Mains – 11th Nov 23

Electoral bonds (EBs)

 

Why in news?

• The government has approved the issuance of the 27th tranche of electoral bonds that will open for sale on July 3. The decision comes ahead of assembly elections of Rajasthan, Madhya Pradesh, Chhattisgarh, Telangana and Mizoram.

Political Funding

• Santhanam Committee in 1964 warned of the corrosive effects of collusion between businessmen and politicians.
• 1969 PM Indira amended Companies Act and imposed a total ban corporate giving to political parties.
• In 1985 Rajiv Gandhi once again legalised corporate giving, but donations remained under the table.
• Dinesh Goswami Committee in 1990 and later Indrajit Gupta Committee recommended limit support in kind while simultaneously recommending a ban on company donations.

Funding related provisions

• Sec 29B of RPA: Every political party is entitled to accept contribution offered to it by any person or company voluntarily, other than a Government company.
• Sec 29C of RPA: The political parties are required to declare the details of contributions of more than Rs. 20000/-. It is mandatory to submit these details to EC else they will not get any tax rebate. Finance Act 2017 reduced this limit to Rs. 2000/-. Now any contribution above Rs. 2000/- must be made only through cheques, drafts etc.
• Sec 13A of Income Tax Act 1961: It provides for exemption of all voluntary contributions received by a political party from payment of income tax. Electoral bonds have also been exempt from IT Act.
• Companies Act: Companies can donate to political parties. Section 182 of the Act provides that:
  • A company needs to be at least three years old to be able to donate to a political party.
  • Companies can donate up to 7.5% of average net profits made during three simultaneous preceding financial years. Finance Act 2017 removed this limit.
  • Such contributions must be disclosed in the company’s profit and loss account. Finance Act 2017 removed this obligation.
  • Approval of the Board of Directors needs to be obtained for the contribution.
• FCRA 2010: It allows donations by foreign companies to entities including political parties.

 

What is an Electoral Bond (EB):

• An electoral bond is a bearer instrument, like a promissory note, that is payable to the bearer on demand to donate their contributions to political parties. It was introduced by the Government of India in 2018 as a means to facilitate anonymous political donations.
• Donor’s bank will know about who bought how much of Electoral Bonds, but the name of the party which received it. The party’s bank would know the amount deposited through Bonds, but not the identity of the donor.

What Is a Promissory Note? A promissory note is a written and signed promise to repay a sum of money in exchange for a loan or other financing. A promissory note typically contains all the terms involved, such as the principal debt amount, interest rate, maturity date, payment schedule, the date and place of issuance, and the issuer’s signature.   What Is a Bearer Instrument? A bearer instrument, or bearer bond, is a type of fixed-income security in which no ownership information is recorded and the security is issued in physical form to the purchaser. The holder of a bearer instrument is presumed to be the owner, and whoever is in possession of the physical bond is entitled to the coupon payments.

 

When are the bonds available for purchase?

• The bonds shall be available for purchase for a period of 10 days each in the months of January, April, July and October, as may be specified by the Central Government. An additional period of 30 days shall be specified by the Central Government in the year of the General election to the House of People.
• Electoral bond would be issued/purchased for any value, in multiples of `1,000, `10,000, `1,00,000, `10,00,000 and `1,00,00,000 from the specified branches of the State Bank of India (SBI). SBI is the only bank authorised to sell these bonds.
• A citizen of India or a body incorporated in India will be eligible to purchase the bond.
• The purchaser would be allowed to buy electoral bond(s) only on due fulfilment of all the extant KYC norms and by making payment from a bank account. It will not carry the name of payee.

 

Electoral bonds: Conditions:

• Electoral Bonds would have a life of only 15 days during which it can be used for making donation only to the political parties registered under section 29A of the Representation of the Peoples Act, 1951 and which secured not less than one per cent of the votes polled in the last general election to the House of the People or a Legislative Assembly.
• The bond shall be encashed by an eligible political party only through a designated bank account with the authorised bank.

 

Are electoral bonds taxable?

• In February 2017, the then finance minister Arun Jaitley said that the donations would be tax deductible. Hence, a donor will get a deduction and the recipient, or the political party, will get tax exemption, provided returns are filed by the political party.

