Donations to Political Parties Increased by 31% in 2021-22: Find Out Who Gained the Most

In the 2021-22 financial year, the ruling Bharatiya Janata Party (BJP) received donations of roughly Rs 614 crores which amounts to nearly 80 per cent of the total donations received by all national political parties, as per the latest report published by the Association for Democratic Reforms (ADR). The Indian National Congress (INC) stands far behind in second position, having received Rs 95 crore while the National Congress Party (NCP) comes in third with Rs 58 crore. The figures in the report match the data published by the Election Commission of India (ECI) in November 2022. The ECI figures also revealed that the Aam Aadmi Party (AAP) received Rs 44.54 crores in the last financial year.

The ADR publishes an annual report analysing donations above Rs 20,000 received by national political parties to advocate for electoral reform and more transparency in the electoral and political funding system in the country. The report analyses the donation details submitted to the Election Commission of India (ECI) for eight national parties, including the BJP, INC, Bahujan Samaj Party (BSP), Nationalist Congress Party (NCP), Communist Party of India (CPI), Communist Party of India (Marxist) (CPI(M)), All India Trinamool Congress (AITC), and the National People's Party (NPEP). Political funding is an extremely critical pillar of democracy, including in India, where the system relies heavily on elections, which come at a significant cost. Let's take a look at the donation patterns to political parties in the last financial year, their sources, and the overall system of political donations in the country.

How much did parties receive as donations in 2021-22?

Overall, in the 2021-22 financial year, the total donations made to political parties amounted to Rs 780.774 crores. This was an increase of 31.50 per cent or Rs 187.026 crore from the last financial year (2020-21). This was significantly lower than the donations received in 2019-20, which amounted to Rs 1,013.805 crores, as this was the year of the last Lok Sabha elections in the country. If we break down the donations done by various states, Delhi tops the list. A total of Rs 395.849 crore was donated to the national parties from Delhi, followed by Rs 105.3523 crore from Maharashtra and Rs 44.9584 crore from Gujarat. 80 per cent of the total donations, amounting to Rs 625.883 crores, came from corporate donations and the business sector in general. The BJP received more than seven times the total amount of corporate donations (Rs 77.075 crore) received by all other national parties last year. Individual donations amounted to Rs 153.328 crore last year.

Donations to the BJP increased by 28.71 per cent in the last financial year to a total of Rs 614.626 crores. This amounts to 78 per cent of the total donations received by all national parties. The Prudent Electoral Trust donated Rs 336.50 crores to the party, which amounts to 54.75 per cent of the total funds received by the party. The party received Rs 95 crores from 1,255 donations, standing at the second spot far behind the BJP. The Prudent Electoral Trust also donated Rs 16.50 crores to INC, accounting for 17.28 per cent of the total funds received by the party.

The CPI(M) declared a decrease of roughly 22 per cent in political donations received to Rs 10.055 crores in the last financial year. The National People's Party (NPP) declared the highest decrease in political donations of 40.50 per cent, from Rs 59.50 lakhs in 2020-21 to Rs 35.40 lakhs in 2021-22. The All India Trinamool Congress (AITC) only declared seven donations for the last financial year. Similarly, the Bahujan Samaj Party (BSP) claimed it did not receive any donation above Rs 20,000 for the last financial year. The party has been submitting the same claim for the past 16 years.

How is the donation system to political parties in India regulated?

The system of giving political donations in India is regulated by the Representation of the People Act, 1951, the Income Tax Act, 1961, and the Foreign Contribution Regulation Act, 2010, and Company's Act. Donations can be made by individuals or companies, as long as they are disclosed. In addition to this, donations can also be made in the form of electoral bonds, which are a new instrument of donations introduced by the government in 2018. An individual can donate up to Rs 2,000 without disclosing their identity. Any donations above this amount need to be made through a cheque or digital payment, and the donor's name and other personal details must be disclosed. Similarly, all companies can make contributions to political parties, but it is mandatory for them to disclose the same in their annual reports, with some exceptions. It should be noted that there is no cap on the limit of donations companies can make to political parties, which often raises concerns. Companies can make contributions to political parties using any instrument.

Foreign donors can also donate to Indian political parties as long as they receive certifications from the Ministry of Home Affairs Foreign Contribution Regulation Act, 2010 (FCRA). Another controversial instrument which was introduced in 2018 as a new way of making political donations is the electoral bond. An electoral bond is a bearer financial instrument like a Promissory Note, issued by scheduled commercial banks after authorization from the central government to donors for making donations to political parties only against cheques and digital payments. Electoral bonds remain a controversial form of donation as the identity of the donor remains anonymous, and the details of the transaction are not disclosed to the public, raising serious concerns about transparency in political funding.

Is the political funding system in India transparent?

The issue of political funding has been a subject of much debate in India, with concerns raised about the influence of various corporates and other individuals in the political and electoral process. To address these issues, the Government of India introduced the Electoral Trusts Scheme in 2013, which aimed to streamline the fundraising process and ensure transparency of corporate contributions to political parties' election costs. However, the issue is that political parties often do not disclose their finances openly due to legal restrictions and loopholes. While some efforts have been made to regulate political financing, there is still a long way to go to ensure a transparent and fair system of political funding. A recent analysis conducted on the Income Tax Returns and donations statements filed with the ECI revealed that between the fiscal years 2004-05 and 2020-21, national political parties have received a total of Rs 15,077.97 crore from unknown sources.

Suggestions made in the ADR report to improve transparency in the funding process include that no part of Form 24A submitted by political parties providing details of donations above Rs 20,000 should be allowed to be left blank. Additionally, all donors should be required to furnish their Permanent Account Number (PAN) details if donating above Rs 20,000. The report suggests that national parties should lead by example by filing complete and correct statements of donations to the ECI and providing all information about their finances under the Right to Information Act. The Chief Election Commissioner Rajiv Kumar also proposed certain reforms in the political donations system of India to the Law Minister Kiren Rijiju in September 2022, including capping cash donations at 20 per cent or Rs 20 crores (whichever is lower). Other suggestions include reducing the limit of anonymous donations made to the parties from Rs 20,000 currently to Rs 2,000. Another suggestion by the Commissioner included requiring candidates to maintain a separate bank account for election expenses, to be done through an Amendment to Rule 89 of Conduct of Election Rules, 1961. The reforms proposed by the CEC are still under consideration and subject to the approval of the Law Commission. As of now, none of them have been carried out.

Shreya Maskara/New Delhi
Contributing reports by Ratika Khanna. Anushka Verma and Aryaman Pathak, Researchers at Polstrat.
From Polstrat, a non-partisan political consultancy which aims to shift the narrative of political discourse in the country from a problem-centric to a solutions-oriented approach.