Archive for July, 2011

Who should pay for election? Not the state.

Posted on July 25, 2011. Filed under: Elections, Politics |

Printed from

Who should pay for the elections? Not the state

 

JAGDEEP S CHHOKAR | Jul 24, 2011

 

http://timesofindia.indiatimes.com/home/sunday-toi/all-that-matters/Who-should-pay-for-the-elections-Not-the-state/articleshow/9341475.cms

 

http://epaper.timesofindia.com/Default/Client.asp?Daily=CAP&showST=true&login=default&pub=TOI&Enter=true&Skin=TOINEW (Click on “All that matters”, page 18)

 

The persistence of the political establishment has to be admired. Just as it has successfully prevented all attempts at instituting any effective check on corruption for 42 years now, it has been trying to bring in state funding of elections for 37 years. And now, a new attempt is underway.
The law minister announced in December 2010 that regional and national consultations on electoral reforms would be held all over the country in association with the Election Commission. The last of the seven regional consultations was held in Guwahati on June 5, 2011. The national consultation, originally scheduled for July, is yet to happen.
Without waiting for the consultation process to be over, the law ministry has prepared a draft Cabinet note, proposing state funding for women and SC/ST candidates, and circulated it to several ministries for comments. The note repeatedly stresses that there has been “complete unanimity on the need for curbing the role of money power in elections”, thereby creating an impression that, by association, the unanimity was on state funding of elections, whereas state funding was consistently opposed by no less a person than the chief election commissioner (CEC) himself in all the seven regional consultations.
With the concluding national consultation being expected within the next month, what’s the need to initiate the note now? Another question: is the outcome of these consultations pre-determined? If yes, then why hold the consultations?
The draft Cabinet note uses two clever stratagems to make a beginning towards its aim of getting full state funding for elections. The first is the “foot-in-the-door” technique. The note proposes state funding only for women and SC/ST candidates, for now. The actual intention comes through in a paragraph that says, “Keeping in view the overall interest and the economic and financial scenario in the country, it may not be desirable to consider full state funding at this juncture.” It is obvious that full state funding is intended to follow at some suitable juncture in the future.
The other stratagem is to link the proposal for state funding with a persistent demand-disqualifying people with criminal cases pending against them from contesting elections. This provision comes with several safeguards which have a strong potential of rendering it toothless in implementation. Repeated reports, commissioned by the government itself, have unambiguously recommended that state funding of elections should not even be thought of, before some pre-requisites such as internal democracy in political parties and complete transparency in their financial affairs is ensured.
The most cited report in this connection is that of the Indrajit Gupta committee submitted in 1999. The paragraph of this report, quoted most often by the political establishment, says, “The committee sees full justification, constitutional, legal as well as on grounds of public interest, for grant of state subvention to political parties, so as to establish such conditions where even the parties with modest financial resources may be able to compete with those who have superior financial resources.” This clearly gives the impression of the well-endowed political parties being in sympathy with their less-endowed brethren.
Those who quote the above paragraph overlook, intentionally or otherwise, the opening paragraph of the “conclusion” of the same report which says, “Before concluding, the committee cannot help expressing its considered view that its recommendations being limited in nature and confined to only one of the aspects of the electoral reforms may bring about only some cosmetic changes in the electoral sphere. What is needed, however, is an immediate overhauling of the electoral process whereby elections are freed from the evil influence of all vitiating factors…. Meaningful electoral reforms in other spheres of electoral activity are also urgently needed”.
The Law Commission, in its 170th report, the most comprehensive document on the subject, titled “Reform of the Electoral Laws, said in June 1999: “…(I)t is absolutely essential that before the idea of state funding (whether partial or total) is resorted to, the provisions suggested in this report relating to political parties (including the provisions ensuring internal democracy, internal structures) and maintenance of accounts, their auditing and submission to Election Commission are implemented…. (T)he implementation of (those) provisions…should be pre-condition to the implementation of the provisions relating to partial state funding…. If without such pre-conditions, state funding, even if partial, is resorted to, it would not serve the purpose underlying the idea of state funding… The state funding, without the aforesaid pre-conditions, would merely become another source of funds for the political parties and candidates at the cost of public exchequer… The state funding, even if partial, should never be resorted to unless the other provisions mentioned aforesaid are implemented lest the very idea may prove counter-productive and may defeat the very object underlying the idea of state funding of elections”.
The dangers of state funding have not only been pointed out by government appointed committees and commissions but also by the Election Commission, and by CECs individually. Former CEC, J M Lyngdoh said: “That is a useless thing. It is a red herring. It doesn’t help anybody.” The current CEC, S Y Quraishi said, “State funding is dangerous. It will not stop illegal expenses…State funding will not stop illegal expenses. In fact, more money will be available to the candidates.”
The proposal to introduce state funding for a section of the candidates, despite all the cautions and warnings, does make one wonder about the real intentions behind the move. There are no prizes for guessing the answer, and one wonders if the change of the law minister will change anything.
The writer is a former dean and director in-charge of IIM, Ahmedabad)

 

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Lokpal needs teeth to bite

Posted on July 18, 2011. Filed under: Elections, Politics |

The Tribune, July 02, 2011

OPED GOVERNANCE

That there will be a consensus on Lokpal is not in doubt. The real issue is what kind of Lokpal will get a consensus — perhaps not the one that might have the potential to make a real difference to the functioning of the establishment

LOKPAL NEEDS TEETH TO BITE
Jagdeep S. Chhokar

http://www.tribuneindia.com/2011/20110702/edit.htm#6

THE empire strikes back”, ‘Divide and rule’ triumphs”. These could well be the headlines towards the end of British rule in the subcontinent. Interestingly, substituting “empire” with “establishment” could make it a headline appropriate for the situation today. Having succeeded in first propping up Baba Ramdev, thus dividing what was labelled as a “civil society”, then discrediting him and now in hyphenating Ramdev and Anna Hazare, the glee in the “establishment” is hard to miss.


In hyphenating Baba Ramdev and Anna Hazare (above), the glee in the establishment is hard to miss Photo: Reuters

Who or what is this “establishment”? In most discussions on the issue, it is often referred to as “the government”. Even an editorial in The Tribune on June 14 ends on a pious note, saying “The country must be tired of the daily discourse on corruption and probity in public life. It is time to act and the government will do well to forge a consensus among all political parties on how to combat corruption before Parliament’s monsoon session begins.”

