There were doubts about the usefulness and efficacy of the electoral bond scheme when it was announced by the government as part of the 2017 Budget. The details were not available then but now that these are known, with the notification of the scheme last week, it turns out that it is no better than the old way of poll funding, and is in some ways worse than that. The claim is that the bond scheme would address the problems associated with political donations to parties. The main problems are the use of black money for donations and the lack of transparency about the source. The first problem is only inadequately addressed by the scheme and the second would remain as it was. Under the scheme, donations can be made to parties through bonds which will be available in only one bank (SBI). The donor has to provide his KYC details to the bank, and the party can encash the bond only through its account.
But only the party and the bank would know where the money came from. The donor's corporate or personal accounts might show the transfer of money, but the Election Commission, the Income Tax department and, most importantly, the voter will not know who has given how much money to which party. This is total lack of transparency about the donations. In the earlier system, parties had to disclose to the Election Commission the identity, PAN and other details of donors who contributed more than Rs 20,000 to their funds. Bonds have been exempted from this requirement. The earlier limit on donations - 7.5% of three years' net profits of a company - has also been lifted. This means, any amount can be donated by a company to a party. The fact that the bonds are white does not mean much when all other details remain in the dark and restrictions and safeguards are lifted.
Since donations through bonds can be made only to parties which got 1% of the votes or more in the previous election, many parties, especially new parties, will be left out of the scheme. This is discriminatory in a democracy where all parties should get the same treatment. Since the identity of the donor is unknown to the voters, they will not be able to know whether the donor secured any benefits from the government in return for the funds. As the bank has information about the donor, the government can find out what other parties got and from where. This can lead to harassment of donors. The flow of all black money will not stop either, because contributions less than Rs 2,000 can still be made in cash. Parties know how to make use of this provision to gain unlimited funds.