Elections and Creative Accounting

All political parties confirm the truth that contesting elections costs big money and as a rule it is usually over and above legally prescribed limits. This electoral compulsion for enormous amount of funds has become the fountainhead of the “super structure of corruption”.

The Election Commission of India (ECI) determines the ceiling on election expenditure by candidates from time to time. Based on its 2003 notification, the current maximum limit on election expenses for contesting parliamentary constituencies is Rs. 25 lakh. This limit varies from state to state, with the smaller states such as Goa having a ceiling of Rs. 14 lakh and bigger states such as Uttar Pradesh having a limit of Rs. 25 lakh.Despite individual candidates filing an account of their election expenditure, there are no authentic estimates of election expenditure by various candidates in parliamentary elections. To understand the scale of expenditure involved, it is necessary to draw some assumptions and relate these to ECI’s election ceiling limit. For estimation purposes, there are 543 parliamentary constituencies and approximately 15 candidates contesting from each constituency. This has been determined on the basis of the total number of candidates who numbered more than 8,000 in the 2009 general election. If we take the limit of Rs. 21 lakh as the approximate median limit on election expenditure —calculated by averaging the ceilings across 28 states, which range from Rs. 14-25 lakh—the total cost of elections to the 543 parliamentary constituencies works out to around Rs. 1,710.45 crore. In other words, Rs. 1,710.45 crore would be the approximate official election estimate to the 2009 Lok Sabha elections as calculated by ECI.

To relate this official expenditure to the actual expenditure incurred by candidates would be to make a farce of ECI’s ceiling on election expenses, which is totally unrealistic when contrasted with the ground-level situation. The cost of transport alone, including fuel and hired vehicle charges, spent by candidates in each constituency will work out to be more than Rs. 20 lakh. This has been estimated on the assumption that a single candidate hires around 20 vehicles for the 45-day campaign period, covering on average of 200km per day with a fuel efficiency of 8km per litre, calculated at the rate of Rs. 70 per litre. In addition, there is the fee of hiring 20 vehicles for the campaign period of 45 days at the rate of Rs. 1,000 each per day. This, however, excludes other expenditures essential to an election campaign such as money spent on party workers, boarding, printing of pamphlets, dole for supporters, etc.

The majority of members of Parliament (MPs) informally admit that the expenditure by candidates in each constituency ranges from Rs. 1-5 crore, with some prestigious constituencies exceeding even these amounts.

When trying to relate the approximate actual election expenditure made on the modest assumption of Rs. 2 crore to the annual income of major political parties for fiscal 2010, it becomes apparent that there is an anomaly between the two. If we take, to give one example, the Bahujan Samaj Party, it contested from 500 constituencies incurring an expenditure of Rs. 105 crore based on the average ceiling limit of Rs. 21 lakh. But its annual income for that fiscal was Rs. 57 crore. This inconsistency requires further probing by the election authorities.A more detailed analysis raises the question of the relevance of imposing such a ceiling on election expenditure, one that is clearly out of sync with the actual expenditure incurred by parties and candidates at the time of elections. Even more worrisome is the fact that these expenditure ceilings apply to the candidates and do not apply to the costs borne by well-wishers, party workers, friends and relatives. In order to rationally account for this, it would be good if the law ministry immediately revises the election expenditure ceiling, raising it to a level that reflects ground realities.

While ECI has made serious efforts to track election expenditure by strengthening the disclosure requirements by candidates and parties, it seems that a huge amount of funds expended remain undisclosed and unaccounted for in official records. Along with a thorough scrutiny of election expenditure, ECI needs to play a more proactive role in enforcing a bare minimum of financial discipline among political parties. This must include full compliance to its operational guidelines on financial reporting on voluntary contributions received and income and expenditure statements.

Based on the information made available by ECI, more than 80% of registered political parties had not submitted both their annual audited account statements and their annual contribution reports. Without the basic maintenance of party accounts including their audit by auditors empanelled with the Comptroller and Auditor General of India, public accountability and transparency in the election expenditure of political parties will remain a pipe dream. After all, as former prime minister Atal Bihari Vajpayee observed, why should an MP begin his/her career in Parliament by embracing an untruth.

(This article was published in Mint on 11th June, 2012)