Lifting the veil

Using the corporate law provision of “lifting the corporate veil” in which the persons actually behind the artificially created corporations are identified in exceptional situations, it is time the nation looked behind the corporate veil of the government: where does the government come from? It comes from Parliament because members of the political executive come from amongst the members of Parliament.

Continuing with the lifting of the veil, where do the MPs come from? Yes, in theory, “We, the People” elect them but before “we” can vote for or against the candidates contesting elections, who decides who can be candidates? Yes, in theory again, anyone can be a candidate but in practice, one needs the nomination of a political party to become a candidate with a realistic chance of being elected. So, behind “the government”, there are political parties.

So, does “the establishment” consist only of political parties? Not really. Only one section of society, however powerful, cannot hold society to ransom, to use a strong expression. “The establishment” actually consists of the political parties in collaboration (collusion will again be a strong expression) with the bureaucracy and big business.

The glee, therefore, is not confined to the government; it extends to all political parties, the bureaucracy and business. This is what the Jan Lokpal Bill is up against. Yes, a Lokpal Bill will be introduced in the monsoon session of the Lok Sabha, and it might even be passed, even unanimously, with “consensus among all political parties”, as the editorial on June 14 advised. But what is that likely to be? Let us look at some examples of issues on which there has been a consensus among political parties in the past.

Instances of increasing the MPLAD Fund amount and the salary for MPs are too obvious and well known to be mentioned. So let us stick to three instances arising out of personal experience.

The first was in 2002 when the Supreme Court ordered a mandatory disclosure of criminal, financial and educational antecedents of the candidates contesting elections to Parliament and state assemblies, and the Election Commission issued orders to implement the Supreme Court’s decision.

It was decided at an all-party meeting on July 8, 2002, that this would not be allowed and the Representation of the People Act will be amended in that very session of Parliament. The amending Bill was ready by July 15, in seven days flat, but could not be introduced as Parliament was adjourned due to the petrol pump scam when Ram Naik was the Petroleum Minister. The government was not deterred.

The Cabinet decided to issue an Ordinance. When the newly elected President, Abdul Kalam, “returned” the Ordinance without signing, it was sent to him again, and he had to sign. The Ordinance was finally declared “unconstitutional…null and void” by the Supreme Court on March 13, 2003.

The second instance was in 2007-08 when the Income Tax Department refused to provide copies of income tax returns of political parties in response to an application under the Right to Information Act because political parties objected to it. The objections were despite the fact that political parties were claiming, and getting, 100 per cent exemption from income tax under a law that Parliament had enacted.

In the hearing of an appeal to the Central Information Commission (CIC), ten lawyers showed up to represent various political parties, including some who had flown in from outside Delhi, to oppose the disclosure. Fortunately, the CIC decided that copies of IT returns had to be given.

The third, and the latest, started in 2009, and culminated on June 03 this year. The Committee on Ethics of the Rajya Sabha instituted a “Register of Interests” of members, in which the financial, business and other commercial interests of members were to be recorded. The stated purpose of the register was to avoid potential conflicts of interest while members of the Rajya Sabha participated in debates in the House and in the formation of standing committees on various issues.

When copies of the register of interests were requested under the RTI Act, these were refused. The response of the Appellate Authority in the Rajya Sabha Secretariat, received on November 23, 2009, to the first appeal was that “the Committee on Ethics, Rajya Sabha,…taking a unanimous view claimed exemption from furnishing the desired information…the decision not to allow the information asked for is that of the Committee on Ethics, Rajya Sabha, which has the endorsement of the Chairman of the Committee” (italics added). Once again, the CIC, on second appeal, decided on June 03, 2011, that the information should be provided.

Politics of consensus

These three instances prove, beyond doubt, that our political parties have no problem in arriving at a consensus and acting unanimously provided (and this is critical) the issue is of their interest. And obviously, these are not the only instances. Consensus and unanimity are also visible when 17 Bills are passed in eleven minutes. What that shows about the application of mind and the quality of scrutiny and discussion is a separate issue.

That there will be a consensus on a Lokpal Bill is not in doubt. The real issue is what kind of a Lokpal will get a consensus: one like a plethora of existing institutions that have acquiesced in corruption becoming rampant at the behest of the establishment, or the one that might have the potential to make a real difference to the functioning of the establishment, and an “effective” Lokpal with teeth that can actually bite.

The writer is a former Professor, Dean and Director of the Indian Institute of Management, Ahmedabad.

—————————–

There is conflict of interest

Now that there are two Lokpal Bills — the Jan Lokpal Bill (JLB) and the Government Lokpal Bill (GLB) — what is likely to happen? Political predictions obviously are always unreliable and also hazardous, but one plausible scenario is the following. Both the Bills will be presented to the Cabinet. The Cabinet has members of parties other than the Congress too. Depending on the clout of the non-Congress Cabinet members (which is not overwhelming, if it is there at all), there might be some changes in the GLB.

The Cabinet will decide which one of the Bills, or both of them, should be put first to the all-party meeting, and then to Parliament. All-party meetings, particularly on crucial national issues, usually do not produce a consensus as we saw again on the women’s reservation issue, and it seems unlikely that the opposition parties will like to allow the UPA to get credit for introducing a credible Lokpal.

A big risk unlikely

That will leave it to the UPA to decide what to put before Parliament. Given the complexity as well as delicacy of the current socio-political situation, and going by its past record, the UPA is unlikely to take a big risk by taking a definitive stand.

Even if the above scenario is unlikely, let us for the moment assume that the two Bills, the JLB and the GLB, are put to vote in Parliament. Which way is the vote in Parliament likely to go?

Before the above question can be answered, let us continue with the “lifting of the veil”. What is Parliament? It is comprised of its members. But who are its members?

With due respect to Parliament as the highest democratic institution in the country, some bitter facts stare us in the face. On the basis of data taken from sworn affidavits submitted by members of Parliament as part of their nomination papers while contesting elections, 162 out of 543 members of the current Lok Sabha (2009) have criminal cases pending against them in which charges have been framed by the court of law and the punishment for which is two or more years of imprisonment. This number, based on the same source, was 156 in the earlier Lok Sabha (2004).

