Sunday, November 25, 2012

Legal framework, Political Parties and their Money

A democratic country requires vibrant political parties and competitive elections. The parties need to be organised and formalized for functioning effectively. In support of this aspect, "Representation of People's Act, 1951" enables parties to get registered itself with Election Commission and also seek a declaration from the parties which contains the provision that the party has faith and allegiance to the Constitution of India and to principles of Socialism, Secularism and Democracy and would uphold the Sovereignty, Unity and Integrity of India. Further, under the "Election Symbols (reservation and allotment) Order, 1968" Election Commission specifies a party as recognized state party or national party based on certain conditions. If a party has secured 6% of total valid votes from four states in the last general election to Lok Sabha or State assembly and has returned at-least 4 MPs to Lok Sabha OR the party's elected members accounts for 2% of total Lok Sabha constituencies and these members are from at-least 3 states, then that party would be recognized as "National Party". If a party other than the 'National Party' has secured 6% of the total valid votes in last Lok Sabha or State assembly election in concerned state and has returned at-least 2 MLAs or 3% of total MLA constituencies in that state, then that party would be recognized as "State Party".The recognized parties get preference during allotment of symbols, free broadcast/telecast time in state-owned media organisations, free electoral rolls..etc.

Political parties perform important functions of country's political system. Those are,
  • Mobilizing and integrating citizens
  • Articulating public interest
  • Formulating public policy 
  • Recruiting political leaders and
  • Organizing parliament and government. 

To perform these functions, financial resources are crucial, traditionally political parties raised fund from membership dues and donation from private individuals. To support and monitor the financial aspect of political parties "Election and Other Related Laws (Amendment) Act, 2003" was passed in 2003. This Act made the contributions to political parties by individuals and companies tax deductible and also made it mandatory to submit the list of donors who have donated more than Rs. 20,000 to the Election Commission to claim tax exemption.

Despite the existing legal frameworks, fund raising and fund management of political parties raise many concerns like "Black Money", "Corporate-Political Party nexus"...etc. Recently such a concern was raised by Janatha Party leader Subramaniam Swamy. In his letter to Election Commission, Swamy told that the loan of Rs.90 Crore given to Associated Journals Pvt Ltd by Congress Party has violated the Guidelines and Rules established by Section 29A to C of Representation of People's Act 1951 and 13A of Income Tax Act 1961. And he also claimed that the Congress Party was liable to be de-recognized. In response, the Election Commission clarified that Congress has not violated Section 16 (A) of Election Symbols (Reservation and Allotment) order, 1968 which empowers the commission to de-recognize a party.

This controversy has exposed the lack of effective legal framework to regulate and monitor the manner in which political parties use their funds and also raise funds. In India, the party and election financing regulation was started in 1968. The then Prime Minister Indira Gandhi has banned Corporate donations to political parties targeting the Swathanthra Party which was free market-oriented. However, in 1985 the Corporate donations were allowed once again by amending the Companies Act. In 1990, the National Front government had set up Dinesh Goswami committee on Electoral Reforms. The committee recommended state funding of elections in form of limited support in kind for vehicle fuels, rental charges for microphones... etc. It also advocated a ban on corporate donations to political parties. In 1998, Gupta committee recommended for partial state funding of elections, but the key recommendations of these committees were not accepted. Due to the ineffectiveness of "Party Financing and Election Expenditure Laws" issues like demand for black money to finance parties and campaigns, undercover expenditure during election and party's tendency to select candidates based on their ability to finance elections were rising. Potential remedies could be borrowed from successful initiative of other countries. Few of the recommendations are state funding of elections, making small-sum donors more attractive to party and as well as donors and raising the ceiling for corporate donations. These suggestions might reduce malpractices in fund raising to some extent. If the funding of political parties become more transparent, then it will result in healthier political environment.

However, another issue remains unaddressed i.e., regulating the manner in which political parties are using their fund. The fund received by Political Parties are tax exempted. They can use their fund for "political activities", but there is no definition of what construes "political activity". Certainly, trying to define the political activity will limit the activity that a political party can perform. Instead of trying to set rules for "what a political activity is?", the regulations can focus on "What is not a political activity?". For example, a commercial activity which yields financial profit cannot be a political activity. The political parties which are forming the government of the country cannot be a commercial venture. So, a legal framework can be proposed to restrict the financially profit making activity of the political parties. Unlike the "Model Code of Conduct for Political parties and Candidates" which is in force during the election times, the proposed legislation should be in effect at all the time with Election Commission of India.

No comments:

Post a Comment