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ORF SEMINAR SERIESVOLUME 1 ISSUE 8 APRIL 2012

Campaign Finance Reforms in India: Issues and Challenges

OBSERVER RESEARCH FOUNDATION

Seminar proceedings compiled & edited by

Samya Chatterjee

Niranjan Sahoo

Seminar proceedings compiled & edited by

Samya Chatterjee

Niranjan Sahoo

OBSERVER RESEARCH FOUNDATION


Executive Summary

India today stands as a model for emerging democracies across the world.

Having held periodic elections since 1951, with the exception of the two-year

Emergency period, the efficacy of the electoral structures both at the national

and State-levels has to a great extent defined India's success as a modern

democratic nation-State. Unfortunately, over the past two decades, the essence

of democracy has been corroded by corruption in the electoral financing

structure. However, corruption is not the sole reason. The other main reasons

are criminalisation of politics and lack of genuine inner-party democracy. To

reform the process, the "pernicious and all-pervasive" influence of illegal

sources of money on the prevalent political culture must be addressed.

To highlight some of the key concerns with regard to campaign finance

reforms, the Observer Research Foundation organised a round-table titled

"Campaign Finance Reforms in India: Issues and Challenges" on February 1, 2012. This

was the beginning of what will eventually be a series of conferences to address

the issue of campaign-funding as well as reforms in political parties. Flagged off

as an introduction to understanding the basic issues that face political parties

and the Election Commission with respect to sources of funding, the round-

table comprised Mr. Manish Tewari (Member of Parliament, Indian National

Congress), Mr. Rajiv Pratap Rudy (Member of Parliament, Bharatiya Janata

Party), Professor E. Sridharan (Academic Director, Centre for Advanced Study

of India, University of Pennsylvania.), Mr. T. K. Arun (Editor, Opinion,

Economic Times), Mr. S. K. Mendiratta (Consultant-cum-Legal Advisor to the

Election Commission of India) and Mr. Anil Bairwal (National Coordinator,

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Association for Democratic Reforms, New Delhi). Some of the key

observations which emerged at the conference were:

• Rising Campaign Expenditure: The key issue highlighted by the

academics, political leaders and observers of election funding was the

rising graph of campaign expenditure. It was stated that this was driven

by a "business proposition" that the prevalent political system in the

country offered. Incurring excess amounts of expenditure was seen as a

desperate attempt by most candidates to win the elections at any cost as

it not only offered a chance to recover the amount at a later date, but to

also earn manifold income if elected.

• State Funding Counter-productive?: Senior representatives advising

the Election Commission categorically held that though state funding

was acceptable in principle, it could be counter-productive as it could

become a source of more funds for the parties without accountability

and transparency. It would alienate the candidates from the people they

claim to represent, which is already a major obstacle to genuine

representation. The Election Commission, during a recent raid,

recovered ` 12 crore in cash and ` 32 lakh litres of illicit liquor. Also,

hashish, opium and other drugs, being offered as inducements to voters,

have been recovered during raids—showing how distant political

parties have become from the actual issues on the ground.

• Lack of Political Will: Political parties across the board are not

interested in genuine reforms; such reforms would essentially be a

threat to the prevalent political structure which suits their needs. The

absence of a law on disclosure of expenditure by political parties has

become a major reason for unaccounted funds. Furthermore, the

provision that donations less than ` 20,000 need not be disclosed was

being abused as a cover for illegal sourcing of funds; while declaring that

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most of the funding was through subscriptions, in reality parties were

receiving funds worth lakhs and crores and not making disclosures.

• On the question of entry of meritorious

politicians, it was lamented that merit was an incidental factor in the

present system. The four fundamental factors that determined the

success of individuals in electoral campaigns were caste, class, religion

and geographical region. If an individual happened to have some merit,

it was not considered important—not a quality that political parties

would have searched for in the first place. Most political parties are

driven by the "winnability" factor—all other considerations have less

value in comparison.

• Party Reforms: On reforms in political parties, most panelists agreed

that there was no legislation to govern inner-party functioning.

According to them, there were no transparent and cogent rules of

functioning, like for example rules that govern co-operative societies

and gurdwaras. All political parties functioned on the basis of a 'High

Command' culture. Instituting not only formal rules, but a culture of

inner-party democracy was crucial to the process of overhauling

political parties.

• Ineffective Legislation: With regard to taming unscrupulous

politicians, legislations like the anti-defection law were found to be

ineffective and counter-productive. The panelists agreed that such laws,

instead of encouraging genuine debate, had stifled debate both within

the political parties and in Parliament. Most independent candidates

often 'negotiate' with parties of all hues, discarding all principles of

political morality. Moreover, whatever reforms have been introduced by

political parties were due to public pressure.

Merit of no consequence:

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•the political leaders, maintained that one way forward was the separation

of Legislature from the Executive. According to them, the policy

paralysis, which has become a major concern in the delivery of adequate

services to the people, could be avoided if the Executive's functions are

separated effectively and in a decisive manner. But this was countered by

some other panelists. To them, while the idea in principle could be

accepted as an effective tool in the short-term, it was not going to solve

the myriad problems with regard to political parties. A striking example

of this is the US where the separation of the Executive and the

Legislature has not solved the problem of campaign finance, which has

been a recurrent theme in all presidential elections in that country. The

debate there has been the pernicious influence of 'only' corporate

funding as opposed to the 'judicious' mix of membership fees and

'limited' State funding. Hence, the separation of the Executive from the

Legislature would not solve the manifold problems and could prove to

dangerous in the long run.

• Make Corporate Funding Transparent and Accountable: The

panelists felt that corporate funding, which has increased over the years

and has been relatively transparent and accountable, was better than

other dubious sources of funding. The electoral trust established by the

Tatas was a model worth emulating, some pointed out. The trust gives

funds to all political parties, recognising their need for finances for

functioning. A similar model could well be adopted by other business

houses. Donating to all political parties on the basis of certain minimum

vote-share or an ascertainment of the popular support derived on

scientific grounds could well be the criterion for donations. According

to the panelists, the need for corporate houses to participate through

donations in the functioning of a representative democracy must be

recognised and such a culture should be suitably nurtured.

Insulate Executive from the Legislature: Some panelists, especially

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•which is likely to see an upward trend in corporate donations to political

parties and election campaigns, must learn from the experience of the

US where corporate donations are subject to strict reporting and

disclosure laws. It should be noted that reliance on corporate donations

has wrecked the election-funding architecture in the US–the primary

reason for the major role of small donors in the 2008 presidential

elections.

• Lessons from the German Model: Scholars from Germany held that

the German model, which was essentially a judicious mix of donations,

membership fees and State-funding (accounting for 25-30 per cent of

the funds), could be worth considering. Donations to political parties

were based on the criterion of the votes they had polled in the previous

elections. It was held that the media played a key role in ensuring that all

political parties and their sources of funding were regularly scrutinised.

• Need for Systemic Reforms: In conclusion, it was accepted by the

panelists that reforms in election funding were essential to clean up the

"rotten system". It was also recognised that "systemic reforms" were the

key, not piecemeal, short-term solutions, to solving the monumental

problems that faced campaign funding and political parties in India.

Learning from the US Experience: According to the experts, India,

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Opening Remarks by the Chair:

Dr. E. Sridharan, Academic Director, Centre for Advanced Study of India,

University of Pennsylvania

As you are all aware, campaign finance reforms in India is a vital issue and

actually we should not just be discussing campaign finance, which is specifically

an American term, but also party finance. After all, it is not only about election-

funding, but also about finance for sustaining parties even between elections. It

is essentially about party-funding, and election-funding should be considered as

a sub-text as it crops up whenever there are elections. There has been a wealth of

experience on party and election funding reforms in long-standing democracies

around the world; India, I think, can fruitfully study some of these experiences

and selectively pick and choose. Ultimately, India has to frame its own system

and design its own reforms in this regard.

