Various studies suggest that this will be the most expensive election in Indian history. The biggest portion of this expense will be the money spent by candidates and parties on election campaigning. According to official data, until April 15, 2014, the Election Commission of India (ECI) had seized over Rs. 217 crores in cash all over the country. Of this, Rs. 118 crores was seized in Andhra Pradesh alone, followed by Rs. 18.31 crores in Tamil Nadu, Rs. 14.40 crores in Maharashtra, Rs. 10.46 crores in Uttar Pradesh and over Rs. 4 crores in Punjab including numerous other small seizures in the rest of the States. 1
According to a study by the Centre for Media Studies, a whopping Rs. 30,000 crores is likely to be spent by the government, political parties and candidates in the 2014 general election, making it the most expensive election in Indian history. Of the estimated Rs. 30,000 crores, official spending by the ECI and the Government of India would only be around Rs. 7,000 – Rs. 8,000 crores. 2
In addition to cash, 10 million litres of liquor and 100 kg of heroin (mostly in Punjab) have been seized. 3 Estimated advertising costs for candidates and parties are staggering. According to reports, the Bhartiya Janata Party (BJP) could end up spending about Rs. 5,000 crores on media and advertising for Lok Sabha 2014 elections. 4 The Indian National Congress (Congress) is also said to be spending Rs. 500 crores on a massive image makeover for both the party and its vice-president Rahul Gandhi. 5
How does this growing hegemony of money on elections affect Indian democracy? Since there is no state funding of elections in India, candidates and parties have to raise money on their own for campaign expenses. Hence, there is no level playing field for candidates. This is clearly shown by the data from Lok Sabha 2004 and 2009, where the poorest 20 per cent of candidates, in terms of their declared financial assets, had a one per cent chance of winning parliamentary elections. The richest quintile, in contrast, had a greater than 25 per cent chance. 6
High expenses in elections also lead to a mockery of statutory requirements. The ECI prescribes expenditure limits for both parliamentary and assembly elections to provide a level playing field to candidates. All candidates under the Representation of People Act, 1951, (RPA, 1951) are required to submit their election expenses to the ECI and the expenditure is expected to not cross the prescribed expenditure limits. In reality, the expense declarations by candidates are under reported, in fact, the former Prime Minister, Atal Bihari Vajpayee, lamented that, “Indian politicians start their legislative careers with a lie — the false spending returns they submit”. 7
To illustrate, the election expense limits for the Lok Sabha 2009 election were Rs. 40 lakhs in bigger States and Rs. 22 lakhs in smaller States. An analysis of election expense declarations for Lok Sabha 2009 elections by the Association for Democratic Reforms (ADR) shows the magnitude of difference between the real spending and the declarations. The average amount of money spent by 437 MPs in the Lok Sabha 2009 election was only about Rs. 14.62 lakhs or 59 per cent of the expense limit of Rs. 40 lakhs. Thirty per cent of MPs claimed to have spent less than 50 per cent of the limits (i.e. less than Rs. 20 lakhs). 8 Interestingly, political parties and candidates had been describing these limits as impractical and wanted a raise in the poll ceiling keeping in mind the inflationary pressures.
For the 2014 elections, the ECI has raised the expenditure limit to Rs. 70 lakhs in bigger States and Rs. 54 lakhs in smaller States and Union Territories. 9 However, an ASSOCHAM report points out, “this time around, each of the contestants, in majority of the cases, may end up spending Rs. five – Rs. seven crores, the scanner of the Election Commission notwithstanding.” 10 At times, many politicians have also agreed to it in informal conversations. As an example, in the run-up to 2014 general election, senior BJP leader Gopinath Munde created a furore by saying that he spent Rs. 8 crores on campaigning during the 2009 election, only to retract this statement when the ECI sent him a notice. 11
Parties favour rich candidates as they bring in much needed cash to contest elections. For the ongoing 2014 general election (first six phases), all parties have given tickets to crorepati candidates. To illustrate, 83 per cent of Congress candidates, 78 per cent of BJP candidates, 78 per cent of candidates from the Nationalist Congress Party (NCP), 94 per cent of candidates from the Dravida Munnetra Kazhagam (DMK) and 83 per cent of candidates from the All India Anna Dravida Munnetra Kazhagam (AIADMK) are crorepatis . The average assets per candidate are Rs. 41.01 crores for candidates from the Congress, Rs. 10.15 crores (BJP), Rs. six crores (AIADMK) and Rs. 10 crores (DMK). 12
As numerous loopholes and lack of transparency mar the current election finance system in India, candidates and parties are able to raise and spend money without making any declarations to the sources. Industrialist and Member of Parliament, Rahul Bajaj, clearly said that black money funds political parties. “Parties do not raise money by cheques and by its small members. All money comes in through black money. Black money doesn’t come from heaven.” 13 Under the current requirements, political parties are held financially accountable in two ways. First, as per the Representation of the People Act, 1951, parties may accept any amount of contribution from a person or a company (other than a government company and any foreign source). Parties have to submit a ‘contribution report’ every financial year to the Election Commission containing the details of all the contributions received in excess of Rs. 20,000 by any individual or company. 14 Second, parties are also supposed to file Income Tax (IT) Returns with the IT department.
