Large-scale electoral and political reforms are needed to strengthen India’s parliamentary system. But that will take time and effort. Meanwhile, the Election Commission has ample powers to push for transparency
Guideline 3(I) Article 8 of the ‘Guidelines and Application Format for Registration of Political Parties’ under Section 29A of the Representation of the People Act 1951 state that “… Accounts of political parties to be maintained on accrual basis; to be annually audited by an auditor on the panel of C&AG; audited annual accounts to be submitted to the ECI within six months of the end of the year.” Further, Guideline 3 (XIX) lays down that a political party must declare in its constitution that it shall submit its audited annual financial statement to the ECI within six months after the end of each financial year.
Based on the information made available by the Election Commission, the status of compliance by political parties has been dismal. Only 176 out of a total of 1,196 registered political parties have submitted their audited annual financial statements for the year 2010-11. The status of compliance is no better in the years preceding 2010. In other words, 85 per cent of the registered political parties did not comply with the Election Commission’s mandatory guidelines governing political parties.
It is well within the powers of the Election Commission to ensure that the political parties maintain audited annual accounts and ensure regular submission. The poll panel could at least publish on its website and in major national papers a list of political parties that have defaulted in submitting their annual audited accounts statement . Such disclosure would enlighten the citizenry regarding the actual performance of political parties, who always claim their commitment to laws enacted by Parliament. Such an initiative doesn’t require amending the RPA, 1951 and other laws governing the working of the Election Commission.
Registration of political parties is also based on a certain minimum performance requirement which includes maintenance of annual accounts on accrual basis and their submission to the Election Commission. The commission has in the past argued that it has no power to de-register a political party. Even accepting this stance of the Election Commission, it should be possible for the commission to keep the registration of political party under suspension till the party has complied with the submission of annual accounts, which is a pre-requisite for registration of a political party.
Moreover, political parties enjoy certain privileges in terms of income tax liability. The panel could inform the Department of Revenue (Union Ministry of Finance) regarding cases of non-compliance so that such defaulting parties do not enjoy the privilege of income tax exemption. But, the Election Commission has rarely recommended any action to the Department of Revenue, and has not issued any show cause notice to parties in this regard.
Closely related to this matter is the issue of donations received by political parties. Under Article 29C of the RPA, 1951, parties are required to submit each year to the Election Commission a report of all contributions received from individuals and companies in excess of Rs 20,000. Those that fail to submit the same are not entitled to any tax relief.
As per information from the Election Commission, only 98 registered political parties out of a total of 1,196 registered political parties have submitted their annual contribution report of donations in excess of Rs 20,000 for the year 2010. A mere eight per cent of political parties are in compliance with the Act. In this matter also, the Election Commission could have issued show cause notices to the political parties and enforced its mandated powers by directing the Income Tax Department to withhold tax relief to those parties that have failed to furnish the information.
Although political reforms are the bedrock of electoral reforms, it is difficult to envisage any national consensus at this juncture. The Election Commission, meanwhile, could at least fulfil its mandate and exercise its powers to the fullest extent possible. This will bring in a regime of public accountability and transparency in the finances of political parties.
(This article was published in the Pioneer on 9th July, 2012)