Traditionally, there are four major types of regulation on election-funding. One

is on limits on expenditure; second is on limits on contributions, whether

contributions from individuals, companies, trade unions or for political action

committees like in the US; the third relates to various forms of State funding—it

can be all-out State funding, or it can be partial State-funding or partial subsidy,

sometimes on a reimbursement basis after elections—and the fourth on various

systems of reporting and disclosure, which also includes, in some countries,

legislation by which parties have to conduct their internal affairs. The parties

have to be internally democratic and have accountability mechanisms. So, these

are the four broad categories of regulation which usually cover the area of

campaign and party finance.

Mr. Manish Tewari (Member of Parliament, Indian National Congress)

Over the past three decades as a political activist I have fought, won and lost a

couple of elections, and participated in various election campaigns across the

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country. I am increasingly coming to the conclusion that we will need to possibly

do something or think radically about campaign finance because conventional

wisdom limits thinking, and trying to gerry mander with the laws just does not

seem to work. Over the years, this has been my personal experience; I think we

have to think out-of-the-box on the whole question of electoral finance

because, as I have noticed that over the years, notwithstanding the vigil of the

Election Commission, the amount of money which actually gets spent in the

electoral process has spiralled out of control.

I can give you the example of the Punjab election campaign, which just got over.

Going by some of the reports, in one of the Assembly constituencies in my own

parliamentary constituency, one of the Opposition candidates apparently has

spent between ` 18 and ` 20 crore. If that is the kind of money that we are

talking about, you have a very serious situation on the ground. So, if the official

ceiling is ` 16 lakhs, the Election Commision has not initiated any

disqualification proceedings. The mismatch is to the extent that the perception

is ` 18 or ` 20 crore and the reporting would have been about ` 8 or ` 9 lakh

because the Election Commission adds about ̀ 3 or ̀ 4 lakh on its own. So you

try and keep the expense accounts within that ceiling, providing a further

margin of about ̀ 1 or ̀ 2 lakh. So, there is a serious problem.

I have been wondering why somebody would spend so much of money in an

election. One obvious reason could be that there is a certain quid pro quo which

a person feels that he would get out of this by making the kind of investment I

have just talked about. If you are, at the end of the day, going to be a legislator,

whether you are on the ruling side or on the Opposition benches, I don't know

how you are going to recoup between ̀ 18 or ̀ 20 crore. So, therefore, at the end

of the day if we are going to have a serious look at the whole system of

campaign finance we will possibly need to see as to how we should completely

and absolutely divorce the Executive functions from the Legislative processes

because as I said if inducement could be a reason, then that divorce could be a

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solution. But in most instances, as my friend and colleague Rudy would bear me

out, it is not really so much about inducement; it is also about a certain sense of

prestige, a certain sense of local influence which people have now started

wanting after they have made money through legitimate means. They see it as

the next step in the upward progression of not only their careers but themselves

as a personality or the extended family which they have. So, the bottom-line is

that the role of money in the electoral process, notwithstanding the vigilance of

the Election Commission, is actually not decreasing, it is increasing.

What is also happening simultaneously is that the vigilance of the Election

Commission is driving a lot of this money underground; with the ban on

posters, banners, the use of or non-use of loudspeakers and other forms of

propaganda or dissemination of your point of view, a chunk of the money is

going into nefarious ways of campaigning. Eventually, whether this has an

impact or not, on the final outcome, I think the jury is really out on it. I have

heard and various people around this table also may have heard that a potential

voter actually takes from everybody who has a freebie to offer and then

ultimately votes in a way that he thinks is judicious. I can relate an anecdote from

my own campaign in the Lok Sabha poll campaign in May 2009.

We were in the last phase of campaigning and there were candidates against me.

They actually put out what in Punjabi is called, the shabeel—shabeel is a kind of an

open invitation to everybody to come and drink and party. How much impact it

had at the end of the day, I really do not know. If somebody after availing a

freebie can still be judicious, then I think we must compliment his very robust

commonsense and not really try and denigrate it by saying that he is selling

himself short or he is being purchased. Possibly he is being more clever than

everybody else put together. So, that is the other side of the coin in so far as

increased spending is concerned.

The third issue of course is how political parties are financed. I think there is

increasing transparency with regard to general corporate financing because

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increasingly more and more corporates have been moving away from the

traditional methods of non-tax compliance to possibly a more robust way of

trying to comply with whatever are the statutory tax limits, whether in terms of

corporate income-tax or in other taxation statutes. That definitely is having a

blow-back effect on political-funding. Increasingly, you would see that more and

more money does come in through the regular, accounted cheque process than

in briefcases or boxes or sacks or whatever other means of transportation. So, I

think, you are possibly seeing some sort of a positive development.

On the issue of how we can make this entire process more robust in terms of it

being accountable, being up in the public sphere for everybody to look at and

then be able to draw conclusions and comment about it—as I said earlier, I really

don't have a solution. The more that I have tried to think through the process,

the more I am coming to the conclusion that possibly the only manner in which

we would really be able to achieve a certain amount of probity in terms of

electoral finance or campaign finance or funding of political parties is by

looking at a programmatic paradigm shift in the way our polity is

structured—which is by insulating the Executive processes completely from the

Legislative processes.

Now, whether that is feasible or there would be a broad consensus on that, I do

not know. These are my personal views and not the views of the Congress Party.

I do not think by this superficial policing, even with the best of intentions, we

are really getting anywhere in making people observe or adhere to (spending)

limits.

Mr. Rajiv Pratap Rudy (Member of Parliament, BJP)

It just happened that this morning I had called Manish to discuss about Punjab

politics. There are two of us sitting here, both spokespersons of our respected

political parties and both have been in politics for the last 30 years. I was the

president of my college (union), became an MLA in Bihar and have spent 25

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years doing exactly what a hardcore politician in India does. The same has been

the case with Manish. For the last couple of months I have been thinking

seriously about campaign finance; today, I am very happy that someone from

across the political spectrum has spoken some keywords which are so

important. I look at the mess which we have created in the last 64 years. Now I

am 50, I became an MLA at 26. Looking back I feel that (a) I have wasted my 25

years and (b) I have to do something.

On the national canvas we see two things happening in this country which

possibly may not be associated. One is the Anna Hazare campaign talking about

honesty and corruption, which is obvious. We all are associating with it directly

and we are saying that this great thing is happening, that the country needs a

debate and there should be honesty and we should have a legislation for the

purpose. This is urban anger which is now getting reflected against the political

class. This anger is about many more things; there is anger about

unemployment, about new cars, about the capacity to grow in life, etc. All that

has got clubbed together and people say that politicians have created havoc in

the system.

There is another thing happening in society which possibly we are not talking

about today. This, I have analysed and will illustrate with an example. I had gone

for a lecture to the National Police Academy (Hyderabad); some figures for

2001 and 2011 prompt me to make this remark. In 2001 the number of people

who were killed in terrorist attacks or by terror actions in this country, including

civilians, paramilitary forces, army and the terrorists, was around 3,500-4,000.

The number of people in 2001 who were killed in Naxalite violence was around

400. In 2011, the number of people who were killed in Naxal violence was

around 1000, and the number of people killed in terrorist activities was around

400.

The writing is absolutely clear on the wall. Today, out of 642 districts in this

country, almost 225 districts are virtually not being controlled (by the

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government) but are in the grip of severe Naxal violence. I position these two

points: The Constitution which we have adopted, which is sacrosanct., the

Government has moved to amend it 115 times and got it amended 94 times.

And, we have thrown up a democracy which is possibly, I believe, quite

dysfunctional.

When we talk about election funding, my basic question is, why does any

individual who has to contest as an MLA/MP, why would he require so much of

money? For example, in Goa, with four Lok Sabha seats, each candidate,

whether from the Congress or the BJP (or other political parties), would be

spending ` 5-7 crore on one seat. I have been in charge of Goa (affairs in the

BJP), and we have seen money being given there. The question arises, for that

matter even in Uttar Pradesh and Uttarakhand, why should an X amount of

money be required to contest elections? What prompts a candidate to spend so

much of money? Why? My requirement for an election could be that I have to

set up a stage, I have to hire a car, I have to visit the place, my transportation

expense could be there, I could paint a poster, I can have an ad, I can have

pamphlets, that would cost me an X amount of money—but why do I need this

huge amount of money? I need that money because I have to position myself in

a manner that it becomes a business proposition. So, how can the government

or any political funding process match the business aspiration of a politician?

