Elections 2014: THE MONEY GAME

WITH elections to the 16th Lok Sabha round the corner, all eyes are now on the Election Commission. With more than 80 crore voters, 543 seats, nearly 10,000 likely candidates and nearly 1,600 registered political parties, the task before the Commission is huge and onerous. More so in the current scenario where the Indian polity is fractured and the use of money and muscle power to garner votes is being exercised with impunity.

Politics today has become a lucrative business. No wonder then, that from just 53 parties in the first general election to the Lok Sabha, today there are nearly 1,600 parties registered with EC. If you count unregistered parties, the number goes up to a humungous 5,000. Some of these registered parties have never even contested one election. But, strangely, all of them maintain an office and receive donations from small businesses, ranging from Rs. 10,000 to 10 crore.

Corporate donation is one of the main sources of income for a political party. In the last three financial years, Indian companies have, according to adrindia.org, reportedly donated crore of rupees to six major political parties, including the Congress, Bharatiya Janata Party (BJP), Bahujan Samaj Party (BSP) and CPI-M. The BJP got the biggest chunk, Rs. 520.1 crore, followed by the BSP (Rs. 231.2 crore), the Congress (Rs. 168 crore) and the CPI-M (Rs. 95.6 crore). Among regional parties, the Samajwadi Party is way ahead of others with Rs. 61.98 crore.

There is a lot of confusion in their books of account as to who donated, how much or why. This, despite stringent monitoring of corporate donations by EC. Earlier, corporate donations were one of the best kept secrets—everyone knew that the money was given, but no one talked about it. Today, there is a major difference. Many companies admit to giving funds to political parties and have started mentioning it in their annual reports. According to figures, the average amount spent per constituency works out to be Rs. 1.29 crore—almost 4 times more than the EC’s prescribed limit. This includes contributions by volunteers. So, if the EC limit is to be enforced strictly, almost half the MPs will be disqualified and will have to vacate their seats.

According to figures, the average amount spent per constituency works out to be Rs. 1.29 crore—almost 4 times more than the EC’s prescribed limit. This includes contributions by volunteers. So, if the EC limit is to be enforced strictly, almost half the MPs will be disqualified and will have to vacate their seats

Clearly, a political party is one of the best places to develop contacts and network with senior government officials, earn easy money, evade taxes and manipulate court cases. This is the reason why many non-serious, fringe parties, or so called ‘letterhead parties’ are getting enrolled with the EC. Many of these parties do not have a chance of ever winning a seat, but they still maintain an office, staff and bank accounts. They allegedly operate as money laundering dens to convert black money into white.

Another glaring example of what happens behind the veil in the murky business of politics is to be seen in Uttar Pradesh, where hundreds of ‘fair weather’ parties spring up just before an election. Their leaders bask in the media attention, giving sound bytes, and then go into hibernation till the results are out. The logic behind the creation of such parties is simple—though small in size, such parties pose a big headache for established players. On top of it, there is always a chance of forming an alliance to play a big role in the post-poll political negotiations with the national parties. Some parties even allow themselves to be used as tools by the bigger parties to eat into the rivals’ vote bank.

JAGO Party, a small nondescript party in Secunderabad, is among the wealthiest political parties in Andhra Pradesh. According to the donation receipts submitted by it to the Election Commission, the party received about Rs. 1 crore, way ahead of the YSR Congress (Rs. 77 lakh), the TRS (Rs. 90 lakh) and the TDP (Rs. 18 lakh). Jago Party, and dozens of other such political parties, have no more than a handful of members and may never contest elections. However, nothing stops them from enjoying the tax exemptions. Under Section 29A of the Representation of the People Act, 1951, donations made to political parties are fully deductible under Section 80GGC of the Income Tax Act. Political parties also do not have to pay income tax on the funds received. This is the loophole that such parties try to exploit. Most parties, big or small, do not maintain proper books of records and details of donors below Rs. 20,000. Even big donations are split up and shown as below the Rs. 20,000 limit. The reason: Section 29C says that political parties only have to submit a statement of donations above Rs. 20,000. The Law Ministry prescribed Form 24A for such reports and income-tax law was amended accordingly, adding Section 13A, exempting these donations 100 per cent from income tax. Further, the RP Act was amended in 2003 and Section 29B was inserted, permitting political contributions voluntarily offered to it by any person or company other than a government company.

