Asian Election Stakeholder Forum III (AESF III) August 22 – 26, 2016 Bali, Indonesia "Transparency & integrity for Quality Elections" General Election Commission Republic of Indonesia and General Election Asian Network for Free Elections (ANFREL)

1. Elections and Political
Finance in India
Association for Democratic Reforms (ADR)

2. ADR-Electoral & Political Reforms
PIL in Delhi High
Court 1999
demanding
disclosure of
candidates’
antecedents
Supreme Court’s
verdict in 2003 made
background
disclosure mandatory
for candidates
Have been conducting Election
Watch ever since
Have an Election Watch chapter
now in each state

3. BETTER POLICY MAKERS
BETTER POLICY BETTER GOVERNANCE
ELECTORAL & POLITICAL REFORM
More representative elections More accountable legislature
EDUCATION LAW & ORDER OTHERSHEALTH
EMPOWERED ELECTORATE

4. 2014 LS 2009 LS
Criminal Cases 185 (34%) 160(30%)
Crorepatis 443 (82%) 300(58%)
Average Assets Rs. 14.70 Cr Rs. 5.12 Cr
 No provision for scrutiny of affidavits or election expenditure
 Sources of Income not disclosed
 Under valued assets

5. Recent Achievements and Awards
• December 2015: ADR won an award of outstanding achievement in the 2015 category of
Citizen's Engagement at the International Electoral Awards 2015 from ICPS
• January 2015: National Election Watch and Association for Democratic Reforms won
Election Commission of India's prestigious ‘National CSO Award – 2014’ for “Best Voter
Education and Awareness for General Election to Lok Sabha 2014” on the occasion of
National Voters' Day on 25 January 2015. State Election Watch chapters of Bihar, Odisha,
Madhya Pradesh, Maharashtra and Uttar Pradesh have received special mention in the award.
• April 2014: Awarded the 'NDTV Indian of the Year- India's Future' in Public Service
Category.
• March 2014: Awarded Innovation for India Awards 2014 by Marico Innovation Foundation
under the Social Category.

6. December 2013: Awarded the CNN IBN Indian of the Year Award in the category of Public
Service, along with Ms Lily Thomas.
May 2014: In Ashok Chavan paid news case, the Supreme Court had passed a judgment holding that
Election Commission of India (ECI) has the power to disqualify a candidate in relation to filing of
false election expenditure statement under Section 10A of RPA. ADR had intervened in the case
supporting the stand of the ECI.
September 2013: The Supreme Court ruled that the right to register a "none of the above (NOTA)"
vote in elections should apply and ordered Election Commission to provide such a button in
the Electronic Voting Machines (EVM). ADR had intervened in the matter.
July 2013: Supreme Court delivered a judgment on a petition filed by Lily Thomas and Lok Prahari
NGO, (ADR intervened) setting aside clause 8(4) of the Representation of the People Act, and
therefore barring sitting MPs and MLAs from holding office on being convicted in a Court of Law.
June 2013: After over a 2-year-long struggle based on an RTI that was filed by ADR, the CIC
delivered a landmark judgment that brought 6 National Parties under the ambit of the RTI Act.

7. What is Political Finance?
• Funds or resources involved in election campaign of candidate and political
parties and also the expenses of the political parties for political activity
during the non-election period
• Resources either raised by the parties or the candidates on their own
• State Funding: at present there is no direct state funding, however the parties
enjoy certain benefits indirectly like tax exemptions, free air time, free
electoral rolls, free space for offices etc.

8. Existing Regulations
Election Finance issues are governed by the following:
• Representation of People’s Act
• The Conduct of Election Rules 1961
• Companies Act 2013
• Income Tax Act 1961
• Foreign Contribution Regulation Act (FCRA)

9. Need for Election Finance Reforms in India
Major Issues include:
• No Limits on political contributions
• No limit on political party election expenditure
• Under-Reporting of Party and candidate expenditure
• Inadequate Disclosure norms and requirements
• Inadequate penal provisions

10. Limits on Contribution
• As of now there is no limit on individual contributions
• Candidates do not disclose the sources of funds, no strict penalty for nondisclosure
• No limits on political party accepting contributions
• During Lok Sabha elections, 2014, the national political parties declared in their election
expenditure statements that Rs 408.75 crores (35.28% of total funds collected) was by cash.
As the parties are not required to provide details of the donors who donated specifically
during election period, these donations in cash will remain unknown
• Corporate contributions to political parties are allowed as long as the company (non-
government) is three years old; its aggregate contribution in every financial year is below
7.5% of its average net profits during the three immediately preceding financial years; and it
is authorized by a Board of Directors’ resolution
• Electoral Trusts can contribute 95% of total funds collected to political parties

11. Source: ECI
Parties only have to declare contributions above Rs. 20,000

12. Limits on Expenditure
• Between Rs. 54-70 lakhs for Parliamentary constituencies and Rs. 20-28 lakhs for
Assembly constituencies
• Candidates have constantly claimed that the election expenditure limit set is very
low. However, based on the election expense declarations of 537 MPs analysed
from Lok Sabha, 2014 to the ECI, 176 MPs (33%) have declared election expenses
of less than 50% of the expense limit in their constituency.
• 108 (20%) MPs declared that they had incurred no expenses on campaigning
through electronic/print media
• No limit on expenditure by parties

