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Electoral Bonds

Mains- GS-2-Polity

The Finance Ministry has launched its quarterly window for sale of electoral bonds to political parties.

SC’s Observation

1. The Supreme Court (SC) refused to stay the scheme last week. 

2. But the SC flagged the possibility of misuse of money received by political parties for activities like funding terror or violent protests.

3. It questioned the Centre on its level of control on the end use of the bonds.

Purpose of Bond

1. Free and fair elections are not possible without transparency in political funding.

2. Electoral bond was offered as a solution to this problem.

3. But it is opposite to the goal of transparency in political funding.

Secrecy & Issues

1. The bonds enable political donations of any amount to be donated anonymously.

2. This has the possibility of the ruling government returning the favour in the form of contracts, licenses etc.

3. By secrecy of the donations, the electoral bond allows private interest to collide with public interest.

4. The ECI has objected to the electoral bonds as it could encourage large sums of illegal donations.

5. It will lead to mushrooming of shell companies to funnel black money into the political system.

6. But ECI counsel recently supported the bonds as without electoral bonds the earlier cash system that was unaccounted would rise.

Other Issues

After the introduction of Electoral bond, subsequent problematic changes were made to few laws

1. Companies law 2013 was amended to enable companies to donate 100% of their profits. Earlier the cap for donations was set at 7.5 %.

2. Requirements for a resolution by the board of directors to make donations to political parties and to declare the political donations in the profit and loss accounts were also removed.

3. A retroactive amendment was brought by the Finance Bill 2016 that repealed FCRA act 1976 and replaced it with the modified 2010 statute.

4. Effect of this is that now the political parties can take donations from the foreign sources.

Misuse of funds

1. The Supreme Court’s concern about the possibility of misuse of funds is very pertinent.

2. Transparency both about the source of income and its expenditure is needed.

3. EC's demand of auditing the accounts of political parties by the CAG-recommended auditing panel might be a solution.


1. SC should pass a judgement to enable disclosure of donors of electoral bonds.

2. An alternative way is to move towards public funding of political parties.

3. Another option is to establish a National Election Fund. Donations could be directed to this fund. Income tax rebates would make it an attractive proposition.

Source : Indian Express