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Mainstream, VOL LI, No 1, December 22, 2012 [Annual 2012]

Money-Power in Elections: A Plea For Public Funding

Thursday 3 January 2013

by L.K. Advani

Shortly after assuming office as the Prime Minister in January, 1985, Rajiv Gandhi invited various party spokesmen in Parliament, one by one, for a series of informal talks on problems facing the country. My meeting with him lasted for about 45 minutes. He discussed mainly Punjab, Assam and Centre-State relations. On my part, I emphasised the urgent and imperative need of electoral reform. I was impressed by his very positive response. I felt even more gratified, when a few days later, I heard the President declare in his Address to the first Joint Session of the new Parliament:

Government are committed to a clean public life. They intend wide-ranging discussions on electoral reforms with political parties and would welcome their cooperation.

More than two-and-a-half years have elapsed since this promise was given. The assurance has been repeated umpteen times in reply to questions on the subject raised in Parliament. Despite persistent prodding from our side, the government has not moved forward even an inch in the direction of fulfilling its promise.

Those who subscribe to the Tantrik practices of Vamachar ritualistically indulge in the five Ms (Pancha Makaras in Sanskrit), namely, madya, mamsa, matsya, mudra and maithun. In India, the electoral process also is vitiated by four Ms (Chatush Makaras), namely, Money-power, Ministerial-power, Media-power and Muscle-power. Attempts at electoral reform must, therefore, aim at elimination of all these four evils. Of these, the malady of Money-power is the most malignant.

Insofar as this question of money-power in elections is concerned, it would not be precise to say that the Rajiv Government has done absolutely nothing about it. Its amendment of the Companies Act is supposed to be a move in this direction. By this amendment, the ban on company donations to political parties was removed. To some this may seem just the right thing to do. But I regard this amendment as a thoroughly retrograde one. It does not curb corruption in any manner. It only accentuates the role of Money-power. It tends to make elections costlier and more unfair than they already are.

In 1962, the Santhanam Committee was set up to make recommendations on Prevention of Corruption. One of the principal recommendations of this Committee was that company donations be banned. The Committee’s report observed: “...in Indian conditions, companies should not be allowed to participate in politics through their donations. It is true that this matter was debated at length during the discussions on the Companies (Amendment) Act of 1960, and it was decided to permit such donations subject to restrictions of amount and conditions of publication. We do not think that this is sufficient and feel that nothing but a total ban on all donations by incorporated bodies to political parties and purposes will clear the atmosphere.”

In 1969, the Companies Act was amended to prohibit company donations. The Statement of Objects and Reasons appended to the Amending Bill said: “Such donations have a tendency to corrupt political life and to adversely affect healthy growth of democracy in the country. It is, therefore, proposed to ban such contributions.”

Certain statistics about company donations given by the High Powered Expert Committee on Companies and MRTP Acts make interesting reading. In its report, this Committee, headed by Justice Sachar, has said: “During the period August 1962 to March, 1966, Rs 126 lakhs were given by the companies to various political parties. Of these, Rs 107 lakhs were given to the Congress, Rs 15 lakhs to the Swatantra Party and a few thousands each to other political parties.” Then, “between 1966 and 1969, 75 companies paid down Rs 1.87 crores out of which Rs 1.44 crores were given to the ruling party.”

Against this background the ban on company donations was not relished by those responsible for fund collection in the ruling party. In fact, the donors also were not very happy. In this context, the Sachar Committee has observed: “Those (representatives of companies) who advocate the giving of political contributions frankly mention as a reason and a justification that the company needs to be on the right side of the ruling party, because its profitability and other advantages are dependent on the goodwill of the ruling party.”

So, after 1971, pressure began to mount that this ban be removed. The argument given was that company donations are continuing notwithstanding the ban, the only difference is that payments are being made in black-money. During the Emergency period, another Amending Bill was brought which sought to lift the ban. Before the Bill could be enacted, there was a change of government. The Janata Government considered the matter, and decided to continue the ban.
Ban on company donations was the only important recommendation of the Prevention of Corruption Committee (Santhanam Committee), which had been implemented till now. It is ironic that this should have been undone by a government elected on the mandate of a Clean Government. Every expert body that has examined this issue—the Santhanam Committee, the Wanchoo Committee on Direct Taxation, the Sachar Committee on Company Law—all have favoured a ban. But the present government felt differently.

