Sunday, September 30, 2012

Indian Political Parties, their funding and RTI – Every man ought to know what it concerns all to know

The Uncomfortable Question

One question which always made me uncomfortable was, 'how political parties are getting funded'? The uncomfortable point here is - I am unable to reach a conclusion.

Let me tell you my problem. In India elections are probably the biggest national festival, parties are campaigning by pasting colourful posters; banners; bill boards; paintings in walls; arranging meetings; rally attended by thousands; leaders are flying in and out using choppers etc; in many places they are arranging transportation facilities for voters; building and maintaining their own or rented offices in cities and villages; probably giving salaries to their leaders, part-time and full-time workers; so on and so forth. Of course I intentionally left so many areas where parties may spend money. 

I can’t simply believe that, entire expenditure for running political parties are being met with monthly donations, members need to give towards party fund. Now-a-days elections are getting more and more expensive. Except some parties, others are not running (or I am not aware) any business for profit. So, how they are able to meet this enormous expenditure? If I can guess it correctly, business houses or wealthy well-wishers may provide donations in huge amounts. As political parties are not allowed to accept any donation from foreign sources, I am ruling out this option.

Association For Democratic Reforms (ADR) Press Release

It is in this situation we have to analyse the recent audit by watchdog Association for Democratic Reforms (ADR), According to the press release by 'Association of Democratic Reforms'

"The top 5 political parties with the highest total income between FY 2004-05 and FY 2010-11 (last 7 years) are: INC: Rs 2008 Cr followed by BJP: Rs 994 Cr, BSP: Rs 484 Cr, CPM: Rs 417 Cr and SP: Rs 279 Cr.
a. Donations and Voluntary Contributions seem to be one of the major sources of income for most of the political parties. 
b. However, donations from named contributors (i.e. contributors who made donations above Rs 20,000 which is to be mandatorily declared) form a very small percentage of total Income of political parties. Of the National Parties for FY 2009-2010 and FY 2010-2011, BJP’s donations from named donors amount to 22.76% of the total income. INC has shown a mere 11.89% of their income from contributions, followed by NCP with 4.64% and CPM, 1.29%
c. Bahujan Samaj Party has declared that it has not received any donations above Rs 20,000 in FY 2009-2010 and FY 2010-2011 even though its total income for the two years is Rs 172.67 Cr.
d. CPI has shown 57.02% of total Income from donations above Rs 20,000
e. Out of the Regional Parties analyzed for FY 2009-2010 and 2010-2011, Telangana Rashtra Samiti (TRS) has 99.98% of its income coming from donations followed by Janata Dal (United) with 95.96% and Lok Janshakti Party with 89.88%.
f. Rashtriya Janata Dal (56.13%) and Telugu Desham Party (37%) derive maximum income from donations above Rs 20,000.
g. BJP had the maximum number of donors donating above Rs 20000 for FY 2009-2010 (279) and FY 2010-2011 (502) while for INC it was 226 in 2009-2010 and 417 in 2010-2011." - ADR Press Release, Sep 10

Please note that the numbers are for seven years.


I think what most of the analysts pointed out are two anomalies,

1. If I can copy Southik Biswas of BBC,
 "But what's really interesting is that less than 20% of their earnings on average came from officially declared donations - those above 20,000 rupees." - BBC
2. Political parties (except CPI) are not giving the names for their biggest donors, people who contributed more than 20 thousands per financial year. Reasons vary from party to party. Some said that 'not received any donations above Rs 20,000 in FY 2009-2010 and FY 2010-2011', 'does not come under the RTI', didn't respond at all, 'didn't have enough man-power to provide the information', 'not a public authority as per the provisions of RTI Act' etc.

Back to the Books

If we have to understand the situation correctly, then it is necessary to check the relevant rules enacted by the Republic of India from time to time. Let's begin with the

a. 'The Representation of the people Act - 1951'

Section 29B of said act describes about contributions,

Political parties entitled to accept contribution. Subject to the provisions of the Companies Act...
every political party may accept any amount of contribution voluntarily offered to it by any person or company other than a Government company: Provided that no political party shall be eligible to accept any contribution from any foreign source...
(c) “contribution” has the meaning assigned to it under section 293A...of the Companies Act...and includes any donation or subscription offered by any person to a political party; and
(d) “person” has the meaning assigned to it under clause (31) of section 2 of the Income-tax Act, 1961...but does not include Government company, local authority and every artificial juridical person wholly or partially funded by the Government.

Let’s go through the relevant section (293A) of Companies Act-1961, which restricts and prohibits companies from giving political contributions,

b. Companies Act-1961, Section 293A

(1) ...
(a) no Government company and (b) no other company which has been in existence for less than three financial years, shall contribute any amount or amounts, directly or indirectly, (i) to any political party or (ii) for any political purpose to any person.
(2) A company, not being a company referred to in clause (a) or clause (b) of sub-section (1), may contribute any amount or amounts, directly or indirectly, (a) to any political party or (b) for any political purpose to any person

Provided that, the amount or, as the case may be, the aggregate of the amounts which may be so contributed by a company in any financial year shall not exceed five per cent of its average net profits determined in accordance with the provisions of sections 349 and 350 during the three immediately preceding financial years...

