News Excerpt:

According to a report by the Association for Democratic Reforms (ADR) almost 60% of the funds received by political parties in 2022 cannot be traced and came from “unknown” sources.

Key Observations from the report:

• National parties declared ₹3,076.88 crore as income in 2022-23.
• ₹1,832.87 crore — or more than 59%  of this money came from unknown sources.
• Of total unknown sources, the share of income from electoral bonds was ₹1,510.61 crore, or 82.42%.
• The vast majority of these funds went to the BJP. During 2022-23, the ruling party declared ₹1,400.23 crore as its income from unknown sources. 
• This amounts to 76.39% of the total income from unknown sources declared by all national parties.
• The other five national parties together have received only ₹432.63 crore from unknown sources.
• The Congress came a distant second, claiming 17.19% of the money and declaring ₹315.11 crore as its income from unknown sources.
• The other parties included in the ADR’s analysis were the Communist Party of India (Marxist), the Bahujan Samaj Party (BSP), the Aam Aadmi Party, and the National People’s Party.
• The BSP, however, declared that it did not receive any funds from voluntary contributions (above or below ₹20,000), or the sale of coupons and electoral bonds, or unknown sources of income. 
• The BSP only received ₹29.27 crore from other known sources of income, which include bank interest (₹15.05 crore), membership fees (₹13.73 crore), gains on the sale of immovable property (₹28.49 lakh), and interest on its income tax refund for 2021-22 (₹20.65 lakh).

Impact of unknown political donations:

• Anonymous donations of high value tend to undermine electoral democracy and governance as they facilitate a quid pro quo culture involving donors and beneficiaries. 

The ADR has suggested stringent measures to enhance transparency and accountability in political funding:

• There should be full disclosure of all donors under the Right to Information (RTI) Act.
• The EC's recommendation to grant tax exemption only to parties contesting and winning seats in elections should be implemented.
• There shoul be a  provision of disclosure of donor’s names contributing above Rs 2,000.
• In a landmark verdict delivered last month, ahead of the Lok Sabha polls, the Supreme Court scrapped the government's electoral bonds scheme of anonymous political funding, terming it "unconstitutional" and ordering disclosure of the names of the purchasers, value of the bonds and their recipients.

Way forward:

• We need public disclosure of funding because political parties are the pillars of representative democracy and transparent accounts are the key to preserving citizens’ trust in parties and politicians.
• The public disclosure of political funding would also help maintain the rule of law and remove corruption in the electoral and political process.
• The outcome of elections should not depend on which party has more money to campaign and woo, or buy voters. 
• The separation of wealth from power is a basic condition of a democratic system. 
• We need to make our democracy healthy by enacting legislation that regulates political party funding and mandates public disclosure.