No place for Doubting Thomases in the State Funding for elections

In a parliamentary democracy the citizens have the political rights constitutionally ensured to make all important choice in government formation by participating in the election process.  The role of political parties is critical as they mobilize public support on their ideology, programme and promises.  The scale of support is manifested through election process. Political parties also perform the important function of informing and educating the citizens about the performance of the government including their shortcomings.

The Representation of People Act (RPA), 1951 makes it mandatory for any association or body of individuals calling itself a political party to make an application to the Election Commission of India (ECI) for its registration.  The sole reference to political parties in the Constitution of India features in the Tenth Schedule, which deals with the disqualification of a person for being a member of either House of Parliament or the Legislative Assembly/Council on grounds of defection.   The RPA, 1951 is the primary law regulating elections in the country.  It is important to make appropriate provision in our Constitution and the RPA, 1951 to facilitate effective regulation of parties by the ECI.  We may perhaps refer to the German law which recognizes the political parties in the formation of political will of the people and requires an internal democracy within the party and transparency in accounting assets and expenditure concerning the party activity.

Political funding is crucial to sustain the activities of any political party.  The expenditure relating to election alone may be termed as campaign finance. This article embraces the term campaign funding to imply the part of the campaign finance funded by the State.  Campaign funding is for conducting competitive election campaign and finance various election related activities in a time frame prescribed by the ECI.  Campaign finance refers to all funds that are raised and spent in order to promote candidates, parties or policies in the electoral contest.  Funds mobilized for elections have a significant impact on the electoral outcome.  Little wonder then that the so-called level playing field of an election arena is heavily tilted towards those who have the deep pockets to influence electoral success.

Political parties raise funds from both private and public sources.  The candidates in the electoral fray also raise funds, sometimes through questionable means.  There is a growing nexus between the political parties and the corporate, organized mafia and other nefarious entities.  The donations to the political parties and the candidates are often in the expectation of quid pro quo which invariably is not in national interest.  The obvious appended hazard is the unsavory role of black money.

State funding of election campaign is often dismissed on the basis of an argument that it will only be a drop in the ocean of corruption.  But to allow this limitation to discourage any proposal on the subject might hamper the larger cause of democracy in the long run.  Funding of election campaign may not right away dismantle the already established nexus between the political parties and their “donors”, but in the long term a step in this direction will surely have a role to play in snapping the ties of allegiance between these formidable companions pumping black money in the system. State support to campaign funding has generated strong “for and against” views in India.   Almost all the government committees formed on the issue of electoral reforms deliberated on the issue of campaign funding but fell short of coming to any concrete policy consensus which could then be tested in terms of ground reality through execution.  There have been significant proposals on the subject from civil society members who have pro-actively advocated for election funding.

Public Interest Foundation (PIF) through in-house research, supplemented with discussions with like-minded NGOs, as well as the intellectual think tanks, has evolved a feasible minimalistic framework of campaign funding for adoption and expeditious implementation. The scheme in tabular form is annexed.

As per the scheme, the administration of campaign funding will be entrusted to the ECI, who would operate the earmarked funds through a designated account for the purpose.  The funds would be non-lapsable. The fund would be created through transfers from the Union Government.  The decision of ECI on the subject of campaign funding will be final.  The Commission needs to be delegated powers to frame rules under the RPA, 1951 for the purpose.  The pattern will be same for Lok Sabha and Assembly elections.  However, it will be advisable to implement the scheme on a pilot basis in next Lok Sabha elections.

Campaign funding is not to be viewed as the expenditure related to various activities of the political parties; it is restricted to the elections only.  The ECI will make the disbursement in two stages.  The first disbursement would be made to the political party immediately after the notification of election date.  The second disbursement to the candidates would be made in two installments; first immediately after the acceptance of valid nomination form and the second after the election results. The disbursement to the candidates has been furnished in two installments to prevent non-serious candidates from siphoning of the state funding and to ensure that the funds provided to the candidate is in congruence with the valid votes polled.

The first disbursement of the fund to the political parties will be restricted to the recognized national and state parties.  The financial payout by ECI would be regulated on a scale of payment of Rs. 10 against each vote polled in favour of those party candidates whose deposit was not forfeited in the previous election for the same assembly or the parliamentary constituency as the case may be.  The total amount received by the political party as campaign fund would then be distributed to the prospective candidates who have been given official symbol.   Thus, the start-up expenditure would enable the candidates to fund their campaign in a fair and transparent manner.  The suggestion to fund the national and state parties is in the interest of ensuring built-in accountability and regulating spurious contestants. To discourage fragmentation of political parties, it is desirable to raise the benchmark for recognition of national and state parties. In the words of Chief Justice Altmas Kabir, “To gain recognition as a political party, a party has to prove itself and to establish its credibility as a serious player in the political arena of the state”.

