Even repeal of the explanation under Section 77 (1) of the RP Act, 1951, which makes nonsense of expenditure ceilings was not addressed by the committee. There is no provision for party finances for normal political activity. Parties are classified somewhat arbitrarily, though uniformly, as State and national parties. All that parties need is to preserve their status as recognized parties. Minimal requirements are needed for a party to be recognized as State party (4% vote or one out of 25 legislators in the House). A national party is one recognised in four States. Obviously such uniform funding of recognised party candidates irrespective of their popular base will lead to unfair consequences. At the other end, genuine independents and new parties will be denied all opportunity of public funding irrespective of their popular base.

There are three central issues which need to be addressed in funding reform. Legitimate private funding should be encouraged, strict disclosure norms must be enforced, and any public funding must be verifiable, non-discretionary and manifestly fair. Such funding should encourage performance, and all parties and candidates should be treated equally. There should be an in-built incentive to raise contributions. Public funding should be a finite amount and should not facilitate political fragmentation. Party funding for normal activity and election funding for the candidate should both be addressed.

One such public funding model would be to fund every candidate at a fixed rate of, say Rs 10 per vote obtained, provided (s)he gets over 10% of the valid vote polled. The actual funding will depend on the uncovered gap between legal expenditure limit and money raised by the candidate; and on the private contributions raised by the candidate. It cannot exceed the former (as expenditure ceiling will operate), and should be equal to or one and a half times the latter (to encourage the candidate to raise contributions). In case of party candidates, 2/3 of the sum will go to the candidate, and 1/3 will go to the party. Once the scheme is in operation, parties will get 50% of the money disbursed in the last election as an advance for the succeeding election. Recognized parties however will get the added benefit of free media time in both public and private channels.

For any funding reform to work effectively, there are several preconditions. Private funding should be encouraged by tax incentives subject to a ceiling. Ban on corporate contributions, proposed by the Law Commission is impractical. It will only drive political funding underground, whereas our objective should be transparent and accountable funding. Corporates should be allowed to fund parties, and not candidates, subject to a ceiling of 5% of net profit or Rs 50 lakhs for national parties and Rs 10 lakhs for State parties. But the crucial element of reform is strict disclosure norms for both the donor and recipient, with severe penalties including mandatory imprisonment. Only when there is a real danger of the donor going to jail for violation will disclosure be effective in India. Election Commission should be in charge of determination of violations, whereas criminal courts can impose jail terms. Candidates and parties should suffer severe penalties, disqualification, derecognition and mandatory imprisonment for disclosure violations. These penalties may appear draconian, but truthful disclosure is at the heart of any meaningful funding reform. In addition, parties should be regulated by law, and voter registration defects and polling fraud should be eliminated by better procedures.

Once these conditions are fulfilled, public funding will work. There are an estimated 57 crore voters, and with 60% average polling, about 34 crore votes will be polled. Once votes polled and contributions raised become the basis of funding, and expenditure ceilings are taken into account, the funding requirement will be of the order of Rs 250 crore for Lok Sabha and an equal amount for State Assemblies. Even this can be raised by creating a public fund, contributions to which can receive 150% tax benefit (for every Rs 100 contribution, Rs 150 would be exempt). Corporates will be happy to take advantage of tax concessions and contribute large amounts.

There are elegant, practical, effective mechanisms to cleanse our electoral system and political funding. What we need is tenacity, will and concern for detail. Let us hope this time parties will do the right thing and help themselves while helping the country.

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