~ By Arjun Sinha
The 2014 general election ushered in a new phase in India’s electoral history. It was the first time in three decades that a single party won majority in parliament and the first time in India’s post-independence history that a non-Congress party obtained an outright majority. This marked the onset of stable and decisive political choices, at sharp contrast from the coalition era of the 1990s.
However, while the stability question in our governance seems to be answered for now, several challenges to the political health of our country still remain.
Our political system is extremely fragmented, with nearly 15 political parties contesting each seat in 2014. States like Haryana see political competition rise to as high as 23 parties per seat. This fragmentation increases the political choices and as a result the amounts of money needed to be spent in an election cycle.
Rising electoral costs lead to parties relying on high net worth individuals. In the 2014 national election, 79% of the Congress Party’s candidates and 73% of the BJP’s candidates had declared assets greater than Rs 10 million. This not only creates a barrier of entry for talented leaders without significant financial capabilities but also leads to selection of a class that is not representative of a country with an annual per capita income of INR 79,920.
The 1990s and 2000s also saw centralisation of power by parties, with the rise in family run units supported by legislation and policy changes such as the anti defection laws. This has affected internal party democracy and dismantled traditional cadre units. As a result, these parties are prone to relying on candidates with their own grassroots machinery -either contractors with business interests in the constituency, dynastic politicians or criminal elements.
Over the past ten years, the number of sitting members of parliament with criminal charges has risenfrom 24% (in 2004), 30% (in 2009) and 34% (in 2014). While the number of dynasts in the 2014 LokSabha has reduced to 21% from the earlier level of 29%, we still see certain parties, such as the Indian National Congress, with nearly 48% of their successful members with political lineages.
The knee jerk response has been to treat symptoms rather than the disease. The ECI has sought to increase restrictions against the participation of criminals in elections or limit the use of finance in elections. However, these low-level changes cannot look to improve the health of the Indian political system. Any long lasting reform must amend the rules of the games, on how political parties and candidates contest elections, and raise finances. This article will focus on the key changes that need to happen for our election process to be more transparent.
- Reforming campaign finance: Increasing transparency, closing loopholes
Historically, parties have been financed by contributions from friends, family and supporters or philanthropic. Corporate donations were legal from the inception of the Representation of the People’s Act in 1951.
It was only in 1968 that donations by corporate entities to political parties were banned. While the official position was to prevent the role of black money in politics, the popular view has been that the move was to block the rise of C Rajagopalachari’s Swatantra Party and its liberal economic agenda. However, instead of clamping down on corporate donations, the move only led to funding being driven underground.
To undo some of this damage and promote disclosure of interests, political parties from 1979 onwards were permitted to claim exemptions from income and wealth taxes, as long as they filed returns listing donations of Rs10,000 and above, along with disclosing the identity of the donors. Changes in 1985 sought to incentivise companies to disclose their donations by granting income tax exemptions for contributions. In a fragmented political landscape, donors saw greater interest in maintaining anonymity rather than taking advantage of tax exemptions.
Therefore, the immediate need is for an increased transparency in campaign finance. An opaque system promotes various undocumented quid pro quo systems. This is especially problematic in a country where the government plays a large role in the economy. Conversely, political parties would obviously find it more efficient to raise finance from a small pool of donors rather than a large base. A trend seen even in developed jurisdictions such as the US, where a recent study demonstrated that merely 158 family interests controlled 50% of the early political funding of the 2016 elections.
However, along with reforming political parties our policy makers need to realise the true cost of campaigning in India. With an average population of 22 lakhs in each parliamentary constituency current expenditure limits allow a candidate to only spend INR 3 rupees to persuade a voter. As a result, while candidates on paper seem to conduct campaigns within prescribed expenditure limits, it is rarely the case in practice. In 1999 the National Election Audit conducted by CSDS estimated that the two principal national parties spent nearly four to six times of the cap. Moreover, misreporting by candidates also undermines the strength of the electoral institution.