The same source shows that there are 315 crorepatis in the current Lok Sabha (2009), whereas this number was 128 in the earlier Lok Sabha (2004). While estimates differ depending on which economist one consults, the proportion of people who are below the poverty line (which is around Rs.12 per day) is said to be between 37.2 and 77 per cent. If we combine it with the fact that almost two-third of the members of the current Lok Sabha (2009) have been elected with more votes cast against them than for them, reasonable, if not serious, doubts arise about the representational legitimacy of such members.

Given the above characteristics, how does one expect the vote in Parliament to go? Expecting parliamentarians to vote against their personal and party interests, in the so-called national interest, seems highly over-optimistic and idealistic. We do not live in an ideal world; we live in a practical and real world. And this is what creates a national conflict of interest.

Two options

Is there a way out? There has to be, else we, as a nation, would be doomed to sink deeper and deeper into the morass created by the all-pervasive corruption, large and small. There seem to be only two options. One is an opportunity for the elected representatives, however questionable their representative legitimacy be, to regain lost ground and establish their legitimacy by giving primacy to the national interest by voting in a strong and effective Lokpal Bill, even independent of and combining the best of both, the JLB and the GLB.

If that does not happen, then possibly the Rubicon would have been crossed. There may then be no alternative but to ascertain the opinion of “We, the People” by way of a referendum for which we do not have a provision…yet. But then, don’t extraordinary situations require extraordinary responses?

 Jagdeep S. Chhokar

====================

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Do our elected representative really represent us?

Posted on July 18, 2011. Filed under: Elections, Politics |

Do our elected representatives really represent us?

 

Truth about democracy: MPs claim to speak on our behalf but more than 98 percent of them have backing of less than half of the registered votes. In the current‘first-past-the-post’ system, caste and religion can sway the result. The law commission and election

commission have suggested an alternative, which needs to be debated

 

Jagdeep S. Chhokar[i]

GovernanceNow, July 16-31, 2011, pp.2-23

One of the major arguments used by the opponents of the Lokpal in the recent furore has been to assert the legitimacy of our elected representatives. The argument goes that only the elected representatives have the right to make laws, and the “unelected” and “unelectable” have no right or say in the matter. This raises the question of how representative are our “elected” representatives. Let us look at a simplified example.

For the sake of ease of calculation, let us assume a constituency has 100 registered voters. “Registered” is important because even though the total population of the constituency, including all age groups, might be 500, and people above 18 years (the minimum age of voting) might be 200, but all 200 may not be “registered” voters unless they get themselves registered and are part of the electoral roll. The assumption here is that only 100 have got themselves registered as voters.

The voting percentage in most elections in the country is around 50-60 %. The recent assembly elections in five states recorded voting percentages in the range of 70-80% and one hopes this continues but the overall trend so far has been in the 50-60% range. So, let us assume the voting percentage in our hypothetical constituency of 100 registered voters to be 60%. The argument will hold even if we take the voting percentage to be 80 but we will stay with 60% for now, for the sake of computational simplicity. This means that 60 people vote in the election, or 60 votes are cast.

One more assumption, let there be only six (6) candidates. Assuming that all candidates are equally good, and voters vote accordingly, on average, each candidate would get ten (10) votes. Any one who gets 11 will be declared elected under the current variant of the “First-past-the-post” (FPTP) system that we have chosen to follow.

Admittedly, it is a theoretical example because of small and easily computable numbers, but it applies equally well to larger numbers. What does this say about the “representative-ness” of the representative who has been “elected”?

Ignoring the total population of 500 and confining the analysis to the registered voters numbering 100, for the time being and again for the sake of simplicity of calculation, out of the 60 people who voted (or out of 60 votes cast), 11 voted for the winner. This works out to 18.33 per cent. If we were to take all the “registered” votes in place of the votes cast, the percentage works out to 11. We, thus, have an “elected representative” whom 11 % or 18.33 % voters voted in favour of. Taking the flip side, it is equally true that 100-11=89 percent of the voters did not vote for the winner. What is more startling is that 60-11=49 or 81.67% {(49/60)/100} or (100-18.33) voted against him. To put it in words, 89% of the “registered” voters did not vote for the winner, and 81.67% of the “votes cast” were cast against the winner!!

There are two questions for the reader at this stage: (a) Is the above a figment of the distorted imagination of a retired professor or a rabid activist? And (b) What might the minimum level of voting percentage cast in her/his favour that will make an elected representative, truly “representative”?

Assuming the answer to (b) to be 50 per cent, let us look at hard data from the 2009 Lok Sabha election. Out of 543 MPs elected, 77.9 % were elected with less than 50% of the votes cast, and 98.09% were elected with less than 50% of the registered votes. The break-up of percentages at different levels of percentiles is given in the accompanying table.

 

% CATEGORIES OF VOTES

Number of winners under each category (based on % of votes cast)

% of winners from each category based on votes cast

Number of winners under each category (based on % of registered votes)

% of winners from each category based on registered votes

0 to 9.99

0

0.00%

2

0.37%

10 to 19.99

0

0.00%

143

26.34%

20 to 29.99

29

5.34%

212

39.04%

30 to 39.99

138

25.41%

148

27.26%

40 to 49.99

256

47.15%

33

6.08%

50 to 59.99

106

19.52%

4

0.74%

60 to 69.99

11

2.03%

1

0.18%

70 to 79.99

3

0.55%

0

0.00%

Total

543

100.00%

543

100.00%

 

Can anything be done to improve the “representative-ness” short of major changes such as moving from the “First-past-the-post” system to the “Proportional Representation” system that has been recommended from time to time?

The Law Commission of India proposed what it called “An alterative method of election” in its 170th report titled “Reform of the Electoral Law” submitted in 1999. Devoting a full part (Part VIII) of their report to this issue, the Law Commission said, “This method goes a long way in ensuring purity of elections, keeping out criminals and other undesirable elements and also serves to minimise the role and importance of caste and religion.” The Law Commission described the alternative method in the following terms:

“(a) no candidate should be declared elected unless he obtains at least 50% of the votes cast;

(b) the ballot paper shall contain a column at the end which can be marked by a voter who is not inclined to vote for any of the candidates on the ballot paper, which is called hereinafter as `negative vote’. (A voter can cast a negative vote only when he is not inclined to vote for any of the candidates on the ballot paper);

(c) for the purposes of calculating the fifty per cent votes of the votes cast, even the negative votes will be treated as `votes cast’;

(d) if no person gets 50% or more votes, then there should be a `run-off’ election between the two candidates receiving the highest number of votes;

(e) in the run-off election too, there should be a provision for a negative vote and even here there should be a requirement that only that candidate will be declared elected who receives 50% or more of the `votes cast’ as explained hereinabove;

(f) if no candidate gets 50% or more of the votes cast in the run-off, there should be a fresh election from that constituency” (Para 8.1).