14. Source: ECI

15. Disclosure of Contribution
• Report detailing all contributions above Rs. 20,000 received from any person or
company to be submitted in each financial year to the Election Commission.
• Contribution below Rs. 20,000 remains unknown
• The Parties are required to disclose to the Commission, within 75 days of assembly
election and 90 days of Loksabha election, the total amount of election expenses
incurred by them, but there is no penal provision, if the parties do not submit the
report at all or submit incomplete or incorrect report.
• Election expenditure statements of political parties are submitted woefully late even
after several notices by the ECI

16. Sources of Funding of Political Parties
8.9
16.04
75.05
Sources of Funding (in Percentage)
Known Sources (Donations above 20,000)
Other Known Income
Unknown Sources of Income
Rs. 435.85 Crores:
Known Sources of
Income from Donation
above Rs 20,000
Rs. 785.60
Crores: Other
Known Sources of
Income
Rs. 3674.50 Crores:
Unknown Sources of
Income
Sources of
Income

17. Need for Election Finance Reforms
• It is a well established fact that money plays a crucial role in politics. ECI, Guidelines on
Transparency and Accountability in Party Funds and Election Expenditure recognizes the
need for finance reform by stating: “concerns have been expressed in various quarters that
money power is disturbing the level playing field and vitiating the purity of elections.”
• The Supreme Court also has emphasized the influence of money power in its various
judgments such as KanwarLal Gupta v Amar Nath Chawla, 1975 and Ashok Shankarrao
Chavan v Madhavrao Kinhalkar, 2014.
• It is an undeniable fact that financial superiority translates into electoral advantage, and
hence richer candidates and parties have a greater chance of winning elections.
• Money, often from illegitimate sources, is used to buy muscle power, weapons, or to unduly
influence voters through liquor, cash, and gifts.

18. • There is widespread prevalence of black money, bribery, and corruption
which in turn helps candidates fund their campaigns.
• The limits of expenditure prescribed are meaningless and almost never
adhered to. As a result, it becomes difficult for the good and the honest to
enter legislatures.
• It also creates a high degree of compulsion for corruption in the political
arena.

19. Law Commission’s 255th Report and Key Issues
• State Funding: Any reform in state funding should be preceded by reforms such as
decriminalization of politics, inner party democracy, electoral finance reform, transparency
and audit mechanisms and stricter implementation of anti-corruption laws so as to reduce
the incentive to raise money and abuse power.
• Contribution Ban: As per analysis of funding of political parties, around 75% of the
contributions come from unknown sources. Anonymous donations should be restricted or
banned
• Law Commission has suggested that anonymous donations should not exceed 20% of the
total contribution received during a year.
• The Law Commission has recommended that the political parties accounts shall be audited
by a panel of auditors selected by CAG.

20. • Contribution Limit: Currently there is no cap on donations to a political party.
• There should be upper cap on donations by a donor to a political party in a year and
there should be reporting of such donation to the public and to enforcement
agencies.
• Regulation on spending: Law Commission has recommended a ceiling on
political party expenditure during elections.
• The candidates and political party should route all election expense through a bank
account, opened for election campaign purpose.

21. • Disclosure Norms and Transparency: There should be a common
accounting method as recommended by the ICAI.
• Candidates should disclose their source along with the election expense
accounts
• Sanctions for Violations: The Law Commission has recommended penal
provisions against failure of the Parties to disclose the information and also
setting up a Independent investigating agency.

22. Funds collected by National Parties during
the Lok Sabha elections
• Total funds collected by the National Parties 2004 Lok Sabha elections was Rs 223.80
crores which increased by 282%, to Rs 854.89 crores during 2009 Lok Sabha
elections.
• During Lok Sabha 2014 elections, funds to National parties increased by 35.53%, from
Rs 854.89 crores during 2009 to Rs 1158.59 crores.
• Over a period of 10 years, the funds collected by National Parties during Lok Sabha
elections increased by 418%.

24. The total funds collected by National parties amounted to Rs 2237.28 crores during Lok Sabha
2004, 2009 and 2014 elections, of which 54% or Rs 1205.92 crores was collected by cheque, while
45% or Rs 1007.81 crores was collected by cash.

25. Expenditure incurred by National Parties
during the Lok Sabha elections
• Total expenditure incurred by the National Parties, during 2004 Lok Sabha elections was
Rs 269.42 crores which increased by 225%, to Rs 875.81 crores during Lok Sabha
2009 elections,.
• The total expenditure of the National Parties during Lok Sabha 2014 elections increased
by 49.43%, to Rs 1308.75 crores from Rs 875.81 crores during Lok Sabha 2009.
• Over a period of 10 years, the expenditure incurred by National Parties during Lok
Sabha elections increased by 386%.

27. Recommendations
• Extending the period in which ECI’s regulation on election expenditure applies on
candidates.
• Limit on election expenditure by the political parties
• Sources of Income of candidates should be disclosed
• Political parties should compulsorily maintain and submit annual audited accounts. There
should be a law governing the functioning of political parties.
• The period for disqualification of a candidate for a failure to lodge an account of election
expenses should be extended
• The Regulation of Electoral Trusts should be given statutory backing by amending RoPA