The second stage of disbursement will be in two installments.  The payment of first installment will be made to all the candidates whose nomination form has been found valid after scrutiny and withdrawal.  The entitlement would be estimated on the basis of total electorate in the constituency. The value would be monetized on a scale of rupees ten per voter in the electoral list.  Each candidate would be given 1% of the total value as the first installment. The rationale for monetizing the electoral list is linked with the size of the constituency and efforts involved in reaching out to the electorate.  The second installment payment of stage two will be made post-election on the basis of counting and result declaration.  The eligibility for reimbursement would be restricted to the candidates who have secured at least 1/6th of the valid votes polled, i.e. those candidates whose security deposit has not been forfeited.  The payment to all such eligible candidates would be on the basis of rupees ten per valid votes polled in favour of the candidate.  The performance based reimbursement suggested is largely to ensure level playing field for all the candidates, and it is hoped that a healthy trend in the electoral politics towards a responsible party based system would gradually evolve.

Compliance of transparent account standards as may be prescribed by ECI would be a pre-condition for any disbursement.  Both the political party and the candidate would be required to maintain a separate bank account for the campaign funding.  This account would also be used for all the donations made either to the candidates or to the political party by private/corporate sources.

For any proposal on campaign funding to not become another breeding ground for more unaccounted money flowing into electoral process, it is critical to enforce the existing provision on contributions and disclosure, and strengthen them to adequately ensure that they are less susceptible to corrupt practices. Sections 77 and 78 of the RPA combined with section 10A state the compulsory provisions for the maintenance and time-bound filling of election expenses by every candidate, failing which the candidate would be disqualified from contesting election for a period of three years.  Through the extension of the purview of Section 10A of the RPA, following the Supreme Court judgment in the case L.R. Shivaramangowde vs. T.M. Chandrashekhar – AIR 1999 SC 252, three years disqualification of a candidate from contesting elections is valid even in case the accounts of election expenses filled by his/her is found to be incorrect or untrue by the ECI.  Moreover, this disqualification of three years should also apply to the candidates who may have been sworn in as elected representative on the basis of election results.  It is also proposed that the scrutiny by ECI about correctness of accounts filed should be completed in 120 days so as to minimize any form of uncertainty and political instability.

These provisions for disclosure of election expenses as detailed by the RPA, Section 77, 78, 10A for individual candidates seem comprehensive, but for the fact that it does not provide for a similar practice to be followed by the political parties should be considered a major lacuna.  The parties play a significant role in financing the election campaigns of their candidates. Moreover, given that in PIF’s proposal a significant amount of the first stage of campaign funding will be made available through the political party organization, stringent legal provision necessitating disclosure on election expenses by political party organization needs to be an important pre-requisite subject to satisfactory compliance of ECI directions on accounts keeping and audit.

Under section 29C of RPA all registered political parties are legally bound to file an annual report on all contribution received in excess of rupees twenty thousand with the ECI. A similar requirement from individual candidates under law will further strengthen the cause of transparency on contributions. Moreover the contribution limit requiring compulsory reporting  by both individual candidates as well as political party organisation should be brought down to rupees five hundred in order to facilitate maximal contributions to come within the purview of accounted money. Thus all contributions Rs. 500/- may be accepted by cheque only. Contributions below Rs. 500/- may be accepted in cash, but all donations must provide details of the donor in a format as may be prescribed by ECI.  However the fact that failure to file these accounts on contributions is not backed by strong enough deterrent, in the form of disciplinary powers to the ECI for non-compliance, weakens the overall provision and thus calls for immediate redressal. It is necessary that wrong disclosures or non-compliance of filing accounts entail severe punishment. Both ECI and IT (Income Tax) authorities will have access to the accounting details and conduct detailed scrutiny to ascertain the correctness of the disclosures made.  Parties which do not submit annual audited statements may be de-recognised and de-registered or both as the case may be.