Explaining the rationale of the method, the Law Commission said, “This method of election is designed to achieve two important objectives viz., (i) to cut down or, at any rate, to curtail the significance and role played by caste factor in the electoral process. There is hardly any constituency in the country where anyone particular caste can command more than 50% of the votes. This means that a candidate has to carry with him several castes and communities, to succeed; (ii) the negative vote is intended to put moral pressure on political parties not to put forward candidates with undesirable record i.e., criminals, corrupt elements and persons with unsavory background” (Para 8.2).

Recognising ground realities and making a balanced assessment, the Law Commission continued, “No doubt this method calls for a run-off and a fresh election in case no candidate obtains 50% or more votes even in the run-off, and in that sense expensive and elaborate, yet it has the merit of compelling the political parties to put forward only good candidates and to eschew bad characters and corrupt elements” (Para 8.2.1).

 

Not being oblivious of the issues arising out of the implementation of this “alternative method of election”, the Law Commission observed, “If the above practical difficulties and problems can be overcome, the idea of 50%+1 vote — and even the idea of negative vote  (as explained hereinabove), can be implemented. We may mention that if electronic voting machines are introduced throughout the country, it will become a little more easier to hold a run-off election inasmuch as it would then be not necessary to print fresh ballot papers showing the names of the two candidates competing in the run-off — or for that matter, for holding a fresh election (in case the idea of negative vote is also given effect to)” (Emphasis added) (Para 8.7).

It does not need to be pointed out that the condition precedent mentioned by the Law Commission, of usage of electronic voting machines “throughout the country”, has already been satisfied and therefore there is really no major obstacle to the adoption of this suggestion, particularly in view of the Law Commission’s observation in the very next paragraph, “Alternative method mitigates undesirable practices. – Probably, the aforesaid problems arise because of the vastness of the country and lack of requisite standards of behaviour and also of cooperation and understanding among the political parties to ensure a peaceful poll…. This is really unfortunate. Even so, we may make every effort to mitigate the undesirable practices and the alternate method of election set out in this chapter is certainly a step in that direction” (Emphasis added) (Para 8.8).

The observations about “lack of requisite standards of behaviour and also of cooperation and understanding among political parties” need to be noted.

Some observations of the National Commission to Review the Working of the Constitution (NCRWC) are very pertinent to this issue. In Para 4.5 of its 2001 report, the NCRWC said, “With the electorate having no role in the selection of candidates and with majority of candidates being elected by minority of votes under the first-past-the-post system, the representative character of the representatives itself becomes doubtful and their representational legitimacy is seriously eroded.  In many cases, more votes are cast against the winning candidates than for them.  One of the significant probable causes may be the mismatch between the majoritarian or first-past-the-post system and the multiplicity of parties and large number of independents” (Emphasis added).

The NCRWC, in 2001, did note the benefits of this system but was somewhat circumspect, saying, “In the circumstances, the Commission while recognizing the beneficial potential of this system for a more representative democracy, recommends that the Government and the Election Commission of India should examine this issue of prescribing a minimum of 50% plus one vote for election in all its aspects, consult various political parties, and other interests that might consider themselves affected by this change and evaluate the acceptability and benefits of this system.  The Commission recommends a careful and full examination of this issue by the Government and the Election Commission of India” (Emphasis added) (Para 4.16.6).

The Election Commission first suggested a “None of the above” option in 2001 and revisited it in 2004 as part of its Proposed Electoral Reforms. This is what the Election Commission said in 2004: “In the voting using the conventional ballot paper and ballot boxes, an elector can drop the ballot paper without marking his vote against any of the candidates, if he chooses so.  However, in the voting using the Electronic Voting Machines, such a facility is not available to the voter. Although, Rule 49-O of the Conduct of Election Rules, 1961 provides that an elector may refuse to vote after he has been identified and necessary entries made in the Register of Electors and the marked copy of the electoral roll, the secrecy of voting is not protected here inasmuch as the polling officials and the polling agents in the polling station get to know about the decision of such a voter.

The Commission recommends that the law should be amended to specifically provide for negative / neutral voting.  For this purpose, Rules 22 and 49B of the Conduct of Election Rules, 1961 may be suitably amended adding a proviso that in the ballot paper and the particulars on the ballot unit, in the column relating to names of candidates, after the entry relating to the last candidate, there shall be a column  “None of the above”, to enable a voter to reject all the candidates, if he chooses so.  Such a proposal was earlier made by the Commission in 2001 (vide letter dated 10.12.2001)” (Emphasis added).

While pointing out the limitations of Rule 49-O, the 2004 observations of the Election Commission overlooked the fact that votes deemed to have been cast under Rule 49-O are not counted, and therefore have no impact on the outcome of the election.

It should be clear from the above that:

  • The “representational legitimacy” or “representative-ness” of the representatives elected under the current system is in serious doubt.
  • It is possible to improve the existing system without completely giving up the current First-Past-the-Post system, and going whole hog to the proportional representation system.
  • Some of the changes that need to be made are:
    •  EVMs should have an option or a button for “None-of-the-above”.
    • Votes cast for the “None-of-the-above” option should also be counted.
    • In case the “None-of-the-above” option gets more votes than any of the candidates, none of the candidates should be declared elected and a fresh election held in which none of the candidates in this election are allowed to contest.
    • In the following elections, with fresh candidates and with a “None-of-the-above” option, only that candidate should be declared elected who gets at least 50%+1 of the votes cast.
    • IF even in this round, the  “None-of-the-above” option gets the highest number of votes cast or none of the candidate gets at least 50%+1 of the votes cast, then the process should be repeated.

This may appear to be a cumbersome and tedious process but it will nudge the entire system in the direction of (a) better representative-ness among the elected representatives by reducing the sectarian effects of vote banks, and (b) encouraging political parties to put up better candidates.