What Manish says is that in the system that we have, elected representatives

continue to occupy Executive positions—like an MLA who gets elected from

the majority party would further position himself to become a Minister or hold

a position of power, have a red light, have an authority. So, his entire working

ethos of getting elected is not on the basis of what you would call a legislator.

Take Uttar Pradesh, where 403 MLAs have to be elected; maybe you can find 10

good people, or even 20, 30, or 40. But what is the incentive that will attract only

the right people to contest elections? Manish and I have chosen to be in politics.

Most of us have not chosen to be in politics because it does not really pay you

back. The Westminster model of government (that India has adopted)

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prescribes that in order of preference, the first criterion is caste. So, the first

fundamental to look for in a candidate is caste. The second fundamental that

political parties look for in a candidate is class, whether he is an OBC, Forward,

Backward, etc. Caste would be, "I am a Thakur, he is a Brahmin" etc. The third

criterion by which political parties choose candidates, which we have been doing

over the years, is religion; whether he is from the minority, whether he is a

Hindu, Muslim or Sikh, etc. The fourth criterion is geographical location,

whether he comes from Bundelkhand, Uttarakhand, from the North, South etc.

The last criterion, which is quite incidental, is merit.

I have many arguments to prove the point I am making. I was looking into the

figures of the cash recovered (by the Election Commission). In Punjab, the cash

recovered was ̀ 12 crore and illicit liquor ̀ 32 lakh litres—7.18 lakh bottles of

X, Y and Z. I want to understand, how would you take care of this, how would

the State take care of this, as well as the distribution of hashish and opium? Why

should an election process require all this? Why? Because you have created a

system which you say is the most functional system and that the last man is

coming to vote, etc. I think during Partition, (then British Prime Minister)

Clement Atlee had said that India does not deserve this political (Westminster)

system, but we politicians said, “No, no. since they are saying so, this is the best

system.” Now, what has happened actually, where have we landed up? We are

not picking up a debate on this subject because it suits the political class, it suits

me, it suits Manish.

An aspect which most of us are refusing to acknowledge is that we have already

come to a point where we are having a referendum; it is no more a majoritarian

form of government. You look at Tamil Nadu, the reference is between

Jayalalitha and Karunanidhi, you look iat Bihar, the election is between Laloo

Prasad and Nitish Kumar, you look at UP, the election is between Mayawati and

Mulayam Singh, you look at Punjab, it is between Amrinder Singh and Prakash

Singh Badal, you look at Gujarat, it is a platform of the BJP but the referendum

is Narendra Modi versus others. We have already reached the point where we are

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talking about referendum, we are talking about a kind of 'presidential order'

(form of government) but are refusing to acknowledge it. The day you decide

that MLAs and MPs will continue to be only legislators; they will only be the top-

most, strongest, most powerful legislators; that they have to get up in the

Assembly (or Parliament), they have to make notes, they have to prepare

themselves, they have to talk for the people, and they can't become Ministers, 99

per cent of the people who are getting into politics will leave politics—and then

you don't have to look for funding—you will not require it because you are not

going to make money or dispense favours.

Today, since one can become a minister after being elected by the people,

everyone asks for their pound of flesh. If Manish becomes a Minister

tomorrow, I think he will be the worst sufferer because his is an urban

constituency which is very demanding. My only submission is that this debate

would be very fruitful if we can discuss the financial order. You cannot match

present aspirations with reforms. You can match these only the day elected

representatives are good people like you and me, sincerely care about the future

of the nation and don't have to think, "how can I get into politics". It is my

submission here that before we proceed further to discuss electoral reforms on

financing, we have to discuss the political system which has been there for 64

years. Both Manish and I know it may not happen, we may spend another 20

years debating because regional parties and other organisations would not want

change. But we have to build up a debate if we want right things to happen in

politics, i.e., to segregate the legislative process from the Executive. This is the

key and if we can't proceed with it, all our discussions will be in vain. So, this is

my submission. I am sure we can open a debate on this.

Chair: Let us open up the floor to an interim discussion instead of taking all the

five speakers in a row so that we can get some questions and feedback. Please be

very focussed in your questions.



Mr. Mohan Guruswamy, Distinguished Fellow, ORF: I am absolutely

delighted to hear two politicians speak this language today. For the first time in

my long innings, I have heard this kind of dispassionate talk. Rudy raised a very

significant point on the role of parliamentarians. There is no reference to

political parties in the Indian Constitution, yet, when you talk about campaign-

financing, you go and give money to a group or an agency which is in a limbo.

For a cooperative society you have rules of functioning, for a gurudwara there

are rules, but there are no rules for political parties.

So, I think you have to legislate for that because if the State is going to fund a

political party, which I think is a good idea, then that political party must

conform to certain norms and behaviour. Most parties have this 'High

Command decides' culture, which is why you are increasingly seeing children,

nephews, grandchildren, all becoming political heirs and successors. I don't

know if political parties can conduct inner-party elections anymore, or whether

the Election Commission should conduct these elections for them. After all,

you have a Registrar conducting elections for cooperative societies. So, these are

much larger issues. Just restricting it to campaign financing means you want

sarkari paisa to do exactly what you are doing now.

Dr. Sridharan: The notion that separating Executive power from legislative

power will actually help you insulate from corruption is misplaced. The

empirical evidence in the US does not support it. There are a number of

Senators who take money, whose financing has been called into question; one

has had to resign, or he has been sacked. You can, through the legislative

process, carry out many Executive functions like allocation of money, do

favours, withhold favours, do anything that currently elected representatives are

doing while holding Executive positions. So, that is not the solution. In the

recent Assembly elections in Kerala, the Congress party could not deploy

helicopters for ferrying their Central leaders for campaigning because there was

a huge uproar from the people, the political opponents and the media; they had

to abandon the idea. So, there is a certain consciousness of the polity which

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militates against the use of money power in a wanton display of the ability to

spend money to influence voting. While you are completely right that there

cannot be any isolated reform in funding of elections or politics in general and it

is more a systemic thing, the solutions that have been suggested, I don't think,

are the ones that will help you change anything.

Mr. Anil Bairwal: As Mr. Tewari has said and Mr. Rudy has alluded to, people

are already spending so much money on elections. Questions are being asked

about too much power being given to the Election Commission, that while it is

not allowing any movement of money, underground money is being used for

campaigning. Even if the Government was to provide campaign-funding, when

people are spending ̀ 18-20 crore and showing ̀ 16 lakh as spent, is the legally-

sanctioned spending for an Assembly poll candidate going to make any

difference?

Mr. Rudy spoke about trying to bring meritorious candidates into the system.

How is this going to come about, when today there is a complete lack of

transparency in how most parties select their candidates? Workers of a political

party have no powers whatsoever in deciding what happens in the party;

everything is decided by the High Command. In fact in UP our analysis shows

that the number of candidates with a criminal background who have been given

party tickets has actually increased compared to the last elections; from 28 per

cent to 38 per cent. A word about the working of political parties: I completely

agree that until we find a way to somehow regulate the functioning of political

parties, bring in more transparency in their functioning and everything that they

do, including inner-party politics, we are trying to just fix things which will not

solve the basic problems that we are aiming at.

Mr. Manish Tewari: As far as the issue of party-financing and election-

financing is considered, it is important to consider the American model where

the funds are given to intermediaries or citizen committees, which distribute

the funds. But in the US they have a strong democratic tradition and citizens'



participation is there at every level, starting from the primary-level to the

national leadership convention. But in India it will be a complex situation

because we do not have a very strong democratic tradition. In the present

situation it would be interesting to adopt the model started by the Tata

Foundation, in which parties are funded on the basis of their electoral

performance. Other corporate houses and the Government can also consider

this model.

When we talk about electoral reforms, it is also important to talk about party

reforms. One interesting reform, which I have been writing about in my articles,

is that in India parties should elect their leaders at national leadership

conventions, comprising provincial party delegates voting as individuals rather

than as State blocs as in the US, where they elect their presidential candidate

every four years. This will give wider support, national visibility and more

democratic legitimacy to the leadership. It will also help in building the

aggregation process in political parties.

