominence in its central organisation.

But the world has moved on from there.

If India’s GDP has grown from $326 billion in 1990 to $2,970 billion in 2019, the size of election funding could not have remained static — new times require new methods.

GDP.1990India: $326 billionChina: $398 billion2019India: $2,970 billionChina: $14,220 billion

— The Spectator Index (@spectatorindex) April 15, 2019

Some years back, I had by chance befriended a young MLA from one of the Hindi heartland states. Coming from a political family, where his father, uncles and cousins have all been involved in local politics, he was a bit of a ‘black sheep’, having graduated from a premier college of the capital. Returning as the proverbial prodigal to prove a point to the family, he ‘bought’’ a ticket for the Assembly elections at Rs 50 lakh from the supremo of a northern region party. Much to the surprise of many, he managed to win the elections on his own steam.

One evening, he explained to me the new economics of election politics. He said over and above the cost of the ‘ticket’, he spent around Rs 1.5 crore on his campaign that included payoffs to various small satraps. That was 2009-10. He had no clue on how much the ticket would cost him in the next elections and what he needed to budget for campaigning.

He had, therefore, set a target for himself to build a corpus of at least Rs 10 crore in five years.

But that wasn’t all. His daily out-of-pocket expenses on needy constituents, party workers and henchmen were to the tune of around Rs 50,000. Add to that the cost of running the house with an open kitchen for guests dropping in anytime, evening hospitality, education of children in top public boarding schools and expensive family holidays. Organising one small dharna or morcha cost a couple of lakhs. If the party supremo decides to visit the area before the elections, his personal contribution would be in excess of Rs 1 crore for ‘bandobast’ and crowd gathering.

It was a crash course in election funding for an uninitiated layman like me. The days of ‘suitcase’ funding are over, he said dramatically, citing a famous case of yesteryears. We need a business model that yields regular revenue streams with long-term capital accumulation. Hence, we see an increasing number of politicians developing business interests, often investing in industries via proxies.

The success of Narendra Modi and Amit Shah in the 2014 elections was that they changed the rules in all aspects of the game from campaigning methods (digital analytics and social media) to fund raising — this, coupled with the Modi wave, made it a virtual ‘tsunami’ that stunned stalwarts in the party as much as it stopped the opposition in its tracks.

It was widely reported after the elections in 2014 how the Congress coffers had hit rock bottom. There was talk in the Lutyens’ grapevine about the president of a national party lamenting to a media owner about how money had completely dried up — nothing like they had seen ever before.

Not one understands better than Narendra Modi that life in politics is like running on a treadmill. You have to innovate for staying ahead. From day one, Modi had made it clear that he is not here, unlike Vajpayee, to offer the Congress a breather for five years before handing the baton back to where it historically belonged. His frequent assertions of the mission ‘Congress Mukt Bharat’ was a proclamation of the BJP being here to stay.

The political genius of Modi-Shah lies in their ability to re-imagine the future — and, if required, reinvent it. Something that the previous BJP leadership brought up with traditional values did not quite get. They figured it would not be possible to take on the might of the Congress and other rich parties like the Samajwadi Party (SP) and Bahujan Samaj Party (BSP) in the north or the cash lords of the south without having its own large financial base. That is where, one might say, in jest, the BJP’s two Gujaratis against the Congress’ one made the critical difference.

The jury is still out on the electoral bonds and the case is sub judice. So, one shall desist arguing against or in its favour.

Finance Minister Arun Jaitley and Attorney General KK Venugopal are on record to say that the scheme is far from perfect. It is easy to pick loopholes and point out scope for misuse, even serious ones. However, if people are calling the government’s defence disingenuous, the arguments against it appear equally specious. Above all, the most vocal critics neither have any alternative solution to offer, nor are they able to make a convincing case of how the earlier practices were preferable.

The entire angst of those opposing the bonds is that the BJP has cornered the lion’s share of it.

Anonymity can hardly be an excuse because in earlier systems of cash donations, no one was any wiser about the identity of the donor. Businessmen and industrialists have been known to hedge their bets between rival parties. In case they made an error of judgement in backing the wrong horse, they were quick to make amends after the elections.

There is an apocryphal story about an industrial and infrastructure group who were close to a particular dispensation in a large state. After an unexpected change of guard, they were summoned by the treasurer of the party that had come to power and asked to cough up an equal sum of what they had paid their opponents. The owner of the group tried to fudge the figure — but he was immediately called out as the treasurer had the information of the exact amount they had paid the earlier regime. So, the basic point is confidentiality is a sham.

Those in the business know everything about each other.

It may be said in support of the electoral bonds that it comes to the bank account of the recipient party — instead of being siphoned off along the way. Since they have to be purchased from a nationalised bank, the money comes into the formal system and the need to ‘convert’ money from ‘white to black’, as required for ‘cash donations’, is largely eliminated (though people can still find ways around it, whether through ‘benami’ front companies or round-tripping from overseas).

Similarly, the eagerness to know who the big donors are is not easy to understand. Under the 'cash system', the identity of the contributors was not known, though people in the business had a fair idea about who were the big boys. The anxiety to expose the names now can only stem from a desire to know the new suit-boot kids on the block.

There are two other conceivable pain points for the other parties. Demonetisation is widely believed to have been a ‘surgical strike’ on political funding. It is supposed to have hit some cash-rich parties the most, who are still to fully recover from its effect. The task has been made difficult by the clampdown of tax authorities and enforcement agencies. This has throttled money supply substantially. Add to that, corporate donors are wary of leaving a trail while gifting bonds. To some extent, the apprehensions have come true with the Supreme Court asking parties to submit names of donors in sealed envelopes.

So, it was a veritable ‘double whammy’ situation for opposition parties that makes their frustration palpable.

However, by no means is the suggestion to eschew challenge to the electoral bonds. The scheme is controversial and open to criticism. But for heaven’s sake, suggest alternatives.

State funding of elections that cost $10 billion, even if the cost is brought down by half, is not economically feasible and would be grave ANYAY to the people as it would starve the exchequer of money to spend on NYAY and other social welfare schemes.

The only way forward is to reduce the ‘cash element’ in funding and bringing greater transparency. Towards that, electoral bonds were a small, tentative and, arguably, flawed step. The attempt should be to improve upon it through bipartisan dialogue and consensus — but not junk it lock, stock and barrel.

The elephant will not turn into a dinosaur or donkey by simply looking away.

Also read: Truth in a 'sealed cover'? SC says political parties must submit details of electoral bonds to the EC, but adds a crucial caveat