Additionally every candidate shall disclose his/her income and assets along with those of his/her family members as defined at the time of nomination.  Every registered political party will be required to submit annual audited financial statement to ECI as is necessary binding on them under Rule 3(xix)) under Article VIII of the Guidelines and Application Format for Registration of Political Parties under Section 29A of the RPA, issued by ECI. Moreover, there shall be compulsory annual disclosure of income and assets of elected legislators.  False or incomplete disclosure by Members of Parliament may invite deterrent penalty including disqualification by the Speaker of the Lower House or the Presiding Chairman of the Upper House.

In the absence of provision for an effective auditing of the accounts relating to election expenditure by the party or the candidates, the entire framework of filing returns would be rendered futile.  Therefore, the compulsory auditing of these accounts should be entrusted to the auditors recommended by the Comptroller and Auditor General of India, which necessarily provides for a scope of cross-checking all reports submitted to both ECI and IT authorities. In addition all these accounts on election expenditure, contributions, assets as well as annual financial statements filed by both candidates and political parties submitted to the ECI should be made available for the information of the public within six months of the end of the financial year in the public domain.

Ceiling on election expenditure is another important feature which deserves review in the Indian context.  The role of black money in elections is well known.  The election expenditure for Lok Sabha election is Rs. 1 crore to Rs. 5 crores as revealed informally by contesting candidates.  Therefore, any ceiling on election expenditure will be theoretical and the elected representative begins his stint on a heap of lies.  If ceiling on election expenditure is not officially regulated, the candidate may furnish the information close to the truth.  Earlier ceiling was considered necessary to discourage role of black money and electoral rigging.  It has not served the purpose.  Therefore, the ceiling on election expenditure may be dispensed with.  The US system in fact does not have any limits set on election expenditure.  Once we have stricter norms for disclosure of expenditure and effective scrutiny of accounts, the objective would be met in a fair and transparent manner.

To assess the likely burden on the central exchequer toward state funding, an empirical exercise taking the 2009 Lok Sabha elections as the reference point was undertaken. The stage one disbursement to the recognized national and state political parties at the rate of rupees ten against each vote polled in their favour excluding the candidates whose deposits were forfeited in the previous election, i.e. the 2004 Lok Sabha elections, has been observed to be approximately Rs. 364 crores. Based on the information, the disbursement to various recognized national and state parties ranged between Rs. 103 crores (INC) and Rs. 5.4 crores (CPI). The second stage of payment in the scheme is in two parts. The candidates whose nominations are found valid would have received an average of Rs. 1.3 lakhs and has been estimated at Rs. 107 crores as total cost. The second installment of the payment due to all candidates securing more than 1/6th of the valid votes has been summed to be Rs.418 crores at all India level. Translated into average disbursement, it came to Rs. 34 lakhs per candidate except few constituencies where the total electorate is very small. There will be no need to raise revenue through any alternative source of cess or new taxes. It is feasible to meet the expenditure of campaign funding by reducing the entitlements to MPs and MLAs under various Local Area Development Schemes. It is estimated that candidates of recognized national and state parties are thus benefited by an average of about  Rs. 35-40 lakhs in the scheme, in addition to other existing privileges like free electorate sheet and free time slot in Doordarshan for propagating the manifesto of the national and state parties.

Every time the issue of state funding of election cannot be put on a hold based on the argument that political party reforms should take precedence over it.  State funding of elections as an agenda is important for a growing democracy claiming equality of opportunity for all its citizens. Moreover, taking a long-term perspective on the issue, the availability of state subvention for campaign funding will sure go on to weaken the sole dependence on private funding.  The current deadlock on the issue of state funding of election inevitably requires simultaneous attempts to cease the impasse. These attempts could demonstrate minimalistic yet critical progression in the broader adoption of election reforms as a whole in the long haul.

PIF’s Proposal on State Subvention to Campaign Funding of Elections:

  • Limited to campaign funding of elections
  • No ceiling on election expenditure
  • Applicable to both parliamentary as well as assembly elections
  • Implementation on pilot basis in parliamentary election


Requires amendment to Representation of People Act (RPA), 1951, Part V, Chapter VIII, Section 77. Also amendment to the Model Conduct of Elections Rules,1961
Administrating agency
  • Election Commission of India (ECI ) along with the support of State Election Commissions


This can be enabled through an administrative order by Union government under the Model Conduct of Elections Rules,1961.It may also be incorporated in RPA, 1951
Corpus to fund the state subvention to campaign finance
  • Creation of a permanent corpus called ‘consolidated fund for election’
  • Corpus to be managed by ECI
  • This non-lapsable corpus will be funded from consolidated fund of India