Participant: Irrespective of the political system, whether it is a parliamentary

form of government or presidential form of government, we find a lot of

instances of corruption, of campaign funds being misused. What we really need

is overall political party reforms and campaign funding reforms. Various steps

have to be taken. Campaign-finance reforms alone will not help the situation.

Mr. Rajiv Pratap Rudy: We are talking from experience… we are talking of a

bottom-line. Before I contest elections, I have to collect all the affidavits: that I

am not dishonest, I have this much of property, I am not a criminal. Even the

Prime Minister has to submit 20 affidavits saying that is he is the best man in the

system! This is because we legislated to create a system where the Election

Commission says that if you are filing your nomination, show me how much

property you have, that you are not a criminal... we have devised legal ways and

laws to say that this man is very nice because he has put it in affidavits. Now, a

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person who is going to get elected has to give 100 undertakings that he is a very

nice man. So, this is the system.

You have a democracy where the late Rajiv Gandhi came in with 401 seats in

Parliament; he brought in an anti-defection law which stated that only if one-

third of the elected members of a party got together could they break that party.

So, we were very scared that all these genuine elected people would switch

loyalties… Then in 2003 there was my Government, an NDA Government,

which said that you needed two-thirds majority to jump sides. You are passing

laws just to tame politicians, where the basic (premise) is that every individual is

eyeing for a position.

What we are suggesting is that the present format of the electoral system is so

messy that all the issues come back to the same point: How do you find the right

people in politics? Why does the present system not allow the right people to

come in politics? This is why we say we need to have a debate; we know nothing

is going to happen. We are a part of the system. Manish will take over further

from here.

Mr. Tewari: I just wanted to endorse what Rudy was saying. In the political

lexicon we have a term called 'winnability', which is a veneer that insulates a

person from the most heinous of crimes. I think what Rajiv is advocating is

something which needs to be looked at seriously. It may not be a perfect solution

but it is a solution nonetheless. Till you do not have a complete hiatus, a

complete divorce between Executive functions and legislative functions, your

ability to be able to either clean up elections or police that clean-up is going to be

ineffective; there is no way in which you will be able to do it.

The Election Commission has been very pro-active for the last 21 years. We

have also gone on television and praised the Election Commission for the

excellent work they do; to be very honest to them, their observers and the

people they deploy actually try and do their job to the best of their ability; but,



then, you are sending a person from a particular State, let us say Andhra Pradesh,

to Punjab, and the poor fellow does not understand the language, he does not

know the lay of the land and he has been there for only five or seven days. So, he

tries to correct the situation based on whatever little inputs he gets. But, as I was

pointing out earlier, when you juxtapose a limit of ̀ 16 lakh against an expense

of ̀ 20 crore, how are you going to handle the matter?

The only way that you can possibly make a beginning is by looking at larger

systemic reforms; you have an election for an Executive process, put that

Executive under a Lok Pal or or whatever 'pal' you want and have the most

robust anti-corruption laws in place. This way you may be able to get a handle on

Executive corruption. As far as the legislative process is concerned, if you

insulate it in this manner, you may not have a 100 per cent success rate but I

entirely agree with Rudy that you may have to begin with a 30 per cent, 40 per

cent or even 50 per cent success rate and you can keep on improving upon it. But

if you continue this way, the way that we are going…it is not going to help.

You talked about helicopters, about people's pressure in Kerala. Honestly, that is

a miniscule expense. I think the public uproar was completely uncalled for

because if somebody has to criss-cross a State and uses a helicopter, probably it

is hardly any expense at all, ` 2 lakh a day or something of that sort. This is

hardly anything compared to the amount of money which actually gets spent. If

you take the case of Punjab, it is not alcohol any longer, not even opium; it is

cocaine, Ecstasy and designer drugs. So, therefore, if at all we want to do

something seriously about this, let us think very seriously about what Rudy has

said, let us try and develop on it, maybe we will get somewhere. This artificial

policing or this kind of a gloss which we are trying to put on, is not going to

work.

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Chair: Mr. T. K. Arun will now make his presentation

Mr. T. K. Arun, Editor, Opinion, Economic Times

I completely agree with Mr. Guruswamy that political parties are rather very

lightly regulated. The Representation of the People Act is the only piece of law

which talks about political parties and puts in some conditions on how they

should behave. In 2008-09, the year in which parties were mobilising funds for

the big battle in 2009, the BJP filed audited accounts for ` 220 crore as income

for the year.

The Congress filed an income of ̀ 393 crore or something like that, whereas the

actual income and expenditure of these parties would have been much more.

The crux of the problem is the complete lack of transparency in the funding of

political parties. Now, can such transparency be instituted, can we bring in this

transparency?

To say that we should follow the 'Tata Trust model' does not really solve the

problem because you can set up a trust and they can give you money and that

money will be recorded—but what if someone is willing to give money and it is

not recorded? Let us take this issue in its entire seriousness. If a company gives

money to a political party or to multiple political parties "off the books" of that

company, you are making nonsense of the practice of auditing accounts of the

company, you are making nonsense of corporate governance, you are making

nonsense of the function of having independent auditors, audit committees

and their reports. Everything is being undermined by the way you fund politics

in this country.

The question is, how can we realistically change this? If you have the political

will, the starting point must be the monitoring of expenditure. If you make it

mandatory for every political party to file a monthly expenditure statement in

the first week of the following month, starting from the village and panchayat



levels, and make it open to challenge by watchdog bodies and by other political

parties, and institute an expanded body of the Election Commission as the

moderator who will actually validate the expenditure, things can change. Sure,

some money that is spent on buying drugs that are illegal might not be reflected

but a large part of the expenditure of political parties would be reflected

because other parties and watchdog bodies could contest the low claim of any

party. This expenditure should be explained in terms of source. There is no

reason why this cannot be done.

You might say Mayawati claims that the vast majority of the money she collected

came through small contributions from people and could not be recorded. This

might have been a possible excuse 20 years ago. Today, it is possible to have

small, hand-held machines that can be connected to some computer server that

can record every single contribution by any donor, even in smaller

denominations of ̀ 5 and ̀ 10, and generate a receipt for it. The question is: do

we have the political will to do this? We have already reformed the economy to a

large extent. State discretion now exists only in some sectors, primarily land and

mining lease, or wherever natural assets are involved. The more you bring in

rules of transparency in conducting Government business and reduce the role

of arbitrary discretion, more transparency will prevail in political funding. The

reason why there is so much of support for Anna Hazare and his reformers is

because now those sections of society have emerged which are prospering

without any Government patronage. They are victims of extortion; they pay

money to politicians and to civil servants. They are doing it not because they

have got patronage but because they are victims, they just have to pay. They are

actually getting nothing from the system but they are made to pay, and this is

getting articulated as support for the demand for a Lok Pal.

It is completely within our ability to clean up the system, starting from

monitoring expenditure to forcing parties to disclose their sources of finance.

We should regulate political parties, have a separate law to govern the conduct

of political parties, make inner-party democracy mandatory, make selection of

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candidates on the basis of primaries as is done in the US, i.e. the candidates

actually have to win the support of registered party members. Radical reforms

will require possibly the right to recall, the right to reject a candidate; you would

have proportional representation; you can have various changes in the polity but

even without such thorough reforms, it is possible to greatly reduce corruption

in politics.

Mr. S. K. Mendiratta, Legal Advisor, The Election Commission of India

As has been rightly said, the law relating to disclosures by political parties is

absolutely absent today. Under the law there is a ceiling fixed for the expenditure

of a candidate but there is no ceiling on the expenditure of any political party.

Some question was raised about ` 16 lakh being the spending-limit and ` 20

crore being spent; if you see our record, in 95 per cent of the cases in the last

elections, the returns from the candidates show that most of them have spent

only ` 8 or ` 9 lakh. Beyond that nobody has spent. So, we should ask the

question, why should we not reduce the limit if you are able to contest elections

with ̀ 8-9 lakh?

