THE CPIML manifesto for the 2019 Lok Sabha elections had demanded, “scrap the Modi Government’s Electoral Bond scheme which helps to hide cronyism and corruption” and “ensure transparency in political funding.”
The BJP is known to have garnered 95% of all political donations made through the first tranche of Electoral Bonds – making it the main beneficiary of a scheme it introduced allowing for unlimited, secret donations from corporate and foreign sources, including offshore accounts housing black money.
Recent revelations have confirmed that Electoral Bonds, introduced by the Modi Government, facilitate corruption. More significantly, the revelations also confirm that the RBI and Election Commission warned the Government that Electoral Bonds would encourage black money to flow in Indian elections – and the Government overrode those warnings – and lied to Parliament denying that such concerns had been expressed. The Government also repeatedly broke rules framed specifically to try and curb the potential of Electoral Bonds to be used for money-laundering.
In a series of investigative reports simultaneously appearing in the Huffington Post in English, as well as in other media in Hindi and Odia, journalist Nitin Sethi, with the help of RTIs filed by Commodore Lokesh Batra, has laid bare the blatantly corrupt and illegal scheme.
Days before the then Finance Minister, the late Arun Jaitley planned to unveil Electoral Bonds in in February 1, 2017 Budget Speech, a tax official pointed out that the scheme would require amendments in the Reserve Bank of India Act. On January 28 2017, the finance ministry sent a token email seeking comments from the RBI. The RBI promptly responded, on January 30 2017.
Strongly advising against the move, RBI chief general manager P. Vijaykumar wrote to the finance ministry: “The proposed mechanism militates against the Reserve Bank’s sole authority for issuing bearer instruments in cash.” He added: “Bearer instruments have the potential to become currency and if issued in sizeable quantities can undermine the faith in banknotes issued by the central bank. Amending Section 31 of the RBI Act would seriously undermine a core principle of central banking legislation and doing so would set a bad precedent.”
But the Modi Government ignored the RBI’s concerns and legislated the Finance Bill 2017, legalising Electoral Bonds. The Government claimed that Electoral Bonds were a means to promote transparency and “cleanse the system of political funding in India,” knowing fully well that the RBI had held the opposite view.
As a result of the scheme, “Indian companies, including shell companies which have no business but to channel money to political parties, individuals as well as other legal entities, such as trusts, can now anonymously buy unlimited amounts of electoral bonds and quietly hand them over to a political party of their choice to encash. Foreign companies can also now route money to Indian political parties.” (Nitin Sehti, Huffington Post)
In another letter to the finance ministry in August 2017, the RBI deputy governor BP Kanungo warned again that there was an “inherent scope of misuse of such bonds for undesirable activities,” adding, “You may appreciate that globally there are hardly any precedents in recent times for issuance of bearer bonds.”
The Election Commission, in May 2017, had written to the Ministry of Law and Justice, saying that the provision of the Electoral Bonds scheme exempting parties from reporting contributions made under the scheme “is a retrograde step as far as transparency of donations is concerned.”
The EC also pointed out that “it cannot be ascertained whether the political party has taken any donation in violation of provisions under Section 29B of the Representation of People Act which prohibits political parties from taking donations from government companies and foreign sources.”
The EC also noted that amendments made to Section 182 of the Companies Act, 2013 “open the possibility of shell companies being set up for the sole purpose of making donations to political parties.”
The EC had sought modifications in the scheme “to provide for transparent reporting of contributions received by the political parties through electoral bonds.” Repeated attempts to mislead the EC on the nature of the Bonds scheme did not succeed.
However, a year later, when TMC MP Nadimul Haque had asked in Parliament “whether it is a fact that the EC had raised concerns on the issue of electoral bonds”, the MoS for finance Pon Radhakrishnan had lied, saying “the government has not received any concerns from the Election Commission on the issue of Electoral Bearer Bonds.”
To cover up this lie, the Government then concocted a cocktail of lies – all now exposed by documents obtained through RTI.
To regulate the sale of bonds and place some restraints on unchecked money-laundering, the in rules notified in January 2018 specified that SBI could sell bonds to donors only in four 10-day windows in January, April, July and October each year, with an additional 30 days sale of electoral bonds in years when a general election was scheduled. In fact, the RBI had recommended that bonds be sold only twice a year for short durations – a recommendation that was overruled.
But in fact, the Modi Government, and specifically the Prime Minister’s Office, repeatedly violated even these lenient rules, effectively using Electoral Bonds as an “ATM” window that could be opened as and when needed by the ruling party.
According to the reports in the Huffington Post, “SBI was supposed to sell the first tranche in April 2018, but the first round was opened a month earlier in March 2018 instead. Rs 222 crore worth of bonds were bought in this round, with 95% going to the BJP.
The following month, in April 2018, SBI opened another window for political donation — in this, bonds worth another Rs 114.90 crore were purchased and donated. But the government was still not satisfied.
With the Karnataka state elections due in May 2018, the PMO instructed the finance ministry to open a special and extra window of another 10 days.
The finance ministry in its files claimed that this illegal sale of electoral bonds just before Karnataka assembly elections, on the instructions of the PMO, was being approved as an exceptional case.”
But the exception soon became the norm. In October 2018, the Finance Ministry signed off on an additional 10-day special window for issuance of Electoral Bonds, this time proposed openly “in view of the forthcoming State assembly elections in five states.” (Nitin Sethi, Huffington Post)
Bonds worth Rs 10 crore, purchased during the “special” window opened at the PMO’s behest before the Karnataka elections, failed to be redeemed within 15 days of the purchase, as stipulated by the rules. However, soon after the 2018 Karnataka state elections resulted in a hung assembly, the central government directed SBI to accept these expired bonds! Who was the beneficiary of this broken rule? That is anyone’s guess. Would the central government go out of its way to break the rule if the BJP were not the beneficiary?
Jaitley had claimed that the donor alone would be able to know how much they had donated to a party: thus eliminating the possibility of quid pro quo or cronies calling in favours.
In fact, journalists found that “electoral bonds don’t really provide a donor with anonymity from the government of the day. In fact, the only people in dark about the source of these donations are the Indian public and opposition parties.”
In April 2018, The Quint bought two bonds worth Rs 1,000 each, and reported that they actually carried a secret alphanumeric code that was visible under UV light. The ministry of finance then claimed that “this number is not noted by the SBI” and cannot therefore be used to trace the donor.
Now, documents obtained through RTI reveal that “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. This mechanism of tracking these bonds was approved by the Finance Ministry. The rules governing electoral bonds require SBI to share this data with law enforcement agencies if required.” (Nitin Sethi, Huffington Post)
Remember, the Modi Government forced demonetisation on the country in spite of the RBI’s warning that this move would have no effect on black money. On that occasion too the PM himself lied to the people, promising that demonetisation was a “surgical strike on black money.” The result was the devastation of India’s economy and the livelihood of India’s poor. Meanwhile the same regime overruled RBI’s and the Election Commission’s warnings that Electoral Bonds would fuel black money and electoral corruption, allowing untold sums of black money to secretly flow into the ruling BJP!
The Modi regime and the BJP must be taught a lesson for promoting corruption in Indian elections and risking the stability of India’s currency – all to secure black money funding for itself.