Many political parties are not even registered and nobody knows why and when were they formed. Many times, such parties close shop or merge with others to form a new party. Many such smaller parties provide an asylum to people with criminal backgrounds, or those
ousted from other parties

LATER, a RTI filed by ADR revealed that donations account for only 20 per cent of the total income reported by political parties. The source of 80 per cent remains unknown. Many parties often collect amounts of less than Rs. 20,000 in cash through ‘sale of coupons’ for which no record is mandated to be kept. Many political parties are not even registered and nobody knows why and when were they formed. Many times, such parties close shop or merge with others to form a new party. Many such smaller parties provide an asylum to people with criminal backgrounds or those ousted from other parties. Many notorious criminals, like Brajesh Singh, Atiq Ahmad and Amarmani Tripathi, have used Kaumi Ekta Manch, Rashtriya Parivartan Dal, Mahaan Dal, Bhartiya Samaj Party and Pragatisheel Manav Party to enjoy the fruits of power in Uttar Pradesh. In the light of this, it is rather surprising that the Election Commission tried to sweep the dust under the carpet by stating: “It is up to the major parties not to field criminals as candidates.”

Under Section 29A of the Representation of the People Act, 1951, donations made to political parties are fully deductible under Section 80GGC of the Income Tax Act. Political parties also do not have to pay income tax on the funds received

A peculiar situation developed in Ashok Shankar Rao Chavan v/s Madavrao Kinhalkar and others, special leave petition (C) No. 29,882 of 2011, when the EC tried to act against Ashok Chavan, the Chief Minister of Maharashtra, for indulging in ‘paid news’ during the 2009 elections. This was not reflected in his statement of election expenses submitted to the EC. The EC wanted to disqualify Chavan as he had filed an incorrect statement of expenses and was liable to be hauled up under law. Surprisingly, a Deputy Secretary to the Government of India, Ministry of Law and Justice, submitted a note, which read as follows: “That I am advised to say that a plain reading of Section 10A of Representation of the People Act, 1951 (RP Act) and Rule 89 of the Conduct of Election Rules, 1961, indicates that the power of the EC to disqualify a person arises only in the event of failure to lodge an account of election expenses and not for any other reasons, including the correctness or otherwise of such accounts.”

The Law Ministry’s interpretation was that as long as the candidate filed a statement of expenses, there was nothing wrong—the EC couldn’t delve into checking those expenses. This, in other words, meant that even if a candidate filed a statement saying he spent one rupee, the EC has to accept his word.

A RTI filed by ADR revealed that donations account for only 20 per cent of the total income reported by political parties. The source of 80 per cent remains unknown. Many parties often raise income less than Rs. 20,000 in cash through ‘sale of coupons’ for which no record is mandated to be kept

The matter is pending in court since then. The result is that Ashok Chavan, in other six months, would complete his full term as an MLA despite the fact that Section 86(7) of the RP Act specifically mentions: “Every election petition shall be tried as expeditiously as possible and endeavour shall be made to conclude the trial within six months from the date on which the election petition is presented to the High Court for trial.”

MANY see the first-past-the-post system of the Indian democracy as problem in itself. According to them, this system is responsible for taking independent candidates out of the equation over the years. The vote share of independents has gone down from 19.3 per cent in 1957 to 4.3 per cent in 2004—a fall of 15 per cent. As against 42 elected independent candidates in 1957, there were just two in 2004. As compared to 60 per cent in 1957, 99.7 per cent independent candidates lost their deposits in 1996. That means, only 0.3 per cent of the independent candidates obtained more that 1/6th of the votes polled in their respective constituencies. In other words, an independent candidate has virtually no chance of winning an election in India–except if he or she is a crorepati or supported by a crorepati party.

How much money has come into the political system can be gauged by the growth in net worth of some politicians. According to sources in CBI, Mayawati’s assets increased from Rs. 1 crore to Rs. 50 crore in just four years. Between 1998 and 2003, she and her close relatives came to own 96 plots, houses and orchards. According to an affidavit filed before Mayawati’s nomination to the Rajya Sabha, her estimated wealth today is over Rs. 111.64 crore.

In his book, The Black Economy of India, Arun Kumar reveals how one of the first things that politicians do after winning elections is to tell a lie. The book narrates an interesting anecdote as to how a politician reportedly told the former Chief Election Commissioner, TN Seshan, that he spent Rs. 55 lakh on election expenses, while declaring an election expense of just Rs. 483. Another TDP MP confided to him about having spent Rs. 8.5 crore in his election campaign. Similarly, a man bluntly told CEC SY Quraishi that he gave away Rs. 35 lakh in cash to voters in Mumbai in a single night. Still his party lost. Clearly, whatever the politicians may think, the voters are not fools and they do realise what’s happening.