It is noteworthy that though in January 1985, the government had promised to consult Opposition parties before making any change affecting elections, in this matter they consulted no one. The Bill was brought in May 1985, and passed in the teeth of strong Opposition. In the Rajya Sabha the entire Opposition walked out in protest.

What is even more disturbing is the rationale offered by this government for lifting the ban. The 1976 Bill, which too sought to repeat the ban provision had, in its statement of Objects and Reasons, argued: “Experience had shown that the said ban has not produced the desired result. It is, therefore, proposed to remove the said ban.” The 1985 Bill, on the other hand, was brought to Parliament “with a view to permitting the corporate sector to play a legitimate role within the defined norms, in the functioning of our democracy.”

A principal objective of reforms in the field of election expenses should be to curb the role of big money. The 1985 amendment frankly declares its objective to be quite the contrary—to legitimise the role of big money in elections.
This, of course, is a negative aspect of the problem—something which ought not to have been done, but which nevertheless has been done. There is a lot besides which needs positively to be done in this arena.

A Joint Parliamentary Committee set up in 1971 to make recommendations with regard to election law had submitted a valuable report in 1973 in which the direction of reform had been clearly indicated. The Committee opined that this problem of Money-power could be solved “only if it is accepted in principle that all election expenses ought to be a legitimate charge on the public fund”. The Committee recommended that “a process should be initiated whereby the burden of legitimate election expenses at present borne by the candidate or the political party would be progressively shifted to the State.”

There is an impression in some quarters that public funding of elections would impose a very heavy burden on the exchequer and that it would promote multiplicity of candidates and parties. This fear is based on the assumption that every candidate in the field would get the State funds. This is not so. Definite criteria would certainly have to be laid down to determine a candidate’s eligibility for public funds. Today, the law provides for a security deposit, which becomes forfeit to the State if the candidate does not poll at least one-sixth the total number of votes polled. This itself can be a fair criterion for eligibility. Only candidates polling at least one-sixth of the total votes polled may be deemed serious candidates, and so entitled to election grants from the State.

The Election Commission, in its report on the 1980 Lok Sabha elections has attempted to work out how much expenditure a Lok Sabha candidate should justifiably incur. Taking into account the amounts likely to be spent on transport, public meetings, printing, polling day costs, etc., the total expenditure for the campaign has been assessed at Rs 1,61,000 per candidate. On the basis of my actual experience, I would think this is on the low side. Also, making allowance for the inflation since then, I think a sum of Rs 5 lakhs would be a more realistic figure.
Now, let us attempt an exercise on the basis of the 1984 Lok Sabha results. For the 508 Lok Sabha seats, where elections were held then (elections were not held in Punjab and Assam), 5301 candidates contested. Of these, as many as 4197 candidates forfeited their deposits. So, according to the eligibility criterion suggested above, only 1104 candidates would be eligible for state finances. If each of these candidates were to be paid Rs 5 lakhs, the total entailment would be slightly over Rs 55 crores. Surely, this is no high cost to pay to emancipate Indian elections from the stranglehold of big money and black money.

Public funding, by itself, is not going to solve the problem. Simultaneoulsy, strict statutory curbs should be imposed on the exterior props of electioneering—the number of posters that may be issued, the number of newspaper advertisements permissible etc. Mobile loudspeakers should be banned; so also processions. On polling day, all vehicles may be put off the road, except those connected with emergency services with elections etc. A consequential piece of legislation would be a law requiring auditing of election accounts of all parites.

Today, a large number of democracies in the world have gone in for public funding of elections. Prominent among these are the Federal Republic of Germany, Japan, Austria, Norway, Sweden, Italy, Israel and France. Since 1976, in the United States, candidates for Presidency are provided state finance on condition they accept certain restrictions such as limit on expenditure and audit of accounts. Even in UK, which in this matter has been the most conservative, substantial grants are paid to parties represented in Parliament—grants, which parties are permitted to use not only for parliamentary research but for elections too. It is high time India also worked out a scheme of election grants.

(Annual 1987)

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