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APRIL 2012
Campaign Finance Reforms in India:

Issues and Challenges
Seminar proceedings compiled & edited by
Samya Chatterjee
Niranjan Sahoo
OBSERVER RESEARCH FOUNDATION
ISSUE 8
NDATI
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VOLUME 1
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ORF SEMINAR SERIES
EARCH F
ES

Seminar proceedings compiled & edited by
Samya Chatterjee
Niranjan Sahoo
OBSERVER RESEARCH FOUNDATION
2012 Observer Research Foundation. All rights reserved. No part of this publication may be
reproduced or transmitted in any form or by any means without permission in writing from ORF.

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 roundtable 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 raidsshowing 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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Campaign Finance Reforms in India: Issues and Challenges
most of the funding was through subscriptions, in reality parties were

receiving funds worth lakhs and crores and not making disclosures.
Merit of no consequence: 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 importantnot a quality that political parties
would have searched for in the first place. Most political parties are
driven by the "winnability" factorall 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.
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Insulate Executive from the Legislature: Some panelists, especially

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

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 USthe 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.
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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 electionfunding, 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 fundingit
can be all-out State funding, or it can be partial State-funding or partial subsidy,
sometimes on a reimbursement basis after electionsand 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 shabeelshabeel 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 itas 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
structuredwhich 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 moneybut 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 positionslike 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 litres7.18 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 topmost, 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 politicsand then
you don't have to look for fundingyou 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.
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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 campaignfinancing, 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 legallysanctioned 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 electionfinancing 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'
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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 onethird 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,
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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 goingit 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 recordedbut 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
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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
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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
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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, Association for Democratic Reforms

(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 ticketdistribution. 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
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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 Statefunding, 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 candidatelimits 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
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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 voteshare, 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 masssupport, 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 excessivespending. 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 campaignfinancing, 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 membership 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
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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
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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 campaignspending 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 ownmarket 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?
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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
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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 grassrootslevel, 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.
Secondlythis is the most disturbing pointwhere 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
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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 etiquettehad 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 fundingand this is a warning because now corporate funding is
being seen as the panacea for all the illsin 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 thereincluding 50 per cent reservation for
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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 100year 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 fundraising 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 corporatefunding, 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
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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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Campaign Finance Reforms in India:

Seminar proceedings compiled & edited by

OBSERVER RESEARCH FOUNDATION

ORF SEMINAR SERIES

Campaign Finance Reforms in India:

Seminar proceedings compiled & edited by

OBSERVER RESEARCH FOUNDATION

Campaign Finance Reforms in India:

ORF Seminar Series

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

Rising Campaign Expenditure: The key issue highlighted by the

State Funding Counter-productive?: Senior representatives advising

Campaign Finance Reforms in India: Issues and Challenges

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

Merit of no consequence: On the question of entry of meritorious

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

Ineffective Legislation: With regard to taming unscrupulous

ORF Seminar Series

Insulate Executive from the Legislature: Some panelists, especially

Make Corporate Funding Transparent and Accountable: The

Campaign Finance Reforms in India: Issues and Challenges

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

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

ORF Seminar Series

Opening Remarks by the Chair:

Campaign Finance Reforms in India: Issues and Challenges

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

ORF Seminar Series

Campaign Finance Reforms in India: Issues and Challenges

ORF Seminar Series

Campaign Finance Reforms in India: Issues and Challenges

ORF Seminar Series

Campaign Finance Reforms in India: Issues and Challenges

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

ORF Seminar Series

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

Campaign Finance Reforms in India: Issues and Challenges

ORF Seminar Series

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

Campaign Finance Reforms in India: Issues and Challenges

ORF Seminar Series

Campaign Finance Reforms in India: Issues and Challenges

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

ORF Seminar Series

Campaign Finance Reforms in India: Issues and Challenges

ORF Seminar Series

Campaign Finance Reforms in India: Issues and Challenges

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

ORF Seminar Series

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

Campaign Finance Reforms in India: Issues and Challenges

Mr. Anil Bairwal, National Coordinator, Association for Democratic Reforms

ORF Seminar Series

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

Campaign Finance Reforms in India: Issues and Challenges

ORF Seminar Series

Campaign Finance Reforms in India: Issues and Challenges

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

ORF Seminar Series

Question & Answer Session

Campaign Finance Reforms in India: Issues and Challenges

ORF Seminar Series