On transparency in funding, for the last 15-20 years we have been asking for a

beginning with an annual audit of political parties' accounts by a panel cleared

by the Comptroller and Auditor-General (CAG) or the Election Commission,

which would be made public. In 1998, the Government set up the Indrajit

Gupta Committee on State funding. I happened to be the Secretary of that

Committee. One of the issues related to the audit and publication of political

party funds by independent auditors. There were nine political parties; all major

political parties were represented on that committee; our present Prime

Minister Dr. Manmohan Singh was a member; so were Mr. Somnath Chatterjee

and Mr. Vijay Kumar Malhotra. Every political party said the present system was

okay: they had very competent chartered accountants, they got their accounts

audited, so what was the need for independent auditors and why should the

political parties publish the audited accounts? This was a very minor thing for



them. The present law says that parties that collect more than 20,000 in

donations have to send an annual list to the Election Commission before filing

returns with the income-tax authorities. Most political parties are not submitting

the list; they say all their individual collections are of less than ̀ 20,000. Parties

that have filed, even if they have collected crores of rupees, hardly show a few

donations above ̀ 20 lakh. This is the situation.

The Election Commission can go only by the law which is given to us by

Parliament; we can't do anything on our own, though sometimes we have done

something that is not provided for in the law. Sometimes we get the flak for that,

and sometimes we get appreciation also. This particular exercise which we are

now undertaking regarding the seizure of money and keeping a check on the

flow of cash and other things during the current round of elections, even for

that at least 10 or 12 petitions were filed before the Madras High Court. They

were saying, "even while walking on the road or travelling, we are being

subjected to harassment". We had to explain it all to the court, and fortunately

for us the court was very sympathetic to us. It observed: “If you have to bear a

little inconvenience and if more public good is served, you please bear with it.”

That is why the Election Commission was able to collect about ̀ 70 crore. Even

in the last elections in Punjab, at least 37 kilos of heroin was seized, and so were

bottles of liquor and other things. Punjab used to be known as the land of five

rivers. Now they say sharaab has become the sixth river .

'Winnability' has been raised as one of the issues. If you say that the other party

has put up a dacoit, so I will also put up a dacoit, then nothing can be achieved.

Since 1998, we have been suggesting that those candidates who are facing

serious charges of murder, dacoity, rape, etc., where the punishment is more

than five years and the court has framed the charges, they should be temporarily

barred from contesting elections. We took care and further suggested that the

charges should have been framed at least one year before the election so that if

somebody is aggrieved he can go to a higher court and have the charges set aside

or stayed.

`

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This matter was considered by a committee of Parliament. They said our

jurisprudence is that a person is presumed to be innocent unless convicted. If

you go by that logic and jurisprudence, then why is it that lakhs of people are put

in jail and are not even being given bail? They are not convicted so they are still

innocent. Why do you put people behind bars under preventive detention law?

They are not yet convicted, they are all innocent as per jurisprudence. They

cannot live with their families, they cannot meet their children, they cannot earn

for them; their family members may be starving. If you can deprive them of all

those fundamental rights, what is so great about the right to contest an election?

We have also been demanding a law, a separate law, on regulating the functioning

of political parties: How they should work, how there should be internal

democracy and periodic elections and publication of accounts and other things

so that there is transparency. All this we have been demanding but unfortunately

we are not in a position to do anything on our own. I will give you another

example. Somebody was saying that the candidates are being asked by the

Election Commission to disclose their assets, liabilities, etc. That was actually

not our order.

That was an order given by the Supreme Court. Some concerned citizens went

to the Supreme Court and said that, "at least you ask them to disclose assets".

The Supreme Court took the view that every voter has a 'fundamental right' of

expression, the vote is an expression of that right. For making that right

effective, he should be able to make an informed choice, and for that informed

choice he should be provided at least the basic information about the

candidates. Voters should know what type of criminal antecedents the

candidate has, how many assets, liabilities, what educational qualifications he

has, etc. The Supreme Court gave a direction to the Election Commission to get

this information and disseminate to the people at large.

We thought that if the law is amended in manner that this information comes in

the nomination paper, it would be better. We wrote to the Government, asking



them to provide these things in the nomination paper. The Government

convened an all-party meeting and there was a unanimous view that nothing

should be made known to the people except convictions. Parliament amended

Section 33(V) of the Representation of the People Act 1951 overruling the

earlier judicial order on criminal antecedent disclosure. So, candidates will file an

affidavit giving only the information with regard to convictions and more than

one-year prison-term. They said this would be the case, notwithstanding

anything contained in any judgment of the Supreme Court, High Court, etc.

The second round then followed before the Supreme Court. The Association

of Democratic Reforms (ADR) and others went to the Supreme Court, which

struck down the particular provision. This is how now the Commission's order,

or whatever you may call it, instructs that candidates must file an affidavit giving

relevant information. You will be surprised, Sir, that when this matter was being

discussed in Parliament, there was a lot of opposition from some parties, some

very important parties, who asked why should a candidate state how educated he

is.

We pointed out to them that if you see the Constituent Assembly debates on this

issue, Dr. Rajendra Prasad (as the Chairman) closed the arguments by saying

that at that juncture 84 per cent of the people were illiterate, very few candidates

were literate and most of them might not be having any formal degree. “If you

provide any educational qualification as a condition we may be out, but the time

will come when the Parliament can do that”, he had said. In 2001, the move was

being opposed.

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Mr. Anil Bairwal, National Coordinator,

(ADR)

A lot of things have already been said about criminalisation, about political

parties, the need to bring more transparency and inner-party democracy. I would

like to touch upon a couple of other points. One thing is about ticket-

distribution. This goes to the core of this money-power issue. The tickets are

given by political parties to people knowing that these are the people who can

spend more money than others. At least this time a lot of candidates were

named well in advance. But there are times when till the last moment, you do not

know to which political party a particular gentleman belongs because he is

negotiating with every party; he is probably trying to join the party from which

he can get the ticket with the least money. It again goes down to the need to

regulate the functioning of political parties. Mr. Mendiratta said a lot of

proposals have been sent to the Government over the years; several

commissions have been set up. But I think political parties have not done their

due; what people were hoping them to do. I am also not sure what they would do

if some recommendations were to go from here.

Mr. Arun gave the example of Kerala where helicopters were not used. The only

thing that works with the political parties is public pressure. I think State funding

would isolate political parties from voters. To some extent, I think they are

already detached from the masses. State funding would detach them even more

because they would not have to look for funding. Some political parties now say

that they don't take funds from big business, they concede that they are taking

money from common people. So, if we say, “You get this percentage of votes,

we will give you this amount of money”, they will sit back and relax.

The third issue is that political parties need money. That is for sure. They cannot

carry out the functions that they are supposed to carry out without money. Now

the question is whether the State should fund them, or whether we should make

other provisions to bring in white money. I agree that we need to tighten the

Association for Democratic Reforms



system instead of bringing in State money; nobody is going to control the

current happenings. They will continue to happen. But maybe we could find a

way to increase the component of white money in the electoral process so that it

just does not thrive on black money alone.

The Election Commission is a body with constitutional status but it does not

even have the right to make election rules. Every time they have to make a minor

change they have to send their request to the Law Ministry. Even the report

about political parties from the Institute of Chartered Accountants of India has

been sent to the ministry. The ministry has been sitting on it and it does not

matter that it is a Congress Minister right now; the BJP has done similar things

while in power in the past. I think most parties play the same game.

Finally, I would just like to comment on disclosures. A lot of political leaders

don't like disclosures. But there is a need to bring in more disclosures. One of

the disclosures is of register of interest which is currently in the Rajya Sabha.

The Political Ethics Committee decided not to make it public and CEC had to

issue a compliance notice. When we are talking about probity and how to bring

in better candidates and better people into the system, the Lok Sabha still does

not have anything related to register of interest. Mr. Rudy was talking about

separating Legislative and Executive functions, and how to make it less

attractive for people to come in into the political system. One way may be

disclosures, particularly for elected representatives, like in some other countries.

In the US, every Senator's income-tax returns are on his website. From ADR, we

have asked for the income-tax returns of 20 MPs whose assets have increased

the most between 2004 and 2009. All the 20 MPs have said they will not disclose

and the appeal is currently pending with the CEC. Things happen here only if

the CEC comes in, or a court comes in. I think all of us are looking forward to a

time when political parties will pro-actively take some steps to reduce the

incidence of some of these problems.

