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Political funding: Finance Bill removes cap on corporate donations, disclosure of beneficiaries' name

An amendment to the Companies Act of 2013 removes the cap that barred companies from donating more than 7.5 per cent of their average net profit to a political party.

India TV Politics Desk, New Delhi [ Published on: March 23, 2017 19:42 IST ]
Finance Bill removes cap on corporate donations
Image Source : PTI Finance Bill removes cap on corporate donations

Finance Minister Arun Jaitley on Tuesday moved an "unprecedented" 40 amendments to his Finance Bill 2017, inviting criticism from Opposition members who alleged that the government was tagging along non-tax bills in the legislation to make them Money Bills.

The Bill was passed by the Lok Sabha on Wednesday and Rajya Sabha does not have any power to reject a Money Bill. It effectively means that the bill has been passed by the Parliament and will soon become a law after presidential assent.

Other than making Aadhar mandatory for filing returns and availing PAN cards, Jaitley proposed an amendment in the Bill to reform political funding and ban cash donations to political parties. 

An amendment to the Companies Act of 2013 allows donations by companies to electoral trusts only through account payee cheque, bank draft or electronic transfer, as part of the government's purported tirade against blackmoney.  

The amendment aims to bring transparency to political funding. 

However, the bill, in another section proposes something which would potentially make the funding more opaque. 

The amendment relaxes conditions for contributions made by corporate entities to political parties. 

The amendment proposed to remove the cap that barred companies from donating more than 7.5 per cent of their average net profit to a political party. Also, the companies no longer need to disclose the name of the party to which the donation has been made.

Till now, corporate bodies could contribute upto 7.5 per cent of their average net profit in the past three financial years and they were required to disclose the names of the beneficiary parties in the profit and loss statements. 

The amendments effectively allow companies to contribute any amount to a political party without making its name public.

A senior official with the Comptroller and Auditor General's office said the amendment opens up the possibility of companies seeking favours by paying whichever political party is in the power. 

"This means, for example, that an infrastructure firm could theoretically pay up to 50 per cent of its net profits to a single party as donation without anyone getting wiser as to which party has been paid... this throws open the possibility that an order to build a highway or a railway bridge could be given to a firm and that firm could pay the donation to the party in power which placed the order with it," the official told The Telegraph.

"The beauty is that if this happens, it will be legitimate and no questions can be asked by any ethics committee of Parliament or by any CAG audit," the official added. 

BJD MP Bhratruhari Mahtab who staged a walkout with party members after Jaitley failed to give satisfying answers to the queries, said, "It opens the floodgates for potential corruption and removes the means to check it."

Another MP, Dinesh Trivedi of the Trinamool Congress, said the anonymity clause needed to be removed. 

"We need to remove the anonymity clause and make it mandatory for firms to disclose to which party they have paid money. Otherwise, we could be flooded with cases of misuse of office to get political donations," Trivedi said. 

Former CPM MP Nilotpal Basu said, "This is typical of the duplicity of the ruling alliance which slips in changes that help breed corruption even as it claims that it is fighting a war against corruption."

The government also amended the law to provide electoral funding to political parties through electoral bonds. A donor could purchase bonds from authorised banks against cheque and digital payments only. 

An individual or a firm can buy these bonds, to be authorised by the Reserve Bank of India, and give them to any political party without disclosing the beneficiaries' name. 

Jaitley, during the discussion on the Bill, said a lot of electoral funding to political parties across the spectrum came by way of undisclosed money and this move will limit the use of such money.

The amendments will limit the use undisclosed money in electoral funding to political parties but will only make the funding more opaque, and that too legally.

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