ELECTIONS 98. At least nine national parties, 30 state parties, 171 registered but unrecognised parties, 13,952 candidates littered around. Looking at 600 million voters. For 543 Lok Sabha seats. Spending Rs 1,000 crore to get them.
Massive numbers. Apart from the Rs 1,000 crore that the candidates will spend on canvassing for votes, the Election Commission will spend another Rs 750 crore to finance the process. But that's not too much: just Rs 12.50 per voter, Rs 7.81 per Indian. Says chief election commissioner M.S. Gill: "The entire exercise is among the cheapest operations in the world."
Sure. But certainly not the cleanest one. If parties have to fight elections today, money is key. Unlike the pre-Independence era, where parties won and lost on the basis of work done in constituencies by a disciplined cadre of workers. Today, after all divisions—religion, caste, mobs—have been taken care of, money has become the great equaliser: have money, will win.
As a result, a lot of investment went into the election process. Until T.N. Seshan happened, and candidates were forced to control all election expenses below Rs 4.5 lakh and canvass for just 14 days. Prior to this, polls were a loud, ostentatious process that flouted every law. Who funded it? Business.
According to E. Sridharan of the Centre for Policy Research, who has studied financing of elections, there's a yawning gap between what political parties show as receipts from business houses and what these companies claim to have donated towards political expenses. The gap is even wider between donations received and the numbers that appear in the account books of parties.
As businesses and industries are dependent on government policies for virtually every item manufactured in the country, businessmen cannot but give money to parties. They have to balance their allocations finely, so that irrespective of which party wins, they get the benefits, the licenses, their houses are not raided.
Moreover, fearing that they could earn the wrath of shareholders, businessmen prefer to take the under-the-table route even though the Companies Act permits corporate donations to parties. The approval of the board of directors is necessary for donations, and the law mandates that the amount donated should not exceed 5 per cent of the average net profit over the past three years. In addition, the donated amount should be mentioned in the annual report of the company. Most companies fear that they will become a pariah for other political parties if they donate to one. No wonder that the first time that a company donated funds to political parties by cheque came to notice only during the 1996 general elections. Today, the Tatas are setting up a trust to distribute funds (see box); others will surely follow.
According to Sridharan, the entire system of raising funds depends on an intricate web of personal connections and understanding of a quid pro quo. But just how glaring the difference is between estimates of expenditures between political parties and business houses is explained further. On an average, for a leading candidate of the Congress or the BJP, almost Rs 2 crore was spent in 1991, adding up to over Rs 1,100 crore during 1991 elections. Against this, party fund raisers quoted figures between Rs 200 crore and Rs 1,000 crore.
Actually, only part of the funds raised by parties is used for election purposes, the rest being an excuse for corruption. A New Delhi-based businessman confirms Sridharan's findings: "The process is so predictable that sometimes the fund raiser and I even laugh about it. It's really pathetic." He points out that while he has to hide the money he gives from the tax authorities, the parties go scot-free. He is perhaps referring to the returns filed by the parties, following a Supreme Court directive. Most parties have filed zero income returns.
Elections 96 changed this attitude. This was the first time that many companies that had actively funded the parties earlier were not approached. Also, for the first time, parties like the Congress and the BJP gave receipts for cash contributions and also accepted donations by cheque.
But even that couldn't buy peace. The high-profile managing director of the beleaguered Mesco group, Rita Singh, paid a whopping Rs 3 crore to the Congress by cheque, stood for elections and is being investigated by the tax authorities for violating the provisions of the Companies Act. The amount paid exceeded the average net profit of the previous three years of the group company which made the donation.
Sridharan concedes that the Seshan-enforced ceiling of Rs 4.5 lakh per constituency is "unrealistically low". The Election Commission agrees, and has recommended a revision. According to Sridharan, it cost the government something upwards of Rs 500 crore to conduct the elections in 1996, against Rs 300 crore in 1991. The difference in the figure is explained by the increased cost of monitoring candidates, including videography and transport. Of course, during 1991, when there was virtually no monitoring, the amount spent by candidates could have been around Rs 1,100 crore (see chart).
The solution could be state funding of elections. The issue of state funding is certain to raise a larger question of whether the state should fund the parties or the candidates since there are several instances of parties ganging up in opportunistic alliances. Besides, there is the added question of who in the party should take charge of the state funds. If the money is placed in the hands of the central leadership, the state units might not approve, particularly in the event of assembly elections. Reimbursement of election expenses—as in Germany—may not work since money is needed upfront during elections and its shortage may lead to it being raised through dubious means. Shouldn't the MP local area development scheme—which costs nearly Rs 4,000 crore over five years—be abolished and the money used to create a corpus for the state fund?
The Confederation of Indian Industry (CII) has suggested a cess on excise duty and a fund pool, to which industry can contribute voluntarily. In 1993, the CII set up a task force, under the leadership of former Maruti Udyog managing director R.C. Bhargava, which recommended that corporate contributions to political parties be made tax deductible and the decision of the board be ratified by shareholders. The initiative from the CII had come about after industrialists' concern for the demands from political parties to fund the 1993 assembly election following general elections in 1989 and 1991. However, none of the recommendations have been implemented.
There is a flip side to this debate. The money that goes into funding polls is, according to Abusaleh Shariff, principal economist, National Council for Applied Economic Research, actually doing good. A private view, he feels that this money funds jobs and finds its way into the economy, creating little islands of demand on the way. Says he: "With say about 500 people working in every constituency, elections give jobs to 2.5 lakh people for a couple of months." In the normal course, there is no public welfare scheme that can match this distribution of money from the rich to the poor.
Like all else in India, the loopholes lead to prosperity, not the laws.
