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Billionaires Buy Electoral Bonds, Netas Get Funds, Taxpayers Pay Bank Charges

Documents reveal that all the costs associated with electoral bonds are paid from the Consolidated Fund of India, which includes all tax revenues.

This story is a part of #PaisaPolitics, HuffPost India’s investigation into how the Modi government brought untraceable funds into Indian politics. Read the rest of our series here.

NEW DELHI — When anonymous billionaires use electoral bonds to funnel thousands of crores into the coffers of India’s political parties, the Indian taxpayer pays the banking fees, commissions, printing costs and associated charges, documents reviewed by HuffPost India establish.

Neither the secretive billionaire donor, nor the recipient political party, pay a paisa to maintain the secure infrastructure of banking channels, accounts and printing presses that facilitate political donations. Instead, the money is paid from the Consolidated Fund of India, a Government of India account that includes all direct and indirect tax revenues. This is in sharp contrast to banking transfers conducted by ordinary citizens, which attract banking fees and commissions.

Thus far, the ruling Bharatiya Janata Party (BJP) has been the biggest beneficiary of the Indian taxpayer’s forced generosity. The party has raised the most money since the scheme was first unveiled. Reports from earlier this month show that 60% of the BJP’s total funds raised through donations in 2018-19, Rs 1,450 crore, was through electoral bonds.

Worse, political donations are tax-free for the donor, so when companies and wealthy individuals donate to their party of choice, the Indian exchequer receives less tax — an argument first made by none other than the Ministry of Corporate Affairs in 2017 in the course of the BJP’s illegal, but ultimately successful, attempt to use the “money bill” route to implement the scheme.

Read how the Modi government illegally bypassed the Rajya Sabha in its haste to implement electoral bonds.

File notings, correspondence, internal notes and memos of the finance ministry reviewed by HuffPost India reveal that the decision to use public funds to facilitate political payments was hard-wired into the controversial electoral bonds scheme from its inception.

The documents suggest that the government initially meant to disclose the payment protocols in publicly available rules formulated to run the electoral bonds scheme. But eventually, the payment details were hidden away from public view in the internal records of the government and the State Bank of India (SBI), the public sector bank tasked with implementing the scheme.

SBI has refused to reply to recent Right To Information (RTI) applications asking exactly how much money it has billed the government for overseeing the sale and encashment of 12 rounds of electoral bonds since the scheme was first unveiled in February 2017 and implemented in March the following year (the 13th tranche took place earlier this month, days ahead of the Delhi assembly election).

Yet, previous RTI applications filed by Commodore Lokesh Batra (Retd) reveal that SBI has charged the finance ministry Rs 3.24 crore for sale of bonds worth Rs 5,832 crore over 10 tranches between March 2018 and May 2019. The SBI charges the government Rs 5.5 for each Rs 1,000 worth of electoral bonds sold. It also charges the government an additional Rs 12 per transaction for digital bonds and Rs 50 for purchase of physically held bonds.

In addition, the Indian Security Press at Nashik (a unit of the government-owned Security Printing and Minting Corporation of India Ltd) charges Rs 25 for each electoral bond with secret numbering and special security features that it publishes for the SBI to use on government’s instructions.

These sums might appear small, but it is worth asking why political parties or their donors cannot foot the bill for these donations.

An expensive affair

The Reserve Bank of India vehemently opposed electoral bonds when the Finance Ministry first asked the RBI for comments in January 2017. (Here’s why) Once the RBI was grudgingly brought on board, the finance ministry circulated an internal note on September 18, 2017, asking a vital question: “What should be the commission payable to Banks/RBI in handling and issuing EBs?”

At the time, the finance ministry suggested the RBI could pay the handling charges and commission to banks which it designated to run the scheme, and not the donors. It also proposed that the amount from bonds not encashed within 15 days by political parties be sent to the Consolidated Fund of India.

Eventually, the finance ministry turned to SBI to manage and implement the electoral bond scheme (the second suggestion also didn’t come to fruition—money from lapsed electoral bonds now make their way to the Prime Minister’s Relief Fund.)

On October 28, 2017, Prashant Goyal, the joint secretary (budget) in the finance department, wrote in an internal note, “Since the cost of administering a paper EB will not be inconsequential and will need to be recovered from donor, EB may be confined to high denominations only, such as those above Rs 1 lakh.”

This was the first admission on official records that running the scheme would be an expensive affair.

But soon, the idea that donors donating in thousands of crores to political parties would have to pay a commission — petty change in comparison with their donations — was shot down during further deliberations within the finance ministry. It was decided that the Union government would pay the bank from its coffers. In other words, citizens would.

A fresh draft of rules for the electoral bonds scheme prepared in November 2017 made this explicit.

“The net cost to the authorised bank, if any, shall be reimbursed by the Central Government,” the draft read.

In the next revision of the draft, prepared after discussions between the finance ministry, the ministry of law and justice and SBI’s law officers, held on December 19, 2017, it was decided the published rules would not mention the fact that the government would dip into the Consolidated Fund of India to pay SBI’s banking commissions. Instead, this information would be provided through administrative orders that are usually not available for public scrutiny.

The draft said merely, “No commission, brokerage, or any other charge for issue of bonds shall be payable by the buyer against purchase of bonds.” It did not explicitly say who would pay it.

The SBI, for its part, tried to insist that the government’s liability be made explicit in the rules.

“In Para (10) sub-para (b) is deleted wherein net cost to the authorised bank was required to be reimbursed by the Central government,” said G. Ravindranath, Chief General Manager of Rupee Markets division in SBI in a note to finance ministry dated December 7, 2017. “We feel that the said clause should be incorporated. In the alternative, the cost must be permitted to be recovered from the Purchaser of the bond.”

The SBI was overruled. The final version of the rules did not mention that neither donors nor political parties would pay for the cost of running the scheme. The rules also did not say that the government would pay the bank from the public exchequer.

The first set of bonds went on sale in March 2018. On April 4, 2018, SBI wrote to the finance ministry, asking it to pay the commissions and costs incurred in running the scheme. It then began sending such bills to the government after each round of sale of electoral bonds. The last such letter billing the government for operating its electoral bonds scheme accessed by HuffPost India is dated May 27, 2019.

The Security Printing and Minting Corporation of India Ltd, too, wrote to the finance ministry asking for it to pay up for the printing costs. By October 2018, the secure printing facility had billed the finance ministry Rs 1.67 crore.

By the end of 10 of the 12 rounds of sales of electoral bonds, SBI had presented the government with a bill of Rs 3.24 crore. This is now a recurring cost that citizens pay for each time the Union government opens yet another window for the secret donations. The cost to citizens for the 13th and latest round of sale ordered by the government days before Delhi elections would be known only in February 2020, if SBI responds to RTI applications requesting this information.

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This article exists as part of the online archive for HuffPost India, which closed in 2020. Some features are no longer enabled. If you have questions or concerns about this article, please contact