———————————


[i] Chhokar is a former professor, dean, and director in-charge of Indian Institute of Management, Ahmedabad, and a founding member of Association for Democratic Reforms (www.adrindia.org) and National Election Watch (NEW).

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Party finances are not state secrets

Posted on July 18, 2011. Filed under: Elections, Politics |

Party finances are not state secrets

Some parties are making corruption charges and some are facing corruption

charges, but they all are united in keeping their own finances as secret as

possible, away from the eyes of the very citizens they claim to speak for. The

supreme court, law commission and other authorities have repeatedly called

for mandatory financial disclosure and yet little has changed

GovernanceNow, July 1-15, 2011, pp.36-41

 

Jagdeep S. Chhokar[i]

 

Arguably, the biggest bugbear for political parties, and at the same time one of the most important and necessary pre-conditions that must be satisfied before any meaningful electoral reforms can actually take place on the ground, is financial transparency of political parties. Let us begin with an example of the bugbear that happened in 2007-08.

The income of political parties is totally exempt from income tax under section 13-A of the Income Tax Act. Assuming an overall rate of income tax to be 25 per cent, and given that the income shown in their return by the Congress and BJP in the financial year 2008-09 was Rs.496.88 crores and Rs.220.02 crores[1], the tax that they did not have to pay works out to Rs.124.22 and Rs.55.005 crores respectively. The income tax thus “not paid” or “not required to be paid” by just these two political parties, and in just one year, works out to Rs.179.225 crores. How much will it work out to for all the political parties put together and over several years, is left to the readers’ computations.

Assuming that the hundreds of rupees of revenue forgone by the Indian State or “We, the People”, as decided by our elected representatives in the Parliament who passed the amendment to the Income Tax Act on our behalf in 1978, it must be in the general public interest, Anumeha, a colleague then working in the Association for Democratic Reforms (ADR), filed an RTI application in February 2007 seeking copies of income tax returns of 19 political parties. As could be expected, the copies were denied. The first appeals to the appellate authorities were then filed, and also rejected, necessitating a second appeal to the Central Information Commission (CIC). The CIC invited the political parties to share their objections to making their IT returns public. A summary of the reasons given by various parties is given in Box 1.

———

Box 1

——————————————————————————-

These are some of the reasons political parties have given for not

disclosing their income tax returns

——————————————————————————-

Party A

  • There could not be any public interest, much less larger public interest, warranting disclosure of desired information.
  • The Income Tax Department cannot divulge such confidential information to strangers and thereby become party to political maneuverings of the rival political parties.

Party B

  • The Parrty is not a public authority in terms of provisions of Section 2(h) of the RTI Act and thus the basis itself of the appellant’s case is incorrect and that the RTI application is liable to be dismissed on this ground alone as baseless.
  • The disclosure of Balance Sheets, Profit & Loss statement and audit reports of political parties, from which income tax returns are derived entirely, contain both personal information of the assessees as well as commercial confidence nature of information, which can harm the competitive position of a political party.
  • The Income Tax Returns are submitted by the assessee to the Government in a fiduciary capacity.
  • The Income Tax Returns are not public documents and it is only the respondent who can generally inspect and have certified copies of the documents.
  • The disclosure of information pertaining to tax assessment order, which contains personal information such as PAN, sources of income and other business related details would cause unwarranted invasion of privacy of the assessee.
  • There is no larger public interest which justifies disclosure of this information.
  • The information has been sought with a political motive and for causing harm and detriment to the political parties.
  • It is denied that the disclosure of information relating to political parties including assessment returns and assessment orders to general public would promote transparency and reduce the role of black money and other undesirable and illegal activities.
  • The copies of the Income Tax Returns filed by Party; PAN number of Party and information regarding the fact whether Party has submitted its Income Tax Returns for the assessment years 2002-03 to 2006-07 is confidential in nature and private in character and thus cannot be disclosed.
  • Information has been asked for with a political motive.

Party C

  • The Party objects to the disclosure of information on the ground that the Income Tax Returns were confidential information, parting with which, will amount to infringement of certain privacy rights of the members of the political parties.

Party D

  • While making a request for information, an applicant may not be required to give any reasons or any other personal details except those that may be necessary for contacting him but Section 6(2) does not give a blanket exemption to the appellant to reveal the bonafide of her/his conduct once an appeal is preferred under the RTI Act.
  • A request for copies of assessment orders is motivated inasmuch as an appellant has no public knowledge of an assessment made. Incomes of political parties are exempt under Section 13A of the Income Tax Act and in the absence of any violation of Section 13A, the information sought for is frivolous and academic.
  • The Returns of Income filed by the assessees under the provisions of Income Tax Act are confidential information which include details of commercial activities. These are submitted in fiduciary capacity. There is no public interest involved in the matter.

Party E

  • The Applicant/Appellant is a busy body having malafide intent and that they are seeking the information for ulterior motives.
  • The Applicant/Appellant has failed to come up with any substantive/cogent reasons for its requests for the information and as to what use and purpose the said information would be put to.
  • The documents relating to Income Tax Returns and Assessment Orders are both personal information of the political parties and also contain commercial confidential nature of data, the disclosure of which is barred under the Right to Information Act.
  • It is now a well settled proposition that Income Tax Returns filed by the assessees before Income Tax Authority are personal as well as fiduciary entrustment and thereby attract the exemptions from the Right to Information Act, 2005.
  • The Income Tax Returns contain commercial information for enabling the Income Tax Department to determine the tax liability flowing from it.

————————————————————————————

End of Box 1

=======================================================

 

The number of times “competitive, commercial interest” appears among the reasons is worth noting. One would think, naively, that political parties are involved in competitive political activities, but their deep involvement in competitive commercial activities which they are so keen to protect is revealing. Despite the objections of the political parties, the CIC permitted the disclosure of the IT returns. While pronouncing a “speaking” order[2] on April 29, 2008, the CIC made very significant observations about the financing and financial affairs of political parties. The oft-repeated argument that there was no public interest involved was roundly rejected. A flavor of the essence of these observations is given in Box 2.

 

Box 2

“There is now widespread concern about a hyphenated relationship

developing between party finance and political corruption.”

