Was the Electoral Bonds Scheme as Transparent as PM Modi Claimed It to Be?

Prime Minister Narendra Modi, in his first comments on electoral bonds after the Supreme Court struck down the scheme in February this year, said it is due to the system put in place by his government that the sources of political funding and its beneficiaries could be found out.

Talking to Tamil news channel Thanthi TV, he went on to say, "I want to ask all experts which agency can find the trail of the money used in elections before 2014. There must have been some expenditure. Modi came up with electoral bonds and so today you know who funded how much to whom."

But is it because of the prime minister that we know who funded how much to whom, or is it because of the Supreme Court which, after striking down the electoral bonds scheme, directed the Election Commission to release the data of those who bought the bonds and the political parties who encashed them? In passing its verdict on 15 February, the apex court slammed the lack of transparency, and said, "Infringement to the right to information is not justified by the purpose of curbing black money".

Was the system in place as transparent as PM Modi claimed in his interview with Thanthi TV?

When the electoral bonds were ideated, legalised anonymity, and not transparency, was the key. Former Finance Secretary Subhash Garg, who played a key role in designing the scheme, explained in an article for The Quint:

"Most political donations before electoral bonds were made in the unaccounted and predominantly non-transparent cash mode. The sad state of affairs existed because the corporations and rich individuals were not interested in making it known which political parties they donated to for reasons that may or may not be justified."

Former Finance Secretary Subhash Garg

Therefore, the government brought changes in the architecture of political funding to meet this key reluctance and make electoral bonds a success. These changes were all aimed at securing the anonymity of the donor.

In fact, for six years, between 2018 and 2024, not a single detail of which party got funds from which donor was revealed to the public. And up until the last day in court, the government and the State Bank of India tried to defend the anonymity of the scheme.

The prime minister, in his interview, challenged experts to find the trail of the money used in elections before 2014. Before the electoral bonds scheme, individuals or companies could donate to political parties either by making direct contributions or through Electoral Trusts, a scheme introduced in 2013.

As Shelly Mahajan and Shivani Kapoor of the Association for Democratic Reforms (ADR) explain in this article for The Quint:

"These trusts permit contributions to political parties only through banking channels, disclose the details of political contributions to beneficiary parties through the regular filing of annual reports and the link between the political party and the donor can be traced by the Election Commission, though not disclosed to the public."

Shelly Mahajan and Shivani Kapoor, Association for Democratic Reforms

There existed paper trails and banking channels in the previous system, but electoral bonds were designed for anonymity, despite the prime minister's claim that today you know who funded how much to whom because of the latter.

Meanwhile, before Prime Minister Modi, Home Minister Amit Shah said during the 2024 India Today Conclave that with the scrapping of electoral bonds, he feared the return of black money in political funding.

But did electoral bonds really curb the flow of black money, or did they steadily legalise and institutionalise the use of unaccounted, illegal money?

Shelly Mahajan and Shivani Kapoor argued, in a separate piece for The Quint, argued:

"The electoral bonds scheme legalised backroom lobbying and unlimited anonymous donations by allowing foreign entities, large-scale entities, unknown hidden entities, and benami transactions to funnel unaccounted black money through shell companies."

Shelly Mahajan and Shivani Kapoor, Association for Democratic Reforms

But there's more.

The electoral bonds scheme set no upper limit for a company's donations. Previously, it was stipulated that political funding by corporations was limited to 7.5 per cent of their net profits of the previous three years.

An investigation by The Quint found that Future Gaming and Hotel Services Pvt Ltd – the top donor to political parties – donated over five times its consolidated profits. And Keventers Group donated Rs 195 crore in just two months during the 2019 General Elections, despite reporting a profit of only Rs 12.24 lakhs in FY2020.

Where did this money come from?