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What is the controversy with electoral bonds?

India’s electoral bond scheme intended to bring more transparency to political funding. It has since become engulfed in allegations of cronyism, as corporations try to buy influence from parties through anonymous cash donations.

Electoral bonds allow individuals and companies to donate unlimited amounts of money to political parties through interest-free bearer bonds, issued by the State Bank of India.

However, the identity of the donor is kept anonymous to all except the SBI, which is legally bound not to disclose this information.

While the scheme was meant to curb black money in elections, critics argue the anonymity provision has instead made the system opaquer and more prone to companies trying to curry favour from ruling parties through quid pro quo donations.

As data on the biggest donors through electoral bonds started emerging after elections, a damning picture unfolded of corporations potentially trying to buy influence.

Major donators faced probes for alleged wrongdoings

Several companies that emerged as the largest purchasers of electoral bonds were facing investigation by federal agencies like the Enforcement Directorate (ED) and Central Bureau of Investigation (CBI) for alleged financial irregularities around the same time.

Future Gaming and Hotel Services Private Limited, whose assets worth over Rs 400 crore were attached by the ED in a money laundering probe, emerged as the single largest purchaser of electoral bonds worth a staggering Rs 1,368 crore.

Megha Engineering and Infrastructure Limited purchased Rs 966 crore worth of bonds. Around the same time, this Hyderabad-based construction giant secured lucrative government contracts worth over Rs 6,000 crore, including the Zojila Pass tunnel project.

The Vedanta Group donated Rs 376 crore through electoral bonds while being investigated by the CBI for alleged criminal conspiracy and cheating in a coal supply case.

The timing of these large donations from companies facing scrutiny over financial dealings has raised questions about whether they were attempting to curry favour and influence policy decisions affecting them.

Vaccine maker’s pandemic donations raise eyebrows

One of the most controversial instances relates to Serum Institute of India (SII), which manufactured the Covishield vaccine during the COVID-19 pandemic.

In 2022, as SII’s revenues from Covishield sales in India soared by 80%, the company donated a whopping Rs 100 crore in a single day to the ruling Bharatiya Janata Party (BJP) through electoral bonds. It followed this up with another Rs 50 crore donation just two days later, and Rs 52 crore more over the next 15 days.

These huge donations totaling over Rs 200 crore from the vaccine maker came at a time when the Indian government decided against purchasing vaccines from global pharma giants like Pfizer and Moderna, citing sufficient domestic production of “affordable” shots like Covishield.

The timing has led to allegations that SII may have tried to ingratiate itself with the ruling BJP through anonymous donations to corner more lucrative vaccine orders from the government amid the pandemic.

BJP was the biggest beneficiary and its scheme was ruled ‘obscure’

While all major national and regional parties received funds through the electoral bond route, data shows the ruling BJP was the biggest beneficiary by a large margin, receiving well over Rs 6,000 crore – almost half of the total raised this way.

In April 2024, a Supreme Court bench struck down the electoral bonds scheme as unconstitutional, noting it had become a vehicle for perpetuating an “obscure system of anonymity” that allowed “unchecked” flow of corporate wealth into politics, defeating the original aims of transparency.

“The Court finds that the electoral bond scheme elements allow for the perpetuation of an obscure system of anonymity operating under a cloak of secrecy undermining the very foundations of electoral democracy,” the judgment stated.

With electoral bonds now ruled illegal, political analysts say India urgently needs to reform its laws governing all forms of political funding to restore transparency and limit corporate influence in policy-making.

Key measures recommended include capping anonymous cash donations at a low threshold, instituting strict disclosure norms for both donors and recipients, limiting corporate donations to a percentage of profits, and setting up an independent monitoring body to oversee compliance.

Experts argue only such comprehensive reforms can help eliminate the influence of anonymous corporate money power in elections – a key tenet of free and fair democracy that the electoral bond scheme ended up subverting.