(4) Every company shall disclose in its profit and loss account any amount or amounts contributed by it to any political party or for any political purpose to any person during the financial year to which that account relates, giving particulars of the total amount contributed and the name of the party or person to which or to whom such amount has been contributed.
(5) If a company makes any contribution in contravention of the provisions of this section, (a) the company shall be punishable with fine which may extend to three times the amount so contributed and (b) every officer of the company who is in default shall be punishable with imprisonment for a term which may extend to three years and shall also be liable to fine.

Section 29C of the same act deals with declaration of donations received by the political parties,

(1) The treasurer of a political party or any other person authorised by the political party in this behalf shall, in each financial year, prepare a report in respect of the following, namely:
(a) the contribution in excess of twenty thousand rupees received by such political party from any person in that financial year;
(b) the contribution in excess of twenty thousand rupees received by such political party from companies other than Government companies in that financial year.
(2) The report under sub-section (1) shall be in such form as may be prescribed.
(3) The report for a financial year under sub-section (1) shall be submitted by the treasurer of a political party or any other person authorised by the political party in this behalf before the due date for furnishing a return of its income of that financial year under section 139 of the Income-tax Act, the Election Commission.
(4) Where the treasurer of any political party or any other person authorised by the political party in this behalf fails to submit a report under sub-section (3) then, notwithstanding anything contained in the Income-tax Act, 1961...such political party shall not be entitled to any tax relief under that Act.

If I can read both observations combined then political parties can accept donations from a person or company. If a political party fails to provide a report in the prescribed form, then what they are going to lose is tax relief, unlike in the case of a company where they have to pay fine, and officers in default may have to face imprisonment. In other words, what I can deduce from this is (please note that I am not a legal expert), if an individual provides a very high amount as donation, then there is no way to know who the source is, if the political party which received the donation conceals the same (which they can do if they are ready to pay the income tax for the said amount). When revealing the name of the source creates more problem than tax relief parties may like to pay the tax!!!

c. RTI Act, 2005

According to RTI Act, 2005

Section 2, clause h states that, "public authority" means any authority or body or institution of self-government established or constituted—
(a) by or under the Constitution (b) by any other law made by Parliament (c) by any other law made by State Legislature (d) by notification issued or order made by the appropriate Government,
and includes any, 
(i) body owned, controlled or substantially financed (ii) non-Government organisation substantially financed directly or indirectly by funds provided by the appropriate Government;

And who is appropriate government here?

Section 2 clause A stated that, "appropriate Government" means in relation to a public authority which is established, constituted, owned, controlled or substantially financed by funds provided directly or indirectly (i) by the Central Government or the Union territory administration, the Central Government (ii) by the State Government, the State Government.

If I am not wrong, according to RTI political parties are not coming under the terms of Public Authority. If I can combine the conclusions made from People Representation Act - 1951, Companies Act - 1961, RTI Act - 2005 'Political parties are not obliged to reveal the information of their biggest donors'.

Responses by political parties to ADR

According to ADR, "In response, all political parties barring the Communist Party of India (CPI) declined to give the information. While CPI provided the information about their largest donors, their addresses, the mode of payment of these donations etc, other parties either didn't reply or simply said that they did not come under RTI. In a letter signed by their then general secretary AB Bardhan, CPI said that it is a 'Public Authority' as the organization is substantially financed directly or indirectly by government funds. It also said that they have an internal appellate authority in case we were not satisfied by the information received."

I appreciate CPI here, but failed to understand how it is "substantially financed directly or indirectly by government funds".

Party expenses

I don't think that all the politicians are joining politics because of the extreme eagerness to serve society. Politicians can take politics as a profession and serve the society honestly. If parties are paying salaries for their selected members so be it, I have no problem. But isn't it necessary that, parties should reveal how they are getting funded?

I can buy the arguments like, it’s difficult to record and maintain the amounts paid in small sums like - 5 INR, 10 INR etc.

But political parties should not do something, which they have to conceal from public on whose votes their future depends. Revealing the contributors name is in no way going to affect national security or any other items mentioned in section eight of RTI Act, which bars the making the data public. And nobody is asking them to reveal the name of people who contributed 5, 10 INR. The amount here is 20000 and above.


If CIC (Chief Information Commissioner) decide that political parties need not reveal the name of their biggest contributors. Then what government should do is go and amend Section 29C of 'The Representation of the people Act - 1951', section 293A of Companies Act, section   and add one more condition in clause h of section 2 in RTI Act. I also believe that political parties should channel contributions more 20000 through normal banking channels.

People should have an option to know, about the entity, whom they are going to vote. Instead of reaching a phase where they are forced to to reveal the information, political parties should do it themselves. Hope that the decision of CPI may act as a guide line for others. If its not enough just take a look at campaign contribution list for US presidential elections.



1. Analysis of total income of political parties ADR
2. Right To Information Act - 2005
3. Companies Act - 1961
4. The Representation of the people Act – 1951
5.     BBC
6.     The Hindu
7.     “Every man ought to know what it concerns all to know” – Thomas Gordan (Cato’s letter No. 38)

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