Expanding war on black money to shady political funds will burnish PM’s halo

Money makes the mare go, but the nightmare of black money doesn’t go away from politics. Perceptively, there is nothing white in raj neeti.

Published: 18th December 2016 04:00 AM  |   Last Updated: 18th December 2016 06:13 PM   |  A+A-

Money makes the mare go, but the nightmare of black money doesn’t go away from politics. Perceptively, there is nothing white in raj neeti. Nobody in India believes our leaders fight elections with white money. Unaccounted pelf mostly finances their ostentatious lifestyles and plush offices in gigantic modern buildings and restored Lutyens edifices. Prime Minister Narendra Modi has made the eradication of black money his mission.

He has played the biggest gamble of his political life by demonetising over 85 percent of Indian currency. If it succeeds, history will hail him as an invincible reformer. Its failure will erode his hard earned political capital. On the very first day of the last Parliament session, he invited all political parties to discuss the mode of collecting money. But his passionate plea for fund reform fell on the deaf ears of all political parties, including his own.

For the past seven weeks, many government agencies have been hounding black money operators, raiding and arresting them. Their ill gotten assets are being frozen. Modi’s decisive coup against black money got him the endorsement of 70 per cent Indians. Both his admirers and adversaries were under the belief that his actions were meant to prevent parties from using dubious dosh in the coming Assembly polls. In the midst of his tirade against tainted lucre came a dampener from the Finance Ministry.

In a routine press conference, Revenue Secretary Hasmukh Adhia clarified that all the registered political parties can deposit old currency in their accounts, without inviting taxes or punitive action. He was legally right. Section 13A of the Income Tax Act, 1961, grants tax exemption to political parties in respect of income from house property, capital gains and other legitimate sources. Currently, no party is expected by law to disclose the names of donors who made contributions less than Rs 20,000. This provision is misused by all of them without exception. They don’t keep records of such donations.

Only amounts above Rs 20,000 are reported to the Election Commission. According to analysis of political funding done by various non-governmental organisations, over 75 per cent of the total donations to all parties fell into the below Rs 20,000 mark. According to a Association for Democratic Reforms (ADR)  report, 79.68 per cent of the income of the five national political parties came from unknown sources in 2012-13. It was also revealed that 57 per cent of their total income in 2013-14 was from the sale of coupons which did not bear the names of the purchasers.

All political parties have been printing an unknown quantity of such coupons of various denominations for the past few decades and showing them as a major source of income in their returns filed with the Election Commission. The poll body has been raising the spectre of black money in elections for the past few years. But parties have always ignored the call for electoral reform, because it would destroy the source of income of many important political heavy hitters. Political parties are the most profitable parking lots for illicit money.

During the past few years, the growth of new political outfits in the country has outpaced the growth of middle and medium manufacturing units and even the GDP. According to a study, parties have grown by 20 per cent since 2004 as against the GDP growth of less than 5 per cent at constant prices. While the number of national parties is almost stagnant at 6, the count of registered but unrecognised parties has risen from 1,094 in 2005 to 1,866 in 2015. Interestingly, 239 new political organisations were registered within a span of 16 months from March 2014 to July 2015. For wannabe netas, it makes more business sense to float a party than running a genuine business enterprise because it insulates them from scrutiny or punishment under income tax laws, which are applicable to the rest of the country.

The elephant in the room is the black money spent by a spectrum of candidates and political parties in Panchayat polls to Lok Sabha elections. While the Election Commission has fixed a limit on expenses for each election, almost all the candidates end up spending much more. According to conservative estimates, both collectively spend over Rs 80,000 crore every five years. For example, on an average, there are at least four serious candidates who contest each of the 542 Lok Sabha seats. Though some even splurge over Rs 10 crore as against the limit of Rs 70 lakh per seat, the average expenditure comes to about Rs 5 crore per constituency. This amounts to over Rs 11,000 crore spent just standing for the Lok Sabha; a sum which includes the money spent by their respective parties.

There are 4,125 Assembly seats in India, each of which are contested by four serious candidates. Each party and candidate spends about Rs 1 crore per seat taking the total expenditure up to Rs 16,500 crore. Hold on. The Indian political superstructure comprises over half-a-million local bodies like Panchayat Samitis, Zila Parsihads, Municipal Councils and Municipal Corporations. Even one Panchayat election costs over Rs 1 lakh.

To contest a corporation seat in big cities like Delhi and Mumbai, a candidate spends almost Rs 25-Rs 50 lakh. Over Rs 50,000 crore is spent on local body elections all over the country. Political parties dish out an additional Rs 100 crore plus annually on chartered planes, helicopters and administrative expenses. But the Election Commission has never received accounts for more than Rs 2,000 crore from all the parties put together. Since black money is generated from unknown sources, the battle should be extended to strike at the cynical substratum of political party funding, which is resisting even RTI purview. The war against black money cannot be won completely unless money minting political entrepreneurs are targeted with equal vengeance and verve.

Prabhu Chawla
prabhuchawla@ newindianexpress.com
Follow him on Twitter @PrabhuChawla

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