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Of paper parties & their finances: Why ECI delisting 200 odd parties is a wise move

Ajay K Mehra | Updated on: 11 February 2017, 5:45 IST

The Election Commission of India (ECI) on Tuesday (20 Decmeber) declared its decision to delist 200 odd political parties that had not contested any election since 2005.

Going a step further, it is forwarding the names of these parties to the Central Board of Direct Taxes to disallow tax benefits to them.

As Chief Election Commissioner Nasim Zaidi explained in an interview to Catch, contributions to political parties and poll funding need to be transparent.

Currently, more particularly since the demonetisation of Rs 500 and Rs 1,000 currency notes, deposits to the bank accounts of several political parties soared.

The deposits were all under the rule that sources need not be disclosed for contributions upto Rs 20,000. Zaidi suspected that 'there are possibilities that these parties may be conduits for what we call anonymous or opaque funds and others refer to as black money'.

Two related questions arise from the red-flagging of 200 odd political parties by the ECI and the CEC's worries regarding conduits being used to filter black money as political contributions.

First, and the larger, question that impacts Indian democracy is India's party system, which has been, and is getting fractured since the decline of the Congress since 1989.

The second question is related to the party and political finance. This impacts both the party system and the electoral process in the country.

The party number game

When India first went to poll in 1952, fourteen national parties and 39 other state parties contested. Over the next five years in the second general election in 1957, the party system crystallised, as four national parties and eleven other state parties participated.

The 16th general election held 57 years later saw only six national parties, 39 state parties and 419 other state parties participating.

The latest list indicated seven national parties, All India Trinamool Congress has graduated to the national category, and 48 state parties.

Obviously, despite the ECI's rules of parties having to register with it in order to contest polls, political parties have been proliferating in India since independence.

One obvious result of this has been that electoral results since 1989 have been fragmented. Not only do we have 'national parties' with limited reach in a few states, the parties with national reach, such as Congress and Bharatiya Janata Party, have been petrified for two decades.

Even now, with a resurgent BJP, the party system looks deinstitutionalised and organisationally weak.

Most smaller parties after independence emanated from the Congress. That trend continued in the later years, as parties were born out of break ups/defections from larger parties.

In most cases, differences at the top led to a leader walking out and forming a new party, rather than look for an option in one of the existing parties.

In the process, many of the parties turned out to be family ventures or personalised leader-centric parties. Dravida Munnetra Kazhgam, All India Anna Dravida Munnetra Kazhgam, Samajwadi Party, Rashtriya Janata Dal, Trinamool Congress, Telugu Desam Party, Telangana Rashtra Samithi, Shiv Sena, Bahujan Samaj Party are some of the examples of deinstitutionalised parties that are family or personality centric.

The money matter

On closer scrutiny, we find party fund as on of the main issues that made leaders and their parties turning to kin as the mainstay of support.

Obviously, such parties also do not have regular organisational elections and inner party democracy. Indeed, the ECI rule book insists that parties must periodically hold their organisational elections, but even it does happen to beat the rules, the elections are a sham. So far, the ECI has been constrained in enforcing this criteria.

Party and electoral funding is among the major challenges under these circumstances. Exempt as they are from paying income tax and wealth tax, the parties have been remiss in filing their I-T returns based on an audited account statement - an important prerequisite for the exemption.

Even as the minimum limit of contribution that does not need the declaration of the donor's name has been raised to Rs 20,000, the parties continue to be opaque in declaring the extent and nature of party funding.

No wonder, despite the sudden announcement, the parties used this rule, following demonetisation, to remit their unaccounted money in their bank accounts.

The frequency and cost of elections drives parties to accumulate sufficient funds. The expenditure ceiling fixed by the ECI for elections has been artificially low, even though it has been rising over the years.

It rose from a Rs 1,50,000 for the Lok Sabha and Rs 50,000 for state assemblies in 1996 to Rs 40,00,000 for Lok Sabha and Rs 16,00,000 for assemblies since 2011.

Despite indirect support given by the government in the form of free airtime, there are many other expenditures that do not fit within the limits. Thus, parties and candidates use the loopholes to bridge the gap.

The move by the ECI can, thus, be used to attend to the existing anomalies in the party system as well as in party finances. But would the government play ball?

Edited by Jhinuk Sen

First published: 23 December 2016, 5:20 IST