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Challenges In Campaign Finance

Setting the Agenda for Ensuring Transparency

                                                                                                         Maj. Gen. (Retd.) Anil Verma*

Elections in India are a hugely expensive affair. Large amounts of money are collected by political parties and spent during the elections. Though there is a prescribed ceiling laid down for the candidates' elections expenditure, there is no limit on the expenditure political parties can incur. A large component of this money originates from dubious sources and 70-75 per cent of funding is from unknown sources. To be fair, 2 elections in India are costly also due to the large size of constituencies, intensity of political competitions, frequency and number of elections and lastly the weakness of the non-electoral system of accounting.

Along with the use of black money in elections, money power is also being used to subvert the essence of democracy. It would not be far from truth to state that politics has been made a profession for personal aggrandisement and family fiefdom by most politicians, and it rests on the principle of quid pro quo. Most political parties or politicians accumulate huge amount of resources while in power. They invest their assets where they can avoid public scrutiny while earning decent returns, for example, in real estate. Subsequently, during elections the money parked in such assets is used to offset election expenses.

Association for Democratic Reforms (ADR) research on these aspects clearly brings out the influence of 2 money power which manifests itself in the rising cost of elections, increase in number of crorepatis MPs/MLAs, assets growth of the re-elected MPs/MLAs and chances of winning for crorepati candidates. These aspects are elaborated in the succeeding paragraphs.

Rising Expenditure by National Parties (Lok Sabha 2004, 2009 and 2014 Elections)

While analysing the total expenditure incurred by the national parties during Lok Sabha elections held in 2004, it was observed that 269.42 crores was spent during the election process which increased by 2 ` 25 per cent during Lok Sabha 2009 elections to 875.81 crores and subsequently increased by 49.43 per c ` ent, to 1308.75 crores during the Lok Sabha elections in 2014. Thus, over a period of 10 years, the expe ` nditure incurred by national parties during Lok Sabha elections increased by 386 per cent.

Funds Collected in Cash by Parties During Lok Sabha 2004, 2009 and 2014 Elections

The same analysis by ADR on election expenditure of national parties during Lok Sabha elections also states that the total funds collected by them amounted to 2237.28 crores during Lok Sabha 2004, 200 ` 9 and 2014 elections of which 45 per cent or 1007.81 crores was collected in cash. Funds collected in ` cash increased from 70.29 crores in Lok Sabha 2004 to 528.76 crores in Lok Sabha 2009. It reduced to ` ` `408.75 crores in Lok Sabha 2014 but formed more than one-third or 35.28 per cent of the total funds collected by national parties during Lok Sabha 2014 polls.


Party-Wise Expenditure during Lok Sabha elections, 2004, 2009 & 2014

National

Lok Sabha

Lok Sabha

Lok Sabha

Total

Party

Elections -2004

Elections -2009

Elections -2014

expenditure

BJP

102.65

448.81

712.48

Rs 1263.94 crores

INC

149.61

380.04

486.21

Rs 1015.86 crores

BSP

4.21

21.23

30.06

Rs 55.5 crores

NCP

3.86

8.06

64.48

Rs 76.4 crores

CPI

0.52

8.12

6.72

Rs 15.36 crores

CPM

8.57

9.55

8.8

Rs 26.92 crores

Grand  Total

Rs 269.42 crores

Rs 875.81 crores

Rs 1308.75 crores

Rs 2453.98 crores


 

State-Wise Increase in Number of Crorepati MLAs/ MPs

Apart from finances of parties which showed a marked increase between elections, there is also a consistent trend of an increase in the number of crorepati MLAs in all the states (except in Delhi)4. In small states such as Manipur, Meghalaya, West Bengal and Goa, the number of crorepati MLAs has doubled. The pronounced increase could be attributed to the lesser number of constituencies that might affect the average of crorepati MLAs. But it is also to be observed that states like Karnataka and Goa have 93 per cent crorepati MLAs in their current assemblies. Seventy-two per cent (27) of total states have more than 50 per cent crorepati MLAs.

Out of the 542 winners analysed during Lok Sabha 2014 elections, 443 (82%) were crorepatis while out of 521 winners during 2009 elections, 300 (58%) winners were crorepatis.

State-Wise Crorepati MPs

From 76 per cent in 2009 Lok Sabha election, Andhra Pradesh had 100 per cent crorepati MPs in 2014 Lok Sabha elections. In 2009, Chhattisgarh had 13 per cent crorepati MPs, however this percentage reached 91 per cent in 2014 Lok Sabha elections. In states such as West Bengal, Madhya Pradesh and Odisha, the number of crorepati MPs in 2014 have doubled from what they were in 2009. States represented by one or two MPs have 50-100 per cent crorepati MPs.

With increasing cost of expenditure for contesting elections, the 'winnability' of a candidate increases with the assets he/ she has at his/her disposal. By distributing tickets to those with high assets, political parties skew the level playing field and mock the concept of 'free and fair' elections.


Chances of Winning of Crorepati Candidates

Based on the assets (moveable and immoveable) declared by the candidates in 2014, ADR analysed that 415 winners or 77 per cent of the total number of MPs occupied the top three highest asset positions in their respective constituencies. One hundred and sixty MPs or 30 per cent of all winners have the highest declared assets in their constituency. This shows that the winnability of candidates who had declared large assets is very high.