In addition, the nature of campaigning itself is changing over time. Campaigns were fought by each candidate in their respective constituencies as representatives of the party. The electoral law framework recognised this model, and sought to regulate expenditures by each candidate, and not the party. However, current political dynamics require parties to share their vision of the nation with their voters based on a single agenda. This increases the role of the presumptive prime ministerial or the state chief ministerial aspirant therebymaking the party’s expenditure (currently uncapped) more relevant.
The ECI should look to either raise the limits imposed on candidates to realistic levels—or alternatively, consider removing caps on expenditure with better reporting and funding norms in place.These measures can be achieved by amending section 77 (to amend the timeline for calculating the expense limits) and section 77A (to amend the information required to be disclosed by individual candidates and its frequency of disclosure) of the Representation of Peoples Act.Similar to the UK, the ECI could look to create a long term and near term campaign periods, and prescribe separate caps for this period (to the extent such caps are realistic).
Along with tackling the rising costs of campaigns and the role of money in elections, the Election Commission should also focus on disseminating greater information to our citizens. The ECI should impose frequent and true disclosures from both parties and candidates. Currently, Indian parties are not required to disclose the source of any income below INR 20,000. Leading to situations such as the Bahujan Samaj Party’s disclosures in 2014 stating that it had received no donations larger than INR 20,000. As recommended by the 255th report of the Law Commission of India, a new section 29D to the Representation of Peoples Act can mandate the disclosure of donations even below INR 20,000 (to the extent the donations exceed 20% of the party’s total contributions / or INR 20 crore whichever is lower). In addition, the current section 29C of the Representation of People’s Act would need amendment to create an obligation on parties to disclose audited financial statements within six months of every financial year, and submit expenditure statements within 90 days of an election.
Once the ECI can increase reporting compliance from parties, the goal should be to reduce the ability of an entity to influence political parties. This can begin with restricting donations from vested interests, such as entities with government contracts. Instead of capping expenditure, the ECI can also look to limit the donations. Caps on donations should exist on each transaction as well as on an aggregate basis in a financial year. Relying on definitions of associates and group companies, the ECI can look to create separate limits on donations by group and affiliated companies. This would force parties to broad base their sources of funds and return to the earlier model of funding parties through donations by cadre/ supporters.
- State funding of elections: Is it a viable solution to murky campaign finance?
State funding as an alternate to private campaign funding has been gathering support over the years. There are various models of state funding currently in practice globally. Some countries, such as Japan provide parties with a direct transfer of funds based on the number of voters. Germanyon the other hand looks to match donations based on the number of votes awarded in the previous election.
However, a common funding support for parties based on population may not reflect support for parties. A common pool would result in more popular parties being forced to receive the same amount as a far unpopular organisation. Funding parties based on the votes received would be backward looking, recognising past performance and not current support. Moreover, parties would still need to raise finance privately and then be reimbursed to an extent based on their performance.
Another form of state funding currently being discussed is the subsidisation of goods and services. Even here, the choice of state funding may not be useful for the parties. Firstly parties depending on the nature of their support base may choose alternate mediums of campaign. Some may rely on social media, while other more on traditional on ground means of outreach. The efficient allocation of financial resources should best be left to the parties in question. The ECI identifying private sector partners has its own set of challenges in terms of proprietary.
One solution of state funding that does resolve some of these challenges is currently being piloted in the city elections of New York. The city has agreed to provide a 6:1 grant ratio for every small donation raised by a candidate. This recognises the current popularity of candidates and allows those with lesser resources to raise the finances required to match well-funded campaigns. However, in India any such model would first require greater financial transparency and discipline from candidates and political parties.
- Case for state regulated political party reform
While it may be useful to add new layers of regulation and compliance,as the NCRWC report on Electoral Reforms and Political Processes notes, no electoral reforms would be effective without reforms in the political party system.
