Download the latest issue of Business Today Magazine just for Rs.49
The Politics of Black Money

The Politics of Black Money

The decisive role money plays in polls is a catalyst for the rampant corruption and unchecked black money in the country.

Black money is in the news again. This time in the wake of IDS that yielded over Rs 62,000 crore. What generates all this is, of course, corruption, which is rampant in the country. It has been a matter of national concern and political parties have been increasingly making this a major election issue. But it is ironic that elections themselves have become the fountainhead of corruption.

The decisive role money plays in polls creates a vicious cycle of corruption. A candidate who spends crores on his election goes on a recovery spree to make his investment pay back by all means, howsoever dubious. It does not take long for the politician-bureaucrat nexus to develop for making money. This unholy alliance between the two most powerful instruments of governance makes corruption unstoppable. The public perception of the corrupt political class is dangerous for democracy.

What's the way out? Start at the root - the electoral corruption. There are two aspects to the problem: collection of funds by political parties, and expenditure by parties and candidates during elections. And the two have a symbiotic relationship.

The law has provided for a ceiling on candidates' election expenditure for a good reason - making election within reach of the less well-off. But most of them violate it with impunity. Presently, the ceiling for the Lok Sabha elections is Rs 70 lakh and Vidhan Sabha Rs 28 lakh. But it's common knowledge that candidates spend 10 to 100 times! Obviously in black money. Many committees have delved into the problem; some recommending a sort of state funding of elections. No one suggests how state funding will drive out black money used for illegal activities like excessive expenditure, bribing voters, 'paid news', etc. In fact, white money will only supplement black money.

When you spend a lot, you have to collect a lot. That leads us to the second issue - transparency of political funding. Over 75 per cent of funds are from undisclosed sources. It may be tainted money from criminals, real estate mafia, drug mafia, corporate houses or contractors, with promises of favours in return. The payback is in the form of contracts, licences, etc. Crony capitalism and corporate houses running governments by proxy is a common public refrain. A report of the CII in 2012 demanded political donations to be kept secret. The reason mentioned was that they would not like competing parties to know what they gave their rivals, and invite harassment. The real reason was that they would not want the quid pro quo exposed!

A possible way out is state funding of political parties - not of elections. This can be done easily by the state paying a fixed sum to a party (or candidate) for every vote secured. If a party garners, say, one lakh votes, it can get Rs 50 lakh (@Rs 50 per vote).

How will state funding operate? In the 2014 LS polls, 55 crore votes were cast. At Rs 50 a vote, total state funding would have come to Rs 2,750 crore. Since in every five-year cycle, every state will also have a VS election, the figure will double - Rs 5,500 crore. This approximately corresponds to the funds the political parties disclosed collectively in five years through all means, including the dubious ones. With state funding, private fund collection (except primary membership) will be totally banned. Simultaneously, a cap should be put on election expenditure by political parties. This should free our political system of dependence on corporate and tainted funds.

Ways and means to raise this money and its distribution can be worked out once the idea finds favour in principle. The budgetary provision of Rs 1,000 crore per annum is peanuts. Even that can be raised by creating a national election fund towards which corporate bodies can contribute.

A study of Political Finance Regulations Around the World by the International Institute of Democracy and Electoral Assistance, Stockholm (2012), showed that more than 70 nations (including 80 per cent countries of Europe) have the facility of giving state funds based on votes obtained. If it works well in so many countries, there is no reason why it will not work in India.

The writer is a former Chief Election Commissioner of India