Excerpts from the central information commission order

————————————————————————————-

Para 28. Political parties are an unique institution of the modern Constitutional State. These are essentially civil society institutions and are, therefore, nongovernmental. Their uniqueness lies in the fact that in spite of being nongovernmental, political parties come to wield or directly or indirectly influence, exercise of governmental power. It is this link between State power and political parties that has assumed critical significance in the context of the Right of Information ― an Act which has brought into focus the imperatives of transparency in the functioning of State institutions. It would be facetious to argue that transparency is good for all State organs, but not so good for the political parties, which control the most important of those organs. For example, it will be a fallacy to hold that transparency is good for the bureaucracy, but not good enough for the political parties which control those bureaucracies through political executives.

 

Para 29. In modern day context, transparency and accountability are spoken of together ― as twins. Higher the levels of transparency greater the accountability. This link between transparency and accountability is sharply highlighted in the Preamble to the RTI Act. In T.N. Seshan, CEC of India Vs. Union of India & ors. the Apex Court referred to the Preamble to the Constitution of India and observed that the preamble of our Constitution proclaimed that we were a Democratic Republic and “democracy” being the basic feature of our constitutional set-up, there could be no two opinions that free and fair elections to our legislative bodies alone would guarantee the growth of a healthy democracy in the country. In People’s Union for Civil Liberties (PUCL) and Ors Vs. Union of India and Anr. (AIR2003SC2363), the apex court stated that it is true that the elections are fought by the political parties, yet election would be a farce if the voters are unaware of antecedents of candidates contesting elections. Their decisions to vote either in favour of ‘A’ or ‘B’ candidate would be without any basis. Such election would be neither free nor fair. In Union of India v. Association for Democratic Reforms & another (AIR 2002 SC 2112) also, the Apex Court has observed as follows:-

 

“To maintain the purity of elections and in particular to bring transparency in the process of election, the Commission can ask the candidates about the expenditure incurred by the political parties and this transparency in the process of election would include transparency of a candidate who seeks election or re-election. In a democracy, the electoral process has a strategic role. The little man of this country would have basic elementary right to know full particulars of a candidate who is to represent him in Parliament where laws to bind his liberty and property may be enacted.”

 

Para 30. The RTI Act aims at expanding accountability through transparency at all levels of governance. It is difficult to be persuaded by the argument that though political parties control the political executive ― who are their appointees ― these parties should be allowed to be insulated from the demands of transparency.

 

In other words, political parties be allowed to escape the obligations / norms transparency imposes, and inferentially, escape accountability, even though these parties almost always influence and, frequently control, State power through the organs of the State. That shall be an unacceptable proposition ― especially in a democracy ― as accountability is the underpinning of the actions of all stake-holders who have anything to do with State power.

 

Para 31. The question that additionally needs to be asked is whether the avowed purpose of the RTI Act, as set out in its Preamble ― to combat corruption ― is being achieved by allowing the finances of the political parties to remain beyond public scrutiny or even public view. There is now widespread concern about a hyphenated relationship developing between party finance and political corruption. The lack of openness and transparency in party finance is matched by the lack of adequate State regulation of such finance.

 

Para 32. The National Commission to Review the Working of the Constitution in its report submitted in March 2002 has recommended that the political parties as well as individual candidates be made subject to a proper statutory audit of the amounts they spend. These accounts should be monitored through a system of checking and cross-checking through the income-tax returns filed by the candidates, parties and their well- wishers. At the end of the election each candidate should submit an audited statement of expenses under specific heads.

 

The National Commission has further suggested that the Election Commission should devise specific formats for filing such statements so that fudging of accounts becomes difficult. Also, the audit should not only be mandatory but it should be enforced by the Election Commission.

 

Para 33. The Supreme Court in People’s Union for Civil Liberties Vs. Union of  (AIR2003SC2363) considered the report of the Law Commission, National Commission to Review the Working of the Constitution, conclusion drawn in the report of Shri Indrajit Gupta and Ethics Manual applicable in an advance democratic country and observed that it is apparent that for saving democracy from the evil influence of criminalization of politics, for saving the election from muscle and money power, for having true democracy and for controlling corruption in politics, the candidate contesting the election should be asked to disclose his antecedents including assets and liabilities. Thereafter, it is for the voters to decide in whose favour he should cast his vote.

 

Para 34. In Common Cause (A Registered Society) Vs. Union of India (AIR 1996 SC 3081), Supreme Court dealt with election expenses incurred by political parties and submission of return and the scope of Article 324 of the Constitution, where it was contended that cumulative effect of the three statutory provisions, namely, Section 293A of the Companies Act, 1956, Section 13A of the Income Tax Act, 1961 and Section 77 of the Representation of the People Act, 1951, was to bring transparency in the election funding. The people of India must know the source of expenditure incurred by the political parties and by the candidates in the process of election. It was contended before the Supreme Court that elections in the country were fought with the help of money power which was gathered from black sources and once elected to power, it becomes easy to collect tons of black money, which is used for retaining power and for re-election and that this vicious circle had polluted the wellspring of democracy in the country. The Court held that purity of election was fundamental to democracy and the Election Commission could ask the candidates about the expenditure incurred by the candidates and by a political party. The Apex Court summed up the position thus:-

 

“…The political parties in their quest for power spend more than one thousand crore of rupees on the General Election (Parliament alone), yet nobody accounts for the bulk of the money so spent and there is no accountability anywhere. Nobody discloses the source of the money. There are no proper accounts and no audit. From where does the money come nobody knows. In a democracy where rule of law prevails this type of naked display of black money, by violating the mandatory provisions of law, cannot be permitted.”

 

Para 35. In Common Cause (A Registered Society) Vs. Union of India (AIR 1996 SC 3081), the Apex Court has further observed that to combat this naked display of unaccounted/black money by the candidates, declaration of assets was likely to check violation of the provisions of the P.R. Act and other relevant Acts including Income Tax Act. The Apex Court did not agree that the declaration of assets would result in infringement of the right of privacy. The following observations of the Court in this context are quite relevant:-

 

“Similarly, with regard to the declaration of assets also, a person having assets or income is normally required to disclose the same under the Income Tax Act or such similar fiscal legislation. Not only this, but once a person becomes a candidate to acquire public office, such declaration would not affect his right or privacy. This is the necessity of the day because of statutory provisions of controlling wide spread corrupt practices as repeatedly pointed out by all concerned including various reports of Law Commission and other Committees as stated above.