Currently, section 29 A of the Representation of the People requires parties to incorporate democratic rules in their constitutional documents at the time of registration. The model guidelines provided as a part of the application form mandates parties to create standards for democratic decision making, appoint elected officers, and regular turnover of organisation position holders. Moreover, as per the model guidelines, parties ideally do not grant veto powers to an individual, and mandate fixed terms for position holders.
The ECI now needs to be empowered to conduct regular audits to confirm the parties’compliance with their internal constitutional documents, and the organisation of internal elections. Infact, in 2011, the Law Ministry had already prepared a Political Parties (Registration and Regulation of Affairs) Bill. Section 6 of the Political Parties Bill required all political parties to form an executive committee to oversee the implementation of democratic norms and intra party elections at all levels. However, after being drafted, the Political Parties Bill saw little to no subsequent debate.
- Empowering our guards: giving teeth to the ECI
As things currently stand, the election commission has limited powers to take action against candidates or their political parties. For example, in 2009, on a misreporting in electoral expenditure by Maharashtra based politician, the ECI was unable to take direct action against the candidate.
The corner stone of electoral governance in India, the Model Code of Conduct is technically not legally binding and any compliance by parties or candidates is only voluntary. In 2013, the Standing Committee on Personnel, Public Grievances, Law and Justice, had recommended granting legal status to the Model Code. Penalties for noncompliance can include withdrawal of the party’s tax exemption status, financial penalties in the range of INR 25,000 for every day of non-compliance. Similar to the approach taken under financial legislation, any mis-reported donation or receipt of a donation from illegal sources should attract a penalty between 3 to 5 times the underlying amounts. In addition, the ECI should also have the power to derecognise repeat offenders or those entities that are found guilty of grave offences.
Along with granting greater regulatory power, it would be necessary to ensure greater independence. This can be granted by granting the other commissioners the same constitutional protections granted to the CEC under Article 324. As recommended by the 1990 Goswami Committee and the 255th Law Commission Report, appointments of all the ElectionCommissioners (including the CEC) should be made by the President inconsultation with a three-member collegium – of the Prime Minister, the Leader of the Opposition and the Chief Justice of India.
- Synchronising India’s elections
India’s continuous electoral cycle, which averages around 2-3 elections a year imposes a high cost on parties. A continuous electoral cycle also diverts the attention of incumbent from governance. The imposition of the Model Code of Conduct, which prevents governments from issuing fresh policy, has unquantifiable costs on the economy.
Therefore, the need of the hour is to synchronise state and central elections. The key concern is that a popular central government may create a down ballot effect, and increasing support for the parties even in the state election. There may be some truth to this view. A recent study by the IDFC Institute noted that in a simultaneous election nearly 77% of all voters choose the same party/ alliance for the state and central election. In addition to reducing informed political choice, it would also reduce the role of the Rajya Sabha, which acts as a counterbalance to the lower house.
Therefore, instead of a single national and state election, the ECI can look to organise elections in two cycles. This would reduce the time spent on campaigning. In addition, a mid-term election would act as a referendum on the central government’s performance.
 Article IV: Organs of the Party (Organizational Structure): Powers and Functions of each of these organs (Decision making power should reflect democratic spirit – no veto power) Method of appointment (and terms) of members to each of the organs (Not more than 1/3rd members can be nominated; Tenure should be fixed not exceeding 5 years; Periodic elections within 5 years maximum)
Article V: Office-bearers of the Party: Powers and functions of each of these office-bearers (Decision making power should reflect democratic spirit – no veto power) Method of appointment (and terms) of each of these office-bearers (Should be elected; Not more than 1/3rd can be nominated; Fixed tenure not exceeding 5 years for everyone; Periodic elections within 5 years maximum)
Ashok Chavan v. MadhavraoKinhalkar SLP (C) NO.29882 OF 2011.
(Arjun Sinha advises on law and policy issues (focusing on technology and energy), and has been consulted on national and state election campaigns. In 2015, Sinha was an adviser to the Election Commission’s National Consultation on Political Finance. He can be contacted at firstname.lastname@example.org)