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Chair: Before opening up the floor to questions and comments, I would like to

give the issue some historical perspective. The origin of the malaise, of the

dependence, enormous dependence on unaccounted money and of extremely

high levels of election expenditure, unaccounted election expenditure, may

have been in 1969, when corporate donations to political parties were banned. It

was made legal again, under Section 293 of the Companies Act, only in 1985. In

1969, in the context of a highly regulated import-substituting economy,

corporate donations were banned; the question arose as to where an adequate

legal source of funds would be available for political parties.

State-funding was introduced in a range of countries through the 1960s, 1970s

and 1980s; you can have a range of designs for State-funding; it can be full State-

funding, on a vote-share basis, on a per-vote basis, on a reimbursement basis; it

can be partial, on a matching-grant basis or against private funds raised. In 1969,

when you banned legal corporate funding of political parties without

substituting it with State-funding, you created a huge vacuum, which meant that

parties were willy-nilly forced to go under the table, to the black money

economy, and were dependent progressively on unaccounted funds.

Then you have another development in 1975, when in the 'Kanwarlal Gupta vs

Amarnath Chawla, case, the Supreme Court said that party expenditure should

also be counted into a candidate's expenditure-limit. The Government

amended the law and appended explanation (i) to Section 77(1) of the

Representation of the People Act, to say that party spending will not be counted

for the purposes of the candidate's expenses limit and, therefore, parties can

spend any amount. The candidate has a fixed limit which has been revised

progressively, which for a Lok Sabha seat is now ̀ 40 lakh, which is a very small

amount compared to the actual amount that gets spent. Effectively, you

removed all expenditure limits because parties could spend as much as they

liked; even after the 2003 amendment brought in by the NDA Government,

where candidates had to declare what their party spent on them, if a party claims

that it does not mention the name of the candidate, does not associate its



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funding with the candidate, it says it is just propagating the party programmes,

then it falls outside the spending limit for a candidate.

The combination of what happened in 1969 and then in 1975 was that you had

no adequate legal source of spending till corporate-funding was reintroduced as

legal in 1985; you had a highly regulated economy where the licence raj was very

much in place; you also had unlimited party-spending, which meant that you had

an arms race between parties at the time of elections. Even the re-introduction

of corporate-funding in 1985 really made no difference because by that time the

dependence on unaccounted money had become deeply entrenched in the

system; also, until 2003, there was no tax incentive. There was the fear of lack of

anonymity, and of being penalised by the party which you did not fund, if it

came to power some time in the future. So, the entrenchment of political parties

in the unaccounted economy became very deep. Although, as Mr. Manish

Tewari said, the 2003 amendments have introduced a degree of transparency,

and more and more companies are now contributing by cheque and claiming

tax-deduction, it is still a small percentage of the actuals.

Now, what do we do about this? As I said at the beginning, there are four types

of regulation of elections and parties: limits on expenditures, limits on

contributions like in the US and public-funding of some kind or the other. It

can be designed in various ways and forms with different types of reporting and

disclosure requirements. So, in principle, one way is to tightly monitor

expenditure and also link it to a tight monitoring of contributions, like what Mr

Arun suggested. But you have other systems also. In the US, there is no limit on

expenditure, but it is relatively clean. You don't have this kind of corruption

because there are very strict reporting and disclosure requirements.

Remove what is basically a farcical cap on expenditure. Why have candidate-

limits of ` 40 lakh when you exempt parties, and effectively make it a

meaningless limit. Why have it all then? Do away with it and focus on having

strict disclosure. There are cash and unaccounted contributions; even if you


contribute by cheques of 19,999, you don't have to disclose it to the Election

Commission as it is less than ̀ 20,000. So, this is also farcical. If you have a strict

system, every contributor has to be identified and the contribution recorded. So,

even if you don't have expenditure limits, and you have a very strict system of

reporting and disclosure, you can clean up the system to a considerable extent.

The other way is to introduce public-funding of some kind. This can be

designed in various ways. I would encourage our guests from Germany to say

something about this. We could learn from the systems that exist in Germany

and other countries in Europe. It could be on a matching grant basis, which is

not totally divorced from the people as you said. If it is just dependent on vote-

share, you don't have to go out to the people to raise money but you can say that

if you raise X amount of money we will match it, 1:1 or 1:2. Give them some

incentive to show their credibility in terms of raising money, in terms of mass-

support, in terms of getting contributions and match it with State funds to some

extent. Along with this, as others have said here, introducing strict

accountability measures and internal democracy within political parties has to

be mandatory because you cannot give a State fund to, say, a leader who is totally

unaccountable to his party. You can have different packages designed. The

totality of the package and the incentives is what really matters.

Participant: What about separating legislative functions from the Executive?

Chair: I don't think in a parliamentary system that can be done. In a presidential

system there is separation of powers. If you are a member of Congress in the

US, you cannot become a member of the Executive. Here in India the ministers

are drawn from the Legislature, from Parliament or the State assemblies.

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Question & Answer Session

Mr. Mohan Guruswamy: In the early part of the Republic, after elections the

defeated candidates could file petitions challenging the election on excessive-

spending. There have been plenty of cases, like the celebrated case of Dr.

Channa Reddy, the then Union Minister of Steel. Within six months of

becoming Minister, his election was thrown out for corrupt practices. So, there

was an incentive for candidates to collect information about one another and be

ready for court cases.

Now the judicial process is so long and extended that these things are never

resolved. I have the case of a friend of mine, Ram Bahadur Singh, who

contested the parliamentary elections from Bihar in 1984. He led in all Assembly

segments, but was declared lost owing to political pressure on the Returning

Officer. He fought for five years, he won the case after the term of Parliament

was over. You need to combine all what has been said here with quick judicial

processes. Maybe you need separate fast-track courts; within 3-4 months you

should have a verdict. Otherwise, people are denied their right to

representation.

Dr. Lukas, Political Counsellor, German Embassy: I am from the German

Embassy and I would like to take up your invitation to say a few words on how

we deal with the system or with the parties in general. We don't have campaign-

financing, we have party-financing. We have a mix of ways in which we have

party-financing; we have public-financing by the State, financing by member-

ship fees, financing through donors, donations by private persons as well as

corporate donations. The public finance depends on the party but if you look

up the website of the German Parliament, public-financing is limited to

somewhere between 25 and 30 per cent for each party. That is a major part of

financing but it is not the bulk. The bulk actually is made up either by

membership fees or by donations. Some parties, I have to add, also have some

economic activities. There are parties who have publishing houses, etc. This is

regarding the financing.

Maybe a line on the way public financing is being done. It is strictly in correlation

to the success or the votes the party gained in the previous elections. For

example, for every vote a party gets it gets a certain amount of money, and it also

is in correlation to the membership fees. For every euro a party gets as

membership fees they get a certain amount of cents in public-financing. So, all

in all, there is a complex system.

Having said that, we also have a very strict system of accountability and of

disclosure. In fact, every party has to disclose its income and its expenditure,

annually, and these disclosures are being supervised or checked by the

administration of Parliament. It is obviously bad to be under the scrutiny of an

administration but it is even worse to be under the scrutiny of the media. Yet, no

system is perfect. In Germany, we have had several cases of black money

pouring into political parties. The good news is that those cases have been made

public in the media and they led to big changes in domestic politics, which led to

the resignation of politicians. So, I would agree with what some people said here

that the key is accountability and disclosure, and German history has shown that

the media plays a key role in pointing fingers at things that go wrong. I will finish

by saying that in my personal opinion, the question whether you have a

parliamentary system or a presidential system must be de-linked from the

question how you finance parties because in any system you would have parties

and in any system you would have parties that gather money and that want to

spend the money in their favour.

Participant: You have heard a political science perspective; I would like to give

an economist's perspective. India is a very complex democracy, at different

stages of building but the crux of the matter is that you have to reform vested

interests by vested interests. Each political party thinks tomorrow it will come to

power. So, all the loopholes should be retained so that when a party comes to



power, it can make money. It is very important to note that politics has become

business. Economists never thought that public expenditure would be treated

as a milch cow. We thought there would be benign governments, Welfare States,

people full of character and people who would not extract money. In foreign

countries there is the State, but here we have made common people the main

donor. Even if you collect ̀ 10 per person imagine how much it comes to.

