Financing Indian Elections Turns Costlier and Murkier

Gautam Singh/Associated Press Anil Ambani, chairman of all listed companies of the Reliance Group, right, waiting to cast his vote during polling for the general elections in Mumbai, Maharashtra, on Apr. 30, 2009.

On June 27, Gopinath Munde, deputy leader of the opposition in Lok Sabha, or lower house of Parliament, was caught complaining on camera in Mumbai that his campaign expenses for his parliamentary election in 2009 had skyrocketed to 80 million rupees ($1.3 million at current rates). This was more than 30 times the permissible limit of 2.5 million rupees at the time.

The amount also exceeded his total declared assets of 62.25 million and was in stark contrast to his sworn declaration before the Election Commission that his election expenses came to only 1.94 million. While on camera, he somewhat recklessly added that he did not care what the Election Commission thought of his remarks as he had barely a few months to go before his current parliamentary term expired.

Within no time, the Election Commission of India demanded that Mr. Munde explain why he should not be disqualified under the Representation of Peoples Act for a false declaration of campaign expenditure. If he does not provide a satisfactory explanation within 20 days, he stands to be disqualified from contesting elections for three years.

The prohibitive cost of entering the electoral fray is one of the biggest drawbacks of Indian democracy today. Despite a statutorily defined limit to campaign expenditure, almost all elected members of the state and national legislatures exceed this limit, now at 4 million rupees, and routinely undervalue expenses in the audited accounts that they have to submit to the Election Commission of India. Even with the underreporting, government data clearly shows a steep rise in the amount spent on Lok Sabha elections.

The political class has responded fairly nonchalantly to Mr. Munde’s indiscreet admission, with some suggesting that their campaign costs were even higher. In the Karnataka legislative assembly elections held in May, Chandan Mitra, a Bharatiya Janata Party member of the upper house of Parliament, claimed on television that each voter wanted a “red note” - the color of a 1,000-rupee bill. One journalist friend in Bangalore confirmed that indeed his maid had received 1,000 rupees from a local candidate and so had the attendant in his sister’s dental clinic.

Aijaz Rahi/Associated Press A voter getting her finger inked at a polling station in Bangalore, Karnataka, on May 5.

He also recounted the story of voters he met in a keenly contested constituency in the assembly elections. An independent candidate had begun by giving 500 rupees each to those who had come to “show” support - a euphemism for demanding money for their vote. Unfortunately, as the number of his “supporters” increased, the handout had to be scaled down until it was reduced to a paltry 20 rupees each. One of the latecomers was indignant even while pocketing his 20-rupee note, saying, “Does he think we are beggars, giving us only 20 rupees? We will teach him a lesson.”

The expenses also have to provide for largesse to campaigners and contractors, caste and community leaders and incentives to minor political rivals to gut their own campaigns. Campaign costs shoot up if the constituency is large or if the candidate is an “outsider” imposed by the party.

Two factors have pushed election expenses upwards in India in recent times: the organizational weakness of centrist parties and a shift in the perception from politics as public service to politics as business.

With no self-renewing institutional structure, political parties have hardly any permanent local cadre. Except for those based explicitly on furthering caste- or religion-based agendas, no centrist party mobilizes around a program of social transformation that might attract large constituencies and generate a committed membership. At the time of elections, there is no party structure that can be activated. The election machinery has to be almost put together anew for each election and services paid for.

The other major trend is an increasing perception that politics can bring lucrative returns on investment. The access to government or even legislative authority means that a politician can control the allotment of government purchases â€" from defense deals to aircraft for state-run airways, as well as in government distribution of food, health services and other subsidies to the poor. In recent years, the allotment of scarce natural resources like minerals, water and public land, or getting such projects environmental clearances, has made politics an investment that pays for itself many times over.

Much of the unaccounted money for elections comes from India’s corporate houses. Corporate families have traditionally financed candidates and parties across the political spectrum with no overt quid pro quo. They see it as part of building a “relationship” with the political class and any favors they may get later as collateral benefit of that relationship.

However, in the past couple of decades a new synergy has developed between politics and business. Many businessmen have themselves successfully contested elections to the legislatures, while many politicians have branched out into business. In Andhra Pradesh, the late Y.S. Rajasekhara Reddy converted most of his party’s legislators into contractors by allotting them government contracts to build canals and roads. His own family’s business fortune grew exponentially - his son, Jaganmohan Reddy, a member of Parliament, is currently in jail, charged with accumulating assets disproportionate to his declared income.

Legislators in recent times have included steel manufacturers, government contractors, hoteliers, realtors, manufacturers of pharmaceutical products, media owners, beedi-kings and mine lords like the Reddy brothers of Bellary in Karnataka. Business entrepreneurs who enter politics can spend enormous amounts of money on their campaigns. Some get fielded by political parties to the upper house of Parliament, where ostensibly no election expenses are involved and the electoral college consists of only members of the state legislative assemblies.

At a rough estimate, nearly 120 out of the 788 members of Parliament are primarily businessmen. This is in stark contrast to the earlier days when businessmen did not enter Parliament at all. The Congress, although it was financed by business houses like the Birlas and Bajaj during the independence movement, did not bring a businessman into the Parliament until 1984 when it nominated K.K. Birla as its candidate from Rajasthan. He stayed in Parliament for 18 years.

State financing of elections has often been discussed as a way of opening up the electoral space to parties and candidates with modest resources. In 1998, the Committee on State Funding of Elections, headed by the late Indrajit Gupta, a veteran Communist leader, and included now-Prime Minister Manmohan Singh as one of its members, suggested that funds be given to “recognized” national and state-level political parties. The parties that were active for five years and won at least 4 percent of the Lok Sabha constituencies in a state would be recognized as a national party, and those that won at least 3.33 percent of the seats in the State Legislative Assembly would be recognized as a state-level party. The committee also recommended that initially state financing should be in the form of facilities rather than cash.

The Law Commission in 1999 proposed a partial financing of elections to begin with and a regulatory mechanism to ensure a well-defined institutional structure in political parties and observation of internal democracy.

There are, however, problems even with state financing, which seems like an attractive proposition but is difficult to implement. Without preventing parties from raising private funds, the state funds could end up topping up the coffers of already-rich parties. Since most political parties are controlled by entrenched political families, it makes little sense to dip into the state exchequer to subsidize their election expenses. Critics point out that this would be a license to loot the exchequer twice - first during the campaign and then after assuming executive office.

Ensuring that Indian democracy becomes a level-playing field is a tall order. This cannot be done without ensuring that the internal functioning of the political parties is democratic, including the process of candidate selection.

As of now, none of the major parties are willing to subject their internal functioning or their financial accounts to public scrutiny. Most have refused to come under the ambit of the Right to Information Act. They seem to prefer opaque and, therefore discretionary, functioning and do not want to be questioned on their sources of funds or how they are spent.

Bharat Bhushan is an independent journalist based in New Delhi. He was the founding editor of Mail Today and the executive editor of the Hindustan Times.