Among the candidates, there were a total of 450 with assets value of more than `10 crores and 132 or 29 per cent of these high asset candidates won in the 2014 elections. Of the 320 candidates with assets between `5 crores to ` 10 crores, 70 (22%) won in 2014. When the asset range was analysed between ` 1 crore to `5 crores, only 17 per cent out of 1,443 candidates in this bracket were declared winners.

The average asset growth for the 396 re-contesting MPs, between the Lok Sabha Elections of 2009 and 2014 was `8.47 crores, an average percentage growth of 145 per cent. This is a disturbing observation as the assets of 396 individuals would rarely increase by `8.50 crores in any other profession in India.

Observations

The above analysis brings out the rise in expenditure/income of political parties and sharp increase in the personal assets of re-elected legislators. Chances of winning of moneyed candidates show the influence of money in elections. There is opacity in the source of 70-75 per cent funding of the political parties as also the rapid increase in the income of re-elected legislators. The fact that these official reports/ submissions to the Election Commission (EC) and the Income Tax Department are gross under-reporting is no secret. Former Prime Minister Atal Bihari Vajpayee had stated, “We (legislators) start our careers with a lie”. He was referring to the election expenditure statements submitted by the winning legislators.


Recommendations of Law Commission (255th Report) and EC

  1. Report of Law Commission5 (255th): It has given concrete recommendations on expenses and contribution, disclosure, penalties and electoral trusts. It has recommended amendments to the Representation of the People Act (RPA), 1951 and Companies Act, 2013 in order to reform the political parties finance in India. These are discussed briefly in the following paras.

  2. Expenses and Contribution: Section 77 of RPA imposes a ceiling on the election expenses of a candidate from the date of nomination to the date of declaration of results. It does not cover any period before the nomination, even though it constitutes a major part of the candidates' expenses. This needs to be amended. Secondly, there is no ceiling on expenditure by political parties, hence a cap needs to be put on this. Section 182(1) of the Companies Act 2013 should be amended to empower the shareholders instead of the Board of Directors to authorise corporate contributions.

  3. Disclosure: It is at the heart of public supervision of political finance and requires strict implementation of the provisions of the RPA, the IT Act, Companies Act and EC transparency guidelines. The December 2016 recommendations of the EC regarding reducing the limit from `20,000 to `2000 for donation disclosure must be implemented. Accounts of political parties must be audited as per the Institute of Chartered Accountants of India (ICAI) guidelines from a panel set up by the Comptroller and Auditor General of India (CAG).

  4. Penalties: Recommendations of the EC on tax exemption being given to only those parties which have won seats in the Parliament/state legislature, should be implemented. For failure to lodge election expenses the Section 10A of RPA should be amended to increase the period of disqualification of defaulting candidate from three to five years. However, similar penalties are not imposed on political parties for failure to lodge account of election expenses. A heavy penalty of `25,000 daily for delay in submission, after 90 days delay, party should be de-listed and for submitting false information, the party must be fined up to `50 lakhs.

  5. Electoral Trusts: Tax relief is available to Electoral Trusts on donations to political parties however a mild penalty is imposed for failure to submit annual report of contributions to the ECI in the prescribed format before the due date of filing tax returns. RPA should be amended to provide for regulation of Electoral Trusts with appropriate penal provision in case of default.

Conclusion

The legal framework is the starting point for the role that money ought to have in political life. However, laws by themselves accomplish little on their own. Better laws, stronger enforcement, improved financial management within the parties are all measures that have been promoted to improve control over money in politics. But as, politicians themselves design the rules they are supposed to obey, regulation continues to include loopholes, enforcement agencies are not sufficiently empowered and parties do not account for their finance.

The system of ensuring compliance is often weak. Thus, there is a need for broader involvement in the development of political finance regulations by having a wide range of stake holders. The starting point for improvement should be a thorough analysis of the specific needs by the monitoring agencies - identifying whether there is a lack of political will, technical know-how or independency from the parties and candidates they are supposed to monitor. Policy makers must give agencies more power to demonstrate serious commitment towards transparency and increased public trust.


  1. Sources of Funding of National Parties: FY 2004-05 to 2011-12, Association for Democratic Reforms (ADR): https://goo.gl/9BwHQG
  2. Election Watch Research and Reports, ADR: http://adrindia.org/research-and-report/election-watch
  3. Analysis of fund collected and expenditure incurred by National Political Parties – Lok Sabha 2004, 2009 & 2014, ADR: https://goo.gl/9dozSZ
  4. Association for democratic Reforms: http://myneta.info
  5. Analysis of criminal and financial background details of Lok Sabha 2014 winners, ADR: https://goo.gl/YuYgxG
  6. Report no. 255 “Electoral Reforms”, Law Commission of India: http://lawcommissionofindia.nic.in/reports/Report255.pdf

*Maj. Gen. (Retd.) Anil Verma is National Coordinator, ADR

Volume: Vol. XXXVI No. 1
January-March, 2017