We are not debating merits and demerits; there are so many other concerns and

in a holistic fashion you have to count them. From an economist's angle, we

assume that the system is fair, assume that there are enough checks and balances

and accountability and transparencies which are the pre-requisites of any moral,

political, ethical system of governance, including elections. The idea of

economists was that if parties start collecting money, particularly from business,

businessmen also treat it as an investment. If a businessman gives ` 1 lakh, he

will expect ` 10 lakh in return, sooner the better. The pay-back periods are

getting reduced. Mr. Rudy said the black money component in campaign-

spending is going up. We are already seeing in every transaction that the black

money portion is going up. So, the idea is not to influence public policy through

money power, it is particularly for influencing business policies, economic

policies to the advantage of a particular corporate house. This is the main idea.

If you isolate it, and if elections are genuinely funded outside of vested interests

who turn public policy for their personal and corporate benefit, the logic of the

economists still remains valid.

But this has now manifested itself in so many other ways that we are simply

overtaken by corruption, we are overtaken by black money; economic reforms

have not helped simply because political reforms, which we all economists now

recognise, are a pre-requisite for good governance. Economic reforms are not

enough by themselves. It has been well said that just focussing on election

campaign funding will not be enough. It will be a brick, an important

component. Don't reduce it to nothing, but for heaven's sake, as Mr. Mendiratta

and others have said, you have to first make sure that there is political will and

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minimum agreement among all political parties for not violating this code of

national responsibility towards cleaning up the system. As of now, no party is

interested. Each party wants to play the same game, “Ab tumari baari, aglee baar

hamaari baari aayegi”. A corporate would say, “reform others, not me, tax others”.

Vested interests are tied up together and no one is seriously interested in

reforms, everyone is interested in putting obstacles or leaving enough loopholes

to reap the benefits from non-regulation.

Certainly we need a regulator. If we have learnt anything from reforms, leaving

it to markets would not help, leaving it to Government will not help. Each has a

vested interest, each has fundamental weaknesses of its own—market failures,

State failures, and people's failures. People too would like not to pay taxes. No

one is honest to the core. So, under such circumstances the first pre-requisite

will be political reforms of the parties and candidates. Good candidates have to

be certified by various parameters, and people at the grass-root should decide

who should be fielded or not, not the political parties.

Participant: As has been rightly said, apart from public pressure, nothing

works on political parties. I have been in touch with the political system for over

three decades; every time there was a question on whether criminals could be

fielded or not, every political party would find one logic or the other to evade it.

Political parties think that they are above all. That is the most unfortunate thing.

Unfortunately, the entire political class is being seen as a villain, which is not true

because political parties, after all, don't descend from heaven. They also come

from the society. So, society at large has also to be viewed in context. But

political reforms, as has rightly been mentioned, is one vehicle through which

we can achieve many things.

What do we mean by a political party? They, like all other organisations, need to

be audited, need to be regulated. Then comes the question of what kind of

candidates? I am really appalled when political party leaders say that if a

candidate has not been convicted, how can he be debarred from contesting?


This is absolutely ridiculous and every political party, every political leader

speaks the same language. We have seen the recent issue on the Lok Pal, with all

kinds of arguments to derail the whole process. Somebody talks of federalism;

suddenly federalism becomes such an important issue. Even those parties that

are highly supportive of a strong Centre, they are also talking of federalism. We

have to all agree that unless public pressure is built, political parties are not going

to agree to anything.

Dr. Niranjan Sahoo, Senior Fellow, ORF: Just two issues which caught my

imagination, based on what Mr. T. K. Arun said about disclosures. We can

actually begin with the panchayati raj institutions, egging on others to disclose

more and more information. But here I sincerely feel that the media is actually

missing in action in terms of reporting, in terms of playing the activist role

which it is playing on many other policy issues, be it on the Lok Pal, be it on many

of the other issues relating to environment and other concerns. Some process

has already been started on disclosure, criminal antecedents and many other

things. Now, routinely, a lot of things are coming to public knowledge, like

corporate donations to different political parties. But why are we not getting

actually deeper and looking at it in terms of who donates and whether it has any

linkages to influencing policies adversely or in any one's favour. I am talking

about the crony capitalism aspects, which have come out vividly in the 2-G case.

So, this needs a thorough probing.

Of course, a research organisation like ours and many others also have to play a

role because we don't have much empirical work on this issue, like how much

money is involved, what kind of role it plays in influencing elections or

determining the outcome. We don't know much about it in India unlike in

Europe and the US. They have reams of empirical work to validate many such

arguments. The time has come to actually take this issue very seriously on our

part, apart from expecting the political class and the civil society to take the lead.

Here I sincerely request the media to play an active role because if they don't

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raise this issue, we will get to hear about it only during election time and that too

would pass.

Mr. T.K. Arun: But media has other priorities now.

Dr. Niranjan Sahoo: I know, but this is the mother of all the corruption. It is

not just the Lok Pal. You need systemic reforms on campaign-funding and

restructuring or redesigning of the system so that good candidates are chosen.

This would attract better talent into the system and infuse new blood through

inner-party democracy. This is not happening. There is a typical feudalism that it

is being practiced in the political system. How to break it? Making a beginning is

very important.

Dr. Klaus Julian Voll: I have a question for Mr. Rudy. In the late 1980s, your

party showed a great interest in the German model of party-financing and also

the mixed electoral system. At that time the BJP was a smaller party. You have

obviously lost interest now. If you are so sincere about reducing these

anomalies, wouldn't it be better to start by talking about financial reforms with

regard to political parties? Wouldn't you have to go and see such models which

have been, let us say, practiced in democracies like in Germany?

We have a famous German political philosopher who developed the law of

'eternal oligarchy'. It is there in each power system, and perhaps what you

discussed here about unanimity among political parties is like what a German

theoretician calls 'post-colonial State class' with various symptoms that you all

have mentioned. The question really is how to transform this. I remember

Vajpayee in the 1990s spoke for a presidential system, exactly along your lines,

but suddenly the whole debate was completely closed.

Mr. Rudy: Whatever you all are saying is perfect. If the product that you are

talking about in the system is an MLA or an MP or a councillor, no political party

in the present system would agree to reforms because the numbers have to be


achieved. All this would prevent that individual, the electability of that

individual, the positioning of that individual.

I am a part of it, I am seeing the disease all around me Yes. We will fail this

country if the elite who are here and many more who I am talking to, if we do

not start. I don't expect this change to happen in my lifetime, I am sure about it,

because the regional political aspirations, individuals, all have come together to

protect (the system). Today in the Punjab elections there was 80 per cent voting,

but the average poll percentage in this country, if you take in last 50 years, has

not crossed 50 per cent. Out of the 50 per cent, the person who gets elected gets

30 per cent. So, a person who gets 1,75,000 votes out of a total of 10 lakh votes

(in a Lok Sabha constituency, for instance) is the elected representative while

those of the 7.5 lakh people who have not voted have no role to play. In urban

constituencies, the literate people, people who can participate in elections,

amidst us, they don't vote. Why don't they vote? In rural areas, those people who

are not so privileged, they vote because of the aspirations, because "this man

(the candidate) is my lifeline. He is going to decide my future, he is going to get

me a job, he is going to get me money".

In Goa, you can check out, on the day of the election the newspaper vendor has

` 2000 in currency notes rolled which he throws into houses. Even as we are

talking about it, we are indulging in it. We need a debate. A political party that

does not have the pressure to have such people elected will definitely subscribe

to all what you are saying. They will put the changes into the system.

We are all talking about transparency. But the end product which you are

demanding is so complicated and is so litigated. The basic assumption of an

individual is so low that we cannot make it, because my electability, my

'winnability' would be completely lost when I put all those formulae that you are

suggesting, into practice.

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Dr. Rekha Saxena, Delhi University: I just want to speak about the Lok Pal

episode and how centralised parties are talking about federalism. The situation

has changed now. India started off as a centralised federation where

parliamentary features overshadowed the federal features of the Constitution.