 

Para 36. In Dr. P. Nalla Thampy Terah v. Union of India and Ors. [1985 Suppl. SCC 189], the Apex Court considered the validity of Section 77(1) of the Representations of People’s Act and referred to the report of the Santhanam Committee on Prevention of Corruption, which says:

 

The public belief in the prevalence of corruption at high political levels has been strengthened by the manner in which funds are collected by political parties, especially at the time of elections. Such suspicions attach not only to the ruling party but to all parties, as often the opposition can also support private vested interests as well as members of the Government party. It is, therefore, essential that the conduct of political parties should be regulated in this matter by strict principles in relation to collection of funds and electioneering. It has to be frankly recognized that political parties cannot be run and elections cannot be fought without large funds. But these funds should come openly from the supporters or sympathizers of the parties concerned.”

 

Para 37. These judicial pronouncements unmistakably commend progressively higher levels of transparency in the functioning of political parties in general, and their funding in particular. Quite importantly, these pronouncements by the nation’s Supreme Court were made much before the RTI Act came into being and, in a sense, even before transparency was enshrined, through the RTI Act, as an avowed objective of governance, Supreme Court delineated the evolutionary process that would culminate in the year 2005 in adoption of the historic enactment of RTI Act by India’s Parliament. The convergence of approach of the nation’s Supreme Court and its Supreme Legislature ― the Parliament ― in preparing the country to embrace the values of transparency in all aspects of governance is striking. It was their response to an idea, whose time had come. And, it is in this context that the case for transparency in political funding ― and its concomitant, the case for disclosure of Income Tax Returns of political parties ― is to be evaluated.

 

Para 48. Political financing and its potentiality for distorting the functioning of the government, has been the subject of wide public debate in contemporary democracies. It is recognized that political parties do need large financial resources to discharge their myriad functions. But this recognition is tinged with the apprehension that non-transparent political funding could, by exposing political parties, and through it the organs of State which come under the control or its influence, to the corrupting influence of undisclosed money, can inflict irreversible harm on the institutions of government. There is public purpose in preventing such harm to the body-politic.

 

Para 49. Democratic States, the world over, are engaged in finding solutions to the problem of transparency in political funding. Several methodologies are being tried such as State subsidy for parties, regulation of funding, voluntary disclosure by donors ― at least large donors ― and so on. The German Basic Law contains very elaborate provisions regarding political funding. Section 21 of the Basic Law enjoins that political parties shall publicly account for the sources and the use of their funds and for their assets. The German Federal Constitutional Court has in its decisions strengthened the trend towards transparency in the functioning of political parties. It follows that transparency in funding of political parties in a democracy is the norm and, must be promoted in public interest. In the present case that promotion is being effected through the disclosure of the Income Tax Returns of the political parties.

End of Box 2

==========================================================

 

The CIC’s observations in April 2008 were possibly the last significant ones but certainly not the first.  The first time serious attention was paid to this issue was in the Law Commission’s 170th report in 1999. In an attempt to put the issue in its proper perspective, the Law Commission made an incisive observation, “In the very scheme of things and as pointed out by the Supreme Court in its various decisions, the bulk of the funds contributed to political parties would come only from business houses, corporate groups and companies. Such a situation sends a clear message from the political parties to big business houses and to powerful corporations that their future financial well-being will depend upon the extent to which they extend financial support to the political party. Indeed most business houses already know where their interest lies and they make their contributions accordingly to that political party which is likely to advance their interest more. Indeed not sure of knowing which party will come to power, they very often contribute to all the major political parties. Very often these payments are made in black money” (Emphasis added) (Para 4.1.6.1).             

 

The Law Commission proposed the insertion of “Section 78A (Maintenance, audit and publication of accounts by political parties)” in the Representation of the People Act, 1951.  The report says, in para 4.2.1, that, “This proposal drew unanimous approval from all at the seminars as well as from several persons, parties and organisations which responded to the Law Commission’s working paper. There was no dissenting voice” (Emphasis added).

 

The Law Commission continues, “The necessity of such a requirement was indeed emphasised by the Supreme Court in its recent decision in Gajanan Bapat v. Dattaji Meghe (1995 (5) SCC 347) where it observed pertinently as under:

 

“We wish, however, to point out that though the practice followed by political parties in not maintaining accounts of receipts of the sale of coupons and donations as well as the expenditure incurred in connection with the election of its candidate appears to be a reality but it certainly is not a good practice.  It leaves a lot of scope for spoiling the purity of election by money influence. Even if the traders and businessmen do not desire their names to be published in view of the explanation of the witnesses, nothing prevents the political party and particularly a national party from maintaining its own accounts to show total receipts and expenditure incurred, so that there could be some accountability.  The practice being followed as per the evidence introduces the possibility of receipts of money from the candidate himself or his election agent for being spent for furtherance of his election, without getting directly   exposed, thereby defeating the real intention behind Explanation 1 to section 77 of the Act. It is, therefore, appropriate for the legislature or the Election Commission to intervene and prescribe by Rules the requirements of maintaining true and correct account of the receipt and expenditure by the political parties by disclosing the sources of receipts as wellUnless this is done, the possibility of purity of election being soiled by money influence cannot really be ruled out.  The political parties must disclose as to how much amount was collected by it and from whom and the manner in which it was spent so that the court is in a position to determine “whose money was actually spent” through the hands of the party” (Emphasis added) (Para 4.2.3).

 

Para 4.2.5 of the report again reiterates, “Even in the responses received by various persons and organisations pursuant to the circulation of the ‘working paper’, there has been no dissenting voice.”

 

In view of the unanimous support the proposal received, the Law Commission went on to actually give the draft of the new section to be inserted in the Representation of the People Act, 1951. The last subsection of this proposed section, 78(A)(4) directly refers to financial transparency in political parties, when it says, “(4) Any orders passed under sub-sections (2) or (3) shall be directed to be published in the press and other media, for public information.”[3]

 

The National Commission to Review the Working of the Constitution (NCRWC), 2001, also deliberated on the issue of financial transparency in political parties. While “identifying the Problem Areas”, in Para 4.29, it says, “Having regard to the prevailing political scenario in the country and the hard fact that no electoral reforms can be effective without reforms in the political party system,” two of the several problem area identified to be “of immediate concern” were:

 

–         “Problems of party funding – need for a legislation to regulate party funds – distribution and spending of party funds during non-election and election times”, and

–         “Maintenance of regular accounts by the political parties – auditing and publishing – making audited accounts available for open inspection” (Emphasis added).