 

 

Reasons for the introduction of EBs:

• To ensure that all the donations made to a party would be accounted for in the balance sheets without exposing the donor details to the public.
• To keep a tab on the use of black money for funding elections. In the absence of electoral bonds, donors would have no option but to donate by cash after siphoning off money from their businesses.
• To encourage digital transactions as EBs will promote a shift from cash-based political donations to digital transactions.
• To formalize political contributions by channelling donations through the banking system. This will establish a documented trail of donations, making the process more transparent and accountable.

 

Criticisms of EBs:

• Critics argue that the anonymity offered by electoral bonds may be exploited to facilitate money laundering or channel illicit funds into the political arena.
• The sale of these bonds through a government-owned bank like SBI creates a situation where the government could potentially have insight into the identities of those financing its political adversaries. Consequently, it opens the door to the government using this information to either coerce contributions, particularly from major corporations, or subject them to reprisals for not supporting the ruling party.
• Electoral bonds, unlike other modes of political funding, do not necessitate approval or verification by the Election Commission of India (ECI). This can weaken the ECI’s authority in supervising political financing and ensuring a level playing field.
• The Election Commission in 2019 told the Supreme Court of India that while it was not against the Electoral Bonds Scheme, it did not approve of anonymous donations made to political parties.
• The electoral bonds scheme eliminates any previous restrictions on political contributions, effectively enabling well-funded corporations to finance elections, potentially creating conditions conducive to crony capitalism.

Way Forward:

• Companies and political parties could exercise moral leadership and voluntarily disclose the identity of recipients and donors, as the Jharkhand Mukti Morcha did it in 2021.
• In many advanced countries, elections are funded publicly, thereby safeguarding the principles of equity and preventing an excessive resource disparity between the ruling party and opposition. Dinesh Goswami committee, 2^ndARC, and several others have also recommended state funding of elections.
• The voters should become self-aware and reject candidates and parties that violate the principle of free and fair elections.

 

 

India-Bhutan Relationship

Why In News

• Recently, Bhutan’s 5th King Jigme Khesar Namgyel Wangchuck and PM Modi held discussions on bilateral cooperation and regional and global issues of mutual interest.

India-Bhutan Bilateral Relations

• Bhutan is one of the two countries where Indians don’t need passport to travel.
• Strategic Location

Bhutan shares its border with four Indian states:

• Assam, Arunachal Pradesh, West Bengal and Sikkim with a length of 699 km and serve as a buffer between India and China.

Treaty of Friendship and Cooperation:

The basic framework of India-Bhutan bilateral relations was the Treaty of Friendship and Cooperation signed in 1949 between the two countries.

• It called for peace between the two nationsand non-interference in each other’s internal affairs.
• However, Bhutan agreed to let India guide its foreign policyand both nations would consult each other closely on foreign and defence affairs.
• The Treaty was revised in 2007.
• Diplomatic relations:
  1. The diplomatic relationswere established in 1968 with the establishment of a special office of India in Thimphu.
  2. Institutional mechanisms:
     • There are anumber of institutional and diplomatic mechanisms between India and Bhutan in areas such as security, border management, trade, transit, economic, hydro-power, development cooperation, water resources etc.

• India has constructed three Hydroelectric Projects (HEPs) in Bhutan:
  1. Chukha HEP,
  2. Kurichhu HEP
  3. Tala HEP which is operational and exporting surplus power to India.
  4. Recently, India completed a 720 MWMangdechhu Hydroelectric Power Project and both sides are in process of expediting the completion of other ongoing projects including the 1200MW Punatsangchhu-1 & 1020MW Punatsangchhu-2.
• Trade:
  1. The trade between the two countries is governed by theIndia-Bhutan Trade and Transit Agreement 1972.
  2. India is Bhutan’s largest trading partner.
• Maitri Initiative: 
  • Bhutan is the first country to receive the Covishield vaccines under India’s Vaccine Maitri Initiative.