It has been seen that only national parties and very few regional parties file their IT Returns on a regular basis every year. Moreover, the system of disclosing their financial details is not consistent among the parties. An analysis of these IT returns and contribution reports by ADR showed that 75 per cent of the sources of funding of political parties are unknown. It was also found that corporate and business houses made 87 per cent of the total donations to national parties between 2004-05 and 2011-12. 15
It is evident that the current regulatory mechanisms are not enough to put a check on the growing influence of black money in elections. There is a need to take comprehensive steps and corroborate financial information received for both parties and candidates from various sources. In one of the steps taken by the Commission, it has made it mandatory for all candidates to list their movable and immovable assets in the affidavits submitted to the Commission. Even though the candidates declare their assets, the legitimacy of the declarations has always been under the scanner with no provision for information for sources of income and massive underreporting and undervaluing of assets being commonplace.
The ECI has routinely been making these affidavits available to the Central Board of Direct Taxes (CBDT) and IT authorities. For one such set of affidavits sent by ECI to CBDT, the correspondence for which is now available under the Right to Information Act (RTI), the ECI sent a copy of affidavits declared by the candidates for Lok Sabha 2004 elections to the CBDT. 16 The CBDT was to scrutinise the information provided in affidavits to ascertain whether the assets declared were acquired through known sources of income. It was after repeated follow-up and reminders from the ECI to the CBDT, that in September 2008 the CBDT informed the ECI that there were 103 cases where statements given in affidavits did not match with the IT returns and there were 195 cases where IT returns were not filed and substantial assets were declared in the affidavits.
According to the CBDT, remedial action as per the IT Act was initiated against these candidates. As per the Election Commission sources, since these affidavits are now available online, the CBDT is proactively supposed to access the affidavits and corroborate them with IT returns. However, no information is available in the public domain about any investigation conducted and action taken by the CBDT on the declarations of candidates.
The National Commission for the Review of Working of Constitution (NCRCW) also highlighted the problem of black money, where it recommended in unequivocal terms, “Candidates should be made subject to 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.” It also stated, “audit should not only be mandatory but it should be enforced by the Election Commission.”
The ECI in its action to send the affidavits to the CBDT after the Lok Sabha 2004 general election was aiming to do the above. If the financial institutions are not supportive and do not share the urgency required in the matters pertaining to elections, how effective can ECI’s efforts be? Scrutiny by the CBDT established discrepancies between asset declarations in affidavits and the IT returns of candidates, imploring the provision of information in the public domain, and appropriate action against erring candidates.
Under another initiative in 2010, the ECI asked for suggestions from the Department of Financial Services, Government of India on reforms and changes in the procedure of expenditure monitoring by the candidates and parties. It had also approached the Ministry of Finance to enhance the scrutiny of Politically Exposed Persons (PEPs) in India.
The Reserve Bank of India, in its Know Your Customer (KYC) guidelines, defines PEPs as individuals who are or have been entrusted with prominent public functions in a foreign country, e.g., heads of states or of governments, senior politicians, senior government/judicial/military officers, senior executives of state-owned corporations, important political party officials. Since PEPs are persons with great political influence and command substantial resources, they pose the challenge of guarding the guardian.
Usually banks keep an eye on the accounts of such persons to check any money laundering activities. During election time, special attention needs to be paid to these accounts too as they may have a bearing on election campaign funds. The ECI was informed that only foreign PEPs are subject to enhanced scrutiny and not the domestic PEPs. Scrutiny of domestic PEPs will make the verification of assets and liabilities of the candidates more meaningful. Any changes in this context will, however, require modification of rules under the Prevention of Money Laundering Act 2002, which requires political will.
