The electoral bonds controversy: All you need to know in 10 points

The controversy over electoral bonds has resurfaced, this time after a five-part investigative series by Nitin Sethi that was published in HuffPost India. The series alleged that the government lied, bent rules and repeatedly ignored objections raised by various stakeholders.

To demand answers, the Congress protested at the Parliament’s Gandhi Statue on Friday/ The party’s MP’s have been demanding that the ruling BJP government — especially Prime Minister Narendra Modi — break the silence over the issue. 

What are electoral bonds?

Electoral bonds, a type of bearer bond instrument through which companies can give funds to political parties, were announced with much pomp during the 2017 Union Budget, and then passed into law with the Finance Bill 2017. Amendments were made to the Reserve Bank of India Act 1934, Representation of Peoples Act 1951, Income Tax Act 1961 and Companies Act. Following this, the scheme was notified in January 2018.

Bearer bonds are known to be untraceable. The electoral bond is interest-free. Whoever wishes can get one from the State Bank of India, issue one to a political party, and the party has to cash it within 15 days. Bondholders donating to political parties, however, remain anonymous.

Due to this, although the government said it was done to make funding more transparent, funding became more hidden. Companies, too, don’t have to reveal which parties they have given money to.

The electoral bonds can be purchased in January, April, July and October for 10 days. It can be 30 days in a year where there is a general election.

Why they are controversial

Electoral bonds were challenged in the Supreme Court, where the petitioners sought a stay on the scheme or some other transparent alternative for funding of political parties. The Supreme Court then reaffirmed that "government must be allowed a free hand to implement the measure in the execution of policies framed,” but asked for parties to disclose their funding to the court. 

In 2017-18, the BJP received most of the funds from electoral bonds. In all the electoral bonds sold in the time that electoral bonds have been in existence, more than half of the value was sold in the two months prior to the Lok Sabha elections. 

BJP claimed that this was done to reduce money laundering and make political funding more transparent, HuffPost’s reporting shows that this was not the case. 

Here’s what you need to know about the controversy that has broken out now:

1. The report by Huffington Post stated that the government ignored the objections raised by RBI, and only after the Bill was passed did the government figure out how the bonds would work.
2. The report added that when questioned in Parliament in 2017 if the Election Commission raised concerns about electoral bonds, then MoS P Radhakrishnan lied on the floor of the House that it hadn’t when it in fact had. The EC had reportedly written to the Law Ministry, who sent the concerns to the Finance Ministry — who never took cognisance of it.
   In 2019, finance minister Nirmala Sitaraman tabled a ‘corrected reply’ the 2017 question, which acknowledged that the EC had raised concerns. Nirmala’s response was tabled after the EC’s objections became public knowledge due to an affidavit that it filed in the Supreme Court in March 2019.
   Furthermore, the concerns of opposition parties were also ignored.
3. Five state Assembly elections were scheduled in 2018. According to the HuffPost article, the prime minister’s office asked for the rules laid down for electoral bonds to be broken — and had special windows apart from the stipulated 10-day window where bonds were issued. The bonds had been opened for in March 2018, April 2018 (when it was actually supposed to be opened) and once again in May 2018, before the Karnataka elections.
   94.5% of the bonds received during this period went to the BJP. The opening of extra windows to sell bonds is crucial because a time limit was imposed in order to curtail money laundering. 
4. After the Karnataka election threw up a hung Assembly, the report states that the Prime Minister’s office forced the banks to accept expired electoral bonds — which had been bought during the special window opened prior to the elections.The expired bonds, which SBI initially refused to accept as they were cashed beyond the 15-day period. The bank wrote to the finance ministry — to see if the period is 15 working days or 15 calendar days. The ministry wrote back that it was 15 calendar days.
   Technically, the bonds had lapsed and couldn’t go to the political party, and should have been given to the National Disaster Relief Fund.However, an official from the finance ministry directed that the bonds could be accepted within 15 working days due to the confusion this time alone.
5. Electoral bonds are supposed to be untraceable. However, a 2018 investigation by The Quint found that they actually carry an alphanumeric code which can be seen under a UV light. At the time, the Finance Ministry issued a press release, stating that security features had been built in to eliminate chances of forgery or presentation of fake bonds, but is not noted in any record by the bank and can’t be used to track a donation. According to HuffPost, however, citing an RTI filed by Commodore Lokesh Batra (Retd), said — “SBI does use the alphanumeric code to keep track of who bought how many bonds, and the political party to whom the bond was eventually donated.
   The rules also state that if required, this data can be shared with law enforcement agencies. This, in turn, means that there is a clear map of the route a bond takes — but only the general populace and opposition parties aren’t aware of it.
6. According to the Indian Express, RTI documents that Lokesh Batra received showed that bonds of Rs 1 crore and Rs 10 lakh were nearly 99.7% of the total bonds sold in between March 1, 2018, and July 24, 2019. Of this, bonds of Rs 1 crore accounted for 91%.
7. On Thursday, the Congress and some other opposition parties staged a walkout from the Lok Sabha, calling electoral bonds a "big scam" and said it wasn’t transparent.
8. The matter was raised by the Congress soon after the House assembled for the day with its leader Adhir Ranjan Chowdhury announcing that his party has moved an adjournment motion over the issue.
9. The BJP on Thursday held a press conference to explain its stand and said that it is only natural that the Congress opposed a system which is cleaning the electoral process of black money.  “The allegations against the government over electoral bonds are baseless. The Modi government has, in fact, for the first time, taken a number of steps against corruption," Union Railways Minister Piyush Goyal said. He further added that cash had been removed from the electoral process.
10. On Friday morning, the Congress protested at Gandhi Statue and demanded that the Prime Minister should break his silence on the issue. "Speak up Prime Minister," shouted Congress MPs who gathered near the Mahatma Gandhi statue in Parliament with placards reading "Rs 6,000 crore robbery".