Recent developments in bilateral cooperation

• Trade:
  • India also agreed to allow Bhutanese trade items to be carried further on from Haldibari in West Bengal to Chilahati in Bangladesh.
• Connectivity Projects:
  1. A decision was made to go ahead with the final survey for the 58 km cross-border rail link between Gelephu and Kokrajharin Assam to be built by India.
  2. The two sides agreed to explore a second rail linkfor about 18 km between Samtse in Bhutan and Banarhat in the West Bengal tea gardens
  3. Rail connectivity could in the future assist air connectivity for Indians in the northeast as well, as Bhutan plans to build an international airport at Gelephu as part of the larger Sarpang district Special Economic Zone
• Upgradation of Check points:
  1. India and Bhutan agreed to designate the Darranga-Samdrup Jongkhar border crossing between Assam and Bhutan’s less-developed South Eastern district as an immigration check post.
     • This will allow third-country nationals to enter and exit as well for enhancing connectivity and promoting tourism.
  2. In particular, the two sides agreedto strengthen trade infrastructure with the upgradation of an existing land customs station at Dadgiri (Assam) to a modernised “Integrated Check Post” (ICP)  along with “development of facilities on the Bhutanese side at Gelephu”.
     • This also indicates India’s support to the Bhutanese SEZ project.

Significance

• Holistic development plans:

1. The decision by India and Bhutan to focus on infrastructure and connectivity is an important marker towards more bilaterally-driven regional initiatives.
2. These plans foretell a future that could well change the development story of the region, including West Bengal and the northeast, Bhutan’s south and east dzongkhags (districts), as well asNorthern Bangladesh.

• Developing opportunities for Bhutan:

1. Bhutan’s economy has been dependent on hydropower and tourism revenues and has been particularly hit by the COVID-19 pandemic as well as worries over global warming.

A lack of opportunities has also led to the emigration by educated youth and professionals.

2. Easing travel between the two countries, and allowing further exchanges to Bangladesh is expected to help raise Bhutanese opportunitiesfor trade and travel, and bring in much needed tourism revenues for the neighbouring country.

• Creation of sub-regional market:
  • In addition, Bangladesh’s signing of a Preferential Trade Agreement with Bhutan in 2020could increase Bhutanese export of local produce and build more markets for Indian and Bangladeshi producers in the sub-region.
• Bridging the economic gap with the northeast:

1. India’s “energy exchange”, which is bringing more Bhutanese and Nepali hydropower suppliers online, while planning to distribute energy to Bangladesh and Sri Lanka, will drive intra-regional growth and revenues.
2. This would also power New Delhi’s attempt at bridging the economic gap with the northeastwhile drawing development partners like the World Bank and donor countries like Japan into the creation of a “sub-regional hub”.

Challenges

• Threat of swapping Doklam:
  1. Bhutan and China have signed a cooperation agreement outlining the functioning of a new joint technical team for the delimitation and demarcation of the boundary.
  2. There are concerns in India that a deal between Bhutan and China could include swapping Doklam – located close to the tri-junction between India, Bhutan and China – for disputed territories in the north.
  3. With Doklam under its control, China could exert more pressure on India; Chinese forces could easily sever India’s connection to the eastern part of their disputed border.
• Bhutan’s issue of brain drain:
  1. The Bhutanese government is worried about the number ofBhutanese migrating overseas as youth unemployment in 2021 reached 21%.
  2. India too needs to pay more attention to this brain drain, as, in the past, Bhutan’s elite would have been educated in India.
  3. India stands to lose its edge in Bhutanese policy-making and public narrative, and thus the projects outlined stand to benefit Delhi and Thimphu in keeping the talent within.
• Negative sentiments:
  1. Much of thenegative sentiments, wrong information about India, are on social media in Bhutan. Some in Bhutan feel that Indians are using security issues as an excuse to keep Bhutan under India’s control.
  2. Parallely, China is employing all kinds of tools, instruments, methodology to attract the Bhutanese — through trade, their modern cities, and scholarships.

Way ahead

• Efficient and time-bound execution is, therefore, key to such ambitious plans.
• Given India’s problems with Pakistan and sanctions on Myanmar for the 2021 coup blocking the path for trade and land connectivity to the East, working with other countries on India’s periphery to build connectivity, markets and energy links is the most sustainable way forward.