While the common man is being subjected to infinite scrutiny and daily changing rules, the political parties enjoy to have a free-run at not disclosing a large part of their income, running into thousands of crores. As long as the political parties continue to enjoy this exemption, the menace of black money cannot be said to have been tackled.
A queue outside RBI Delhi office
In one of the most unprecedented decisions in Indian history that was taken on 8th November, 2016, Prime Minister Narendra Modi, suddenly announced the cancellation of Rs. 500 and Rs. 1000 notes with a view of “eliminating black money”. Over the last seven weeks, the PM has regularly reiterated this stand, and called demonetization a “war on black money” through his speeches at various election rallies, the survey on his mobile app, and most recently in his “Mann ki Baat” program on Sunday. However, Nasim Zaidi, the Chief Election Commissioner of India, recently expressed that “many political parties are being used as conduits for siphoning off black money”.
As per the Representation of the People Act, 1951 (RP Act), political parties are not required to report the names of the individuals or organizations from whom they have received donations of amounts less than Rs. 20,000. A study by Association for Democratic Reforms (ADR) has shown that these ‘unaccounted donations’ form a large part of political parties’ income. In the year 2014-15 alone, BJP declared an income of 505.26 crore rupees from unknown sources, while Congress received a sum of 445.22 crore from unknown sources during the same time-period. At present, there are over 1,700 registered political parties in India, and many political parties may have been misusing this exemption to convert their black money, as voiced by the Chief Election Commissioner.
At a time, when the common citizen is being questioned for even depositing 5000 rupees in their personal account, should the political parties be given a free-run to deposit hundreds of crores into their accounts without declaring the sources, while also enjoying 100% tax-exemption?
An article last month speculated that since political parties are legally not bound to declare the donors below 20,000 rupees, and permitted to collect infinite such donations, it allows existing political parties to use this loophole post-demonetization to successfully convert all their unaccounted money into white without any fear of penalty. In order to examine the truth behind the above speculation, ABP News carried an investigative report, where they traced many political parties at their registered address as given to Election Commission. The report found that many political parties in the Delhi-NCR region, indeed existed only ‘on-paper’.
Given that the Modi government has been very quick in changing rules almost every-day for the common people, such as putting restrictions on withdrawal from ‘Jan-Dhan’ accounts, frequently changing the limits and deadlines for deposits and withdrawals for cash, and even announcing an amnesty scheme to declare black money, it is surprising that political parties are still being given a free-run despite repeated demands from the Election Commission and the civil society to remove these exemptions.
Following the uproar caused by the statement of revenue secretary, Hasmukh Adhia, about political parties being exempted for deposits made into their own accounts, Finance Minister Arun Jaitley was quick to bring out a press release, stating that no exemptions had been given to political parties ‘after’ demonetization. What he conveniently chose to ignore was that the political parties have long been enjoying these exemptions from ‘before’ demonetization. At a time when the rules for common man are being changed every day, why is the government not showing any intent to change the rules for the political parties?
In fact, at his rally in Kanpur, the Prime Minister proclaimed that the laws regulating the funding of political parties were made by the Congress & the present government has “not altered even a ‘comma or a full stop’ in that.” The question which arises then, is that, if the Prime Minster considers demonetization to be a war on black money, why has he not made any effort to change these rules which are helping the political parties to siphon off black money despite a warning from the CEC?
In the same press release, Jaitley also said that “Under Section 13A of IT Act 1961, Political parties have to submit audited accounts, income & expenditure details and balance sheets.” However, further research of the documents analyzed by Association for Democratic Reforms in this matter shows that the reality is far-different from what is being projected by Mr. Jaitley. While, it is true that political parties are required to get their accounts audited by the chartered accountants, they are not required to disclose the details of donors giving less than 20,000 rupees to either the Election Commission or the IT Department. This is also evident from the Income-Tax returns filed by BSP for the year 2013-14. Moreover, can the IT Returns of the political parties make them accountable for their expenditures?
A close look at the IT Returns of BJP for the year 2014-15 reveal that the party spent 2.1 crore rupees on ‘entertainment’ within one year. If no red-flags were raised on this, who is to stop a political party from spending Rs. 21 crore or Rs. 210 crore on ‘Entertainment’ in the upcoming years? Such unchecked income and expenditure, can easily provide a ‘legal’ pathway to convert black money to white.
Another analysis by ADR reveals that out of 1,703 registered political parties in 2013-14, only 69 parties submitted reports of donations (above Rs. 20,000) to EC, while only 14 parties submitted their audit reports. The status of income and expenditure of remaining 1,620 parties (~95% of the registered parties) remains largely unknown. Thus, if 95% political parties can go unquestioned about their finances, can demonetization really be called a “war against black money”?
Recent revelations of an Enforcement Directorate probe which revealed that the Bahujan Samaj Party (BSP) deposited Rs. 105 crore into their party account in 1000 and 500 rupee notes after demonetization only reinforce the need for making the political donations accountable. BSP’s supremo, Mayawati has since explained that they received this amount in small donations from all over India since August 2016, and is therefore under the ambit of law. This is consistent with the income-tax returns submitted by the party to the Election Commission over the last 10 years, where BSP has not received a single donation over Rs. 20,000 in the last ten years, as per the analysis of ADR.
At a time, when the common citizen is being questioned for even depositing 5000 rupees in their personal account (Non-KYC compliant accounts are still required to provide a satisfactory reason to two bank officials), should the political parties be given a free-run to deposit hundreds of crores into their accounts without declaring the sources, while also enjoying 100% tax-exemption?
When according to the Prime Minister, even beggars are using swipe machines, and he is urging the whole country to go cashless, why is he not leading from front by mandating the BJP and other political parties to go cashless? Why is the Modi government which enjoys clear majority in the Lok Sabha, not showing any intent to curb black money, by amending the RP Act, or bringing an ordinance to remove the 20,000 Rupees limit, despite suggestions by the EC? In the presence of this evidence, it is abundantly clear that unless the laws which allow political parties to freely deposit hundreds of crores in their bank accounts are amended, it would be grossly inaccurate to call demonetization a war on black money.
(Nishank Varshney is a Public Policy scholar at the Humphrey School of Public Affairs, University of Minnesota. He has previously worked on Electoral Reforms with the Association for Democratic Reforms).
(This article was first published on Kafila Online).