The menace of black money cannot be curbed by the limited initiatives of the ECI alone. It is important that a detailed analysis is done on how the provisions of RPA can be made more harmonious with the other financial rules and regulations. This would include looking at the IT Act, the Wealth Tax Act, the Companies Act, the Foreign Exchange Management Act (FEMA), the Prevention of Money Laundering Act, Banking Regulations Act, and Cooperative Society laws and audit standards, so that hidden and illegal funds of parties and candidates can be tracked.
The ECI and other stakeholders should also continue to look at other methods like state funding of elections to provide a level playing field to candidates. A more up-to-date analysis of the subject, keeping in mind the current electoral-political scenario of the country may go a long way in controlling the threat of black money.
These reforms require political will and action. Are Indian political parties open to reforming and strengthening the rules and regulations that lead to transparency and accountability in raising and spending money?
References: (All articles referred to were last accesssed on April 30, 2014)
1 Indian Express, 2014. Elections 2014: Election Commission Seizes Rs. 195 crore in cash; 11,000 FIRs filed. Details available on http://indianexpress.com/article/india/india-others/elections-2014-ec-seizes-rs-195-crore-in-cash-11000-firs-filed/.
2 NDTV, 2014. Rs. 30,000 crore to be spent on Lok Sabha polls: study. Details available on http://www.ndtv.com/elections/article/election-2014/rs-30-000-crore-to-be-spent-on-lok-sabha-polls-study-496364
3 NDTV, 2014. Elections, 2014: Cash concealed in cars, private plaenes and ambulances. Details available on http://www.ndtv.com/elections/article/election-2014/elections-2014-cash-concealed-in-cars-private-planes-and-ambulances-508929
4 Himani Chandna Gurtoo. Hindustan Times, 2014. BJP’s advertisement plan may cost a whopping Rs. 5,000 cr. Details available on http://www.hindustantimes.com/elections2014/state-of-the-states/advertisement-war-to-win-lok-sabha-elections-may-cost-bjp-whopping-rs-5-000-crore/article1-1207499.aspx
5 Sudhir Suryawanshi. DNA India, 2014. Congress Rs. 700cr ad blitzkrieg to revolve around Rahul Gandhi. Details available on http://www.dnaindia.com/india/report-congress-rs700cr-ad-blitzkrieg-to-revolve-around-rahul-gandhi-1962172
6 Milan Vaishnav. Carnegie Endowment, 2014. Crime but No Punishment in Indian Elections. Details available on http://carnegieendowment.org/2014/01/24/crime-but-no-punishment-in-indian-elections/gz9k
7 Sunanda K. Datta-Ray. The Tribune, 2014. Assets — real or otherwise; It’s discrepancy that matters. Details available on http://www.tribuneindia.com/2004/20040426/edit.htm#5
8 Association for Democratic Reforms, 2014. 129 (30%) MPs declared Election Expenses of less than 50% during Lok Sabha, 2009. Details available on http://www.adrindia.org/content/129-30-mps-declared-election-expenses-less-50-during-lok-sabha-2009
9 Earlier limit was Rs 40 lakhs for bigger States and Rs. 27-35 lakhs for smaller States.
10 The Associated Chambers of Commerce and Industry of India, 2014. Elections to give Rs 60,000 crore GDP boost to economy: ASSOCHAM. Details available on http://www.assocham.org/prels/shownews-archive.php?id=4421
11 The Hindu, 2013. Munde admits spending Rs. 8 crore in 2009 polls. Details available on https://www.thehindu.com/news/national/other-states/munde-admits-spending-rs-8-crore-in-2009-polls/article4857676.ece
12 Association for Democratic Reforms, 2014. Consolidated Analysis (Phase 1 to 6) of Criminal and Financial background details of contesting candidates in Lok Sabha 2014 elections. Details available on http://adrindia.org/research-and-report/election-watch/lok-sabha/2014/consolidated-analysis-phase-1-6-criminal-and-finan
13 The Economic Times, 2011. Black money funds political parties: Rahul Bajaj. Details available on http://articles.economictimes.indiatimes.com/2011-02-04/news/28432802_1_black-money-bajaj-family-rahul-bajaj
14 Ministry of Law annd Justice. The Representation of the People Act, 1951. Document available on http://lawmin.nic.in/legislative/election/volume%201/representation%20of%20the%20people%20act,%201951.pdf
15 Association for Democratic Reforms, 2014. Corporates made 87% of the total donations from known sources to National Parties between FY 04-05 and 11-12. Details available on http://adrindia.org/research-and-report/political-party-watch/combined-reports/2014/corporates-made-87-total-donations-k
16 The information was collected through RTIs filed by Association for Democratic Reforms.