 

While commenting on the need for a law to regulate the functioning of political parties, the NCRWC has said, “The law should make it compulsory for the parties to maintain accounts of the receipt of funds and expenditure in a systematic and regular way.  The form of accounts of receipt and expenditure and declaration about the sources of funds may be prescribed by an independent body of Accounts & Audit experts, created under the proposed Act.  The accounts should also be compulsorily audited by the same independent body, created under the legislation which should also prepare a report on the financial status of the political party which along with the audited accounts should be open and available to public for study and inspection” (Emphasis added) (Para 4.30.4).

 

The NCRWC has made extensive observations in a special section on the Funding Political Parties (Para 4.35). Relevant portions of these observations are reproduced below so that the full extent of the complexities and also the import of the recommendations can be adequately appreciated.

 

“The problem of political funding is a complex one and there are no panaceas. Political parties need hefty contributions from companies and from other less desirable sources.  The greater the contribution, the greater the risk of dependence, corruption and lack of probity in public life.  The demand for transparency must be conceived as a democratic value in itself, a tool designed to avoid any wrongful influences of money in politics…Consequently, any proposals for reforms concerning political funding should revolve, among other things, around the following four main objectives:

 

(i)                  reducing the influence of money by diminishing its impact (by shortening campaigns, establishing ceilings on expenditure and limiting individual contributions);

(ii)            improving the use of money by investing it on more productive activities for the sake of democracy, and not just squandering it on propaganda and negative campaigns;

(iii)         stopping, or at least curtailing, as much as possible, current levels of influence peddling and political corruption; and

(iv)          strengthening public disclosure and transparency mechanisms with respect to both the origin and the use of funds” (Emphasis added) (Para 4.35.1).

 

“At present, different Acts regulate the flow of funds to political parties both from internal as well as external sources. The Commission recommends that a comprehensive legislation providing for regulation of contributions to the political parties and towards election expenses should be enacted by consolidating such laws.  The new law should aim at bringing transparency into political funding”(Emphasis added) (Para 4.35.2).

Audited political party accounts like the accounts of a public limited company should be published yearly with full disclosures under predetermined account heads” (Emphasis added) (Para 4.35.4).

 

The Election Commission first recommended the maintenance of accounts by political parties and audit of these accounts in 1998. It reiterated these in the 2004 Proposed Electoral Reforms. Item 9 of Part I of the Election Commission’s recommendations says,

“The Commission considers that the political parties have a responsibility to maintain proper accounts of their income and expenditure and get them audited by agencies specified by the Commission annually.  While making this proposal in 1998, the Commission had mentioned that there was strong need for transparency in the matter of collection of funds by the political parties and also about the manner in which those funds are expended by them.  Although in an amendment made last year, vide the Election and Other Related Laws (Amendment) Act, 2003, a provision has been made regarding preparation of a report of contributions received by political parties in excess of Rs.20,000/-, this is not sufficient for ensuring transparency and accountability in the financial management of political parties.   Therefore, the political parties must be required to publish their accounts (at least abridged version) annually for information and scrutiny of the general public and all concerned, for which purpose the maintenance of such accounts and their auditing to ensure their accuracy is a pre-requisite. The Commission reiterates these proposals with the modification that the auditing may be done by any firm of auditors approved by the Comptroller and Auditor General.

The audited accounts should be available for information of the public(Emphasis added).

 

Not to be left behind, the Second Administrative Reforms Commission (ARC) also paid attention to this issue in 2007. Para 2.1.3.5.1 of the fourth report of ARC titled “Ethics in governance” says, “Political parties have a responsibility to maintain proper accounts of their income and expenditure and get them audited annually. The steps taken in the Election and Other Related Laws (Amendment) Act, 2003, following various reports mentioned in para 2.1.3.1.4 will be strengthened if this is made mandatory under law. The Election Commission has reiterated this proposal. This needs to be acted upon early. The audited accounts should be available for information of the public” (Emphasis added).

As can be seen from the above, there is complete agreement amongst all commissions that (a) political parties should be required to maintain proper accounts in predetermined account heads, (b) such accounts should be (i) audited by auditors recommended and approved by the Comptroller and Auditor General of India, and (ii) available for the information of the public.

It is with this background that the Election Commission requested the Institute of Chartered Accountants of India (ICAI) to suggest appropriate accounting practices for political parties. It has been reported by the Press Trust of India (PTI) that the ICAI has submitted its 38-page report to the Election Commission on May 27, 2011. Some of the recommendations are reported to be that political parties should follow the accrual basis of accounting wherein they will have to report transactions on a real time basis, they should follow March 31 as uniform financial year and prepare consolidated financial statements incorporating taluka, district, and state-level party branch accounts, and that all of them should follow a common format for reporting their accounts and other financial statements. The report is also reported to have recommended that all parties must get their accounts audited by a firm of chartered accountants out of a panel of approved chartered accountants maintained by the Election Commission, and that the auditors be changed every three years. The recommendations also include publishing of the audited accounts annually and be made available on the website of the party for information and review by the concerned stakeholders and the public at large within six months of the close of the financial year. There are also recommendations for publishing of financial statements in English in leading national newspapers and in the local language in the leading newspaper in the state, and for submission of the audited financial statements to the Election Commission. While the Election Commission is reported to be yet to take a final view on the recommendations, it is hoped that the recommendations will be made mandatory, and the failure to comply with any of the recommendations should lead to automatic de-registration of the party. Sadly, the Election Commission does not yet have the power to de-register political parties and this power also needs to be given to the EC.

———————————-


[1] Data taken from copies of income tax returns of Congress and BJP received from the Inocme Tax authorities under the Right to Information Act, 2005.

[3] The recommendation of the Law Commission for inserting section 78A was not acted upon. Another section was added as section 78A with effect from September 11, 2003, which refers to “Free supply of electoral rolls.”


[i] Chhokar is former professor, dean and director in-charge of IIM, Ahmedabad,and a founding member of Association for Democratic Reforms (www.adrindia.org) and National Election Watch (NEW). jchhokar@gmail.com

 

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