On February 2024, the Indian Supreme Court ruled that political parties could no longer receive political funding from electoral bonds, striking it down as unconstitutional, a measure touted as a mostly clean and accountable method to receive political funding by the ruling BJP, which introduced the scheme back in 2018. Fast forward to the 2019 general elections and the present, and we have seen that the Election Commission of India (ECI) itself raised doubt about its transparency in its affidavit claiming that “the scheme is contrary to the goal of transparency in political finance”, also sharing a letter to the Union Government outlining its impact on the transparency of political funding. Several parties have moved the SC against the electoral bond scheme, prominent among which is the pro-democracy NGO Association of Democratic Reforms (ADR), and this eventually resulted in the effective termination of the scheme, much to the rejoice of the opposition parties and pro-democracy organizations and institutions, which begs a few questions: what is the electoral bond scheme which justifies its controversy? Why is its result of further opacity contradicting its supposed intention of higher transparency? Why is the opposition rejoicing? And finally, is there a better option? Were previous methods any better?

Electoral bonds are instruments wherein the bearer (political parties) is paid a certain amount on demand by the payer, who are according to this scheme, any Indian citizen and domestic or foreign organization. It was introduced in The Finance Bill of 2017 during the Union Budget as the Anonymous Electoral Bond scheme.  Its rationale was that the veil of anonymity regarding from who or what political parties sourced their funding made them less susceptible to be swayed by their interests, hence increasing accountability. It was facilitated by amending legislation to allow foreign funding of parties by finance act 2016. Moreover, amendments to the  Income Tax Act ensured it wasn’t  required for political parties from keeping a detailed record of funding received from the scheme. The cap on maximum donations made by companies to political parties was removed. Previously “companies could only donate up to 7.5 percent of three years of the company’s net profits”.

The government also argued that since funding was done through the formal banking system, as the SBI was the sole authority in raising these bonds, there was less chance for foul play. This, however, was also flawed, as the SBI being directly under the control of the government, gave the ruling party a further advantage in the acquisition and concealing of information pertaining to the electoral bonds. Thus, any plan to devise a fair method of political funding was flawed at best and ostensible at worst. The striking down of the electoral bond system was hailed by Indian political institution such as the ECI, NGOs such as the ADR, and even opposition political parties such as the Left Democratic Front (which, in fact, was one of the parties which moved the SC against the scheme) and the INC, which in fact promised in its manifesto for the 2019 general elections to remove the scheme if voted. So why the opposition from the opposition?

Firstly, there are concerns about the growth of a political oligarchy similar to Russia, if you will. The first cycle of electoral bonds showed that 85% of the bonds were purchased in the denomination of Rs 1 crore. This trend continued throughout the existence of the Scheme. Till January 2024, 15,631 electoral bonds worth Rs 15,631 cr were purchased in this denomination, which is more than 94% of the total bonds sold during all the phases. The large denominations of the purchase indicated that it was the conglomerates which bought most of the electoral bonds, which could have resulted in higher influence of corporates, thus giving political priority to corporations over the individual citizens and their interest. So, electoral bonds have been shown to erode the Right To Information Act and the principle of transparency  which is so crucial and intrinsic to the functioning of a legitimate democracy, hurting the so-called Social Contract between the individual and the state. It also ran the risk of promoting an oligarchy in the political system, and some may argue has somewhat succeeded, though not necessarily due to the electoral bond scheme, with the growing public discourse on the seemingly symbiotic relationship between the Adani corporation and the current administration. However, Indian politics has historically always been swayed by powerful individuals and organizations influencing the government to act in their interest, even in previous governments of the current opposition. But I digress.

The LDF and the INC have also both shown  their disapproval of the scheme, and it is understandable why. The Electoral Bond scheme seems to have denied the opposition parties a level playing field in the area of political funding. BJP’s received 74 percent of bond yields among national parties,  while among both national and state parties both, the share was 57%. Electoral Bonds thus decreased the level playing field between political parties.

Given these disadvantages, it seems any other form of funding is better, even the previous methods, though they are not without their limitations. Let us take the example of electoral trusts, which ensure funding solely through the banking system, and “disclose the details of political contributions to beneficiary parties through the regular filing of annual reports and the link between the political party and the donor can be traced by the Election Commission”, although the information is not revealed to the public. One of the main arguments for the Bond scheme which argues that funding through the banking system would result only in white money funding is hence redundant, for the system was already in place and Electoral Bonds were, in this regard, nothing novel.

However, even through this system, Indian politics were still susceptible to unwanted influence. In March 2014, the Delhi High Court had held both the Congress and the BJP guilty of taking foreign funding from Vedanta and its subsidiaries. The then INC government and the opposition of BJP in a shameless example of collusion, amended legislation such that the illegalities resulting from their respective sources of political funding were removed.

I argue not that the previous system was good, but that it was better. Structural flaws in the form of foreign funding and opacity persist with both the methods of funding, but as explored, legislation gave these unfair practices legitimacy in the case of Electoral Bonds. Our take home as perceptive citizens may be the lesson that legislation does not equal legitimacy. In some cases, legislation makes us worse off for its much harder to overturn a bad practice, in the case of the electoral trusts and its misgivings, the amendments to the Foreign Contribution Regulation Act which removed the illegalities of political funding resulted in both the BJP and Congress escaping scot free from the verdict of the Delhi High Court. The bench of justices led by Chief Justice DY Chandrachud of the Supreme Court appropriately took the verdict of striking down the Electoral Bond scheme, but it was, in fact, operational for 6 odd years from 2018 to 2024 February. It was a lucky situation that good sense prevailed, but good sense can’t be relied on indefinitely. At some point, institutional and structural changes are the only way out. This is especially true in the case of aforementioned monetarization of politics.