But since 1989, with the transformation of party system, judicial interpretations

favouring the cause of State autonomy, privatisation, globalisation of the

economy, creating pressure for the integration of national economy with the

global economy, and pressure for decentralisation of power to the grassroots-

level, a new dynamic has emerged in the manner politics is run. Now India is

moving towards greater federalism and the Lok Ayukt has had a direct impact

on the federal structure. I work on federalism, I have written extensively on this.

I think the Government should have brought it (Lok Pal) like in the case of

panchayat, in the form of an enabling Act and asked the States to pass a

conforming act.

Dr. Iqbal Husain, Jamia Millia Islamia: I am an academician and teach law at

the Jamia Law Faculty. I am seeing from the academic point of view the election

system and when I go back 65 years, when our country had great leaders, they

were very honest and all of them wanted prosperity and freedom of the country.

After the British left we started governing ourselves; the quality of the leaders

that we got went down. Two months back I attended a seminar of corporates in

in-house councils. They admitted that they were making contributions to

political parties, but when asked where were they taking this money from, they

said they were raising the donations from the people by over-pricing. I fail to

understand then why we have legalised ̀ 40 lakh as expense-limit for candidates

contesting Lok Sabha elections. Especially when parties are spending beyond

the expenditure limit and the Election Commission unable to take action.

Secondly—this is the most disturbing point—where is the reservoir of

candidates for parties to choose from? I am an academician. I cannot contest

elections because I do not fulfil the criteria, the kind of compulsions, and do not



have the kind of things which are required to win an election. In the past, every

university, every college used to have a students' union. At least within the

academic culture, student leadership used to be created. At the time, we had

most of our leaders coming from the student leadership and they had a little bit

of etiquette—had some consciousness, and would not go beyond a limit. What

is happening today? The leadership is coming from the gonda elements of the

locality and the good people are being excluded.

That is why every serious talk must address this issue. It is not as if we are not

moving in the right direction. We are encountering problems and most of the

problems are the contribution of all the parties. As we all have agreed, the

parties themselves do not want change. One of the leaders here asked what

kind of political administration can be expected if 75 per cent of the people

were not voting. Yes, it is true that happens, but what is the repercussion? The

candidate who has paid ̀ 5 crore, to get the ticket, he is getting elected through

corruption. Is it not? At the time of election the people are silent. But when they

are subjected to corruption they come along with Anna Hazare. That is the

reason. So, if politicians keep on making excuses about different political

systems, different political theories, and try to remain in the power by whatever

the means, if they are not honest, certainly a day will come when we will have a

revolution in this country.

Mr. Samya Chatterjee, Research Assistant, ORF: I will just focus on the US

campaign finance system because two remarks were made about how there has

been more transparency or accountability there. That is not true. They face

almost similar problems that we face. Of course, not on the same scale but the

problem of unaccounted money remains. In 2009, there was a US Supreme

Court decision which legalised corporate contributions without limits.

Previously, there were limits to those contributions. In fact, if you followed the

last presidential elections in 2008, the rise of small donors was a direct result of

the disproportionate amount of influence that corporate contributions had.

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To expand on this, in the US the problem essentially is that when a corporate

makes contributions, it does so through lobby groups and they have the concept

of soft money; they have fund-raising dinners and that is how they influence and

change the policies. It is a very different and far more sophisticated form of

corruption that takes place there. It has the same effect that we are talking about,

the disconnect between the people and the elected representatives. That, I think,

was identified as the fundamental problem affecting all polities. In fact, it is there

in the United States. So, when we look to the US, it is not a rosy picture. The

same problem exists in the UK. But one of the biggest differences is that the

media there plays a very pro-active and reformist role.

If it is a general election, the total amount of money spent will be on the front

pages. There, they dissect the amount of money being spent, from whom it is

coming, and it is discussed throughout the election period. You can find out the

details in every local and national newspaper as to who are the corporates who

are funding and how much money is being donated. That way, the electorate is

more informed, compared to the lack of information as in this country.

Thirdly, in the US, the disclosure laws are very strong and the courts are very

stringent about it, and therefore you have a far better system. But coming back

to corporate funding—and this is a warning because now corporate funding is

being seen as the panacea for all the ills—in our Indian context, if we compare it

to all other sources of funding, it is relatively clean. You need a judicious mix of

State-funding, corporate funding and you lay down limits, membership fees, etc.

It is a continuous process, so there is no one-size-fits-all approach.

Dr Niranjan Sahoo: We need something like the Clean Money Act in the US.

Be it, $5 or $2 or $3, it is all recorded. But unfortunately we are not making a

beginning. At least, a beginning can be made at the panchayat-level, where most

of the political parties would probably find an ideal setting because most of the

experiments are happening there—including 50 per cent reservation for


women. That was actually acceptable at the panchayat-level, not at the Assembly

or parliamentary level.

Mr. Samya Chatterjee: Just to give you another example. The US has been

passing laws. I am taking this example because it is seen as the democracy which

functions well. It does in so many other respects, but the point is that it is a 100-

year process. Every 15 years they have to come up and change the laws because

no matter how many laws they make, people will find ways to break them. The

latest example was in 2001. There was a law called the Bipartisan Campaign

Reforms Act. It was passed by members from both the political parties, and it

was a very difficult Act to pass as it tried to ban essentially soft money and fund-

raising dinners, etc. In India, the biggest problem today is that we just talk about

limits on contributions and limits on expenditure, inner-party reforms, etc. You

have to put a cap on political party spending at some level because as long as you

keep even one channel open, everything is going to be funded from there. The

caps have to exist at all levels.

Chair: We will have the speakers respond or make whatever observations they

want to make.

Mr. T. K. Arun: About the media reporting and analysing of corporate-

funding, there is no data whatsoever. A prerequisite for it is that parties should

report how much money they receive and that money should be received on

record from companies. Then media can analyse which company has donated

how much, and how far have policies changed in favour of which company or

industry. We recently ran a couple of stories where we listed corporate-funding

to political parties. This could be misused. So, first of all, you need stringent laws

on reporting and disclosure. Only then you can analyse what effect this has. Let

me tell you that the situation is far from hopeless.

Thankfully in politics, apart from political parties and institutions and research

funds and media, there are the people. Ultimately, only when the people mature

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politically do things change. If the DMK lost the elections in Tamil Nadu, it was

not that it did not have access to money. Here also newspaper vendors threw

money to the tune of ` 5000/- with the morning paper. But DMK candidates

lost. Ultimately, when people begin to have respect for themselves and resent

the idea they can be bought, they react differently. This is exactly what happened

in Tamil Nadu.

There was a time when people could be bought with money. But beyond a point

people say they have had enough, and that is happening all across the country

right now. It is an overall process of maturing of politics; people's own sense of

self-worth and awareness of their rights have ultimately changed things. I think

that is actually happening and these are all various ways of crystallising and

institutionalising the urge for basic self-empowerment of the people. Without

that you can do nothing. Hopefully, there are signs that this is actually

crystallizing.

Mr. Mendiratta: What is needed now? The need is for stringent laws. But who

will make the laws? Why should parliamentarians make a law that would go

against them? Why should they do it? That is the difficulty. Unless there is some

public pressure for them to do some thing, they won't do anything.

Participant: Lack of political will.

Mr. Mendiratta: No, I won't say political will. There is unanimity of political

will because they don't want to do anything.

Participant: I totally agree with that. In fact, State-funding is actually the only

clause in the entire electoral reforms on which there is political will among

political parties. You have every political party saying this is something which if

done would be very good. For everything else, they are just saying this has that

problem, that has this problem, etc. At least Mr. Rudy was very honest in saying

that nothing is going to happen and if there is some public pressure where

people raise a hue and cry, maybe things will happen. But otherwise we are going


to continue as in the past. We can debate and do a whole lot of things, Sir, but

until they agree and do something about it, nothing is going to happen.

Chair: I think we will bring the seminar to a close.

Samya Chatterjee is a Research Assistant and Niranjan Sahoo a

Senior Fellow at Observer Research Foundation, New Delhi.

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*********************

Observer Research Foundation is a public policy think-tank that aims to influence formulation of policies for building a strong and prosperous India. ORF pursues these goals by providing informed and productive inputs, in-depth research and stimulating discussions. The Foundation is supported in its mission by a cross-section of India's leading public figures, academics and business leaders.

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