Requires amendment to RPA, 1951, Part V, Chapter VIII
Scheme STAGE 1 (Payment to Political Parties)

  • Only recognised national and state parties based on the results of the previous elections
  • Payment of rupees ten against each vote polled in favour of all those candidates from recognised national and state parties whose deposit was not forfeited in previous election
  • This fund to be appropriately distributed amongst the candidates with party symbol

STAGE 2 (Payment to Candidates)


  • Payable to all candidates whose nomination held valid after scrutiny and withdrawal of nominations
  • To be made directly to the candidates of all parties and also those contesting as independent
  • Amount due to each such candidate would be 1% x (Total number of electorate of that constituency x rupees ten)


  • Payment will be performance based reimbursement post elections based on election results of the polls
  • Directly to the candidates
  • Only threshold criterion would be that the candidates should have secured atleast 1/6thof the valid votes polled, i.e. those candidates whose security deposit was not forfeited
  • Amount due to each eligible candidates would be calculated at the rate of rupees ten against each vote polled in favour of such eligible candidates
Requires amendment to Representation of People Act (RPA), 1951, Part V, Chapter VIII



















Pre-conditions for disbursement
  • In the Election expenditure statement all political parties to submit their audited annual financial report to ECI within 60 days of the end of each financial year
  • Separate bank account of political parties and eligible candidates for the purpose of election expenditure
  • All other contributions, in addition to state subvention in regards to election expense to be received in this particular account
  • All transactions of this account to be reported
  • This bank account to be linked to UID to facilitate tracking of any illegitimate money transactions
  • Complete disclosure on all contributions received by both party and candidates
  • Complete disclosure on all election expenditure made by both party and candidates to ECI within 30 days after elections


Requires amendment & strengthening of Representation of People Act, 1951, Section 29C 


Requires amendment to Representation of People Act, 1951, Section 77,78, 10A



Strengthening of Rule 3(xix)) under Article VIII of the Guidelines and Application Format for Registration of Political Parties under Section 29A of the RPA, issued by ECI

Disclosure On Contributions:

  • To be filed by both political parties and candidates with the ECI
  • Contributions above Rs.500 to be made by cheque
  • All contributions must provide details of the donor in the format prescribed by ECI
  • Besides disqualification for state-funding of elections, other strong civil and criminal punitive measures to be introduced for non-compliance
  • Providing powers to ECI for de-recognition, de-registration  in addition to withdrawal of IT exemption for punishing non-compliance on disclosure of all contribution by both political parties and individual candidates

On Election Expenditure:

  • To be disclosed by both political parties and individual candidates with the ECI within 30 days
  • Non disclosure by individual candidates is punishable under law with disqualification from contesting of elections for three years
  • Similar requirement and provision for compliance from political parties on all expenditure expenses backed with legal sanctions
  • In case disqualification for three years is declared by ECI, then this disqualification should stand valid even if this candidate has already won and taken oath in the lok sabha or state assembly
  • ECI to certify the correctness of the election expenditure accounts submitted in a time-bound manner within 120 days
  • No reimbursement towards campaign funding in  cases of non-compliance on true, time-bound filing of election expenses by both political parties and individual candidates

On Asset Statement:

  • Every candidate shall disclose his/her income and assets along with those of his/her family members in the new format for filing of affidavit effective from 2011 at the time of filing nominations.  False or incomplete disclosure may invite deterrent penalty including disqualification
  • Every Member of Parliament to compulsorily file annual disclosure on income and assets to the Speaker of the Lower House or the Presiding Chairman of the Upper House of elected legislators.  Non-compliance may invite deterrent penalty to be decided by the presiding authority



Requires strengthening and amendment to Representation of People Act, 1951, Section 29C









Requires amendment to Representation of People Act, 1951, Section 77,78, 10A













Requires amendment to RPA, 1951, Section 33A

Requires strengthening and amendment to the Members of Lok Sabha (Declaration of Assets and

Liabilities) Rules,2004


Requires strengthening and amendment to the Members of Rajya Sabha (Declaration of Assets and Liabilities)

Rules, 2004

Audit requirements
  • Compulsory auditing of all accounts/disclosures on assets, contributions as well as annual financial statements by both political parties as well as individual candidates should be entrusted to the auditors recommended by the Comptroller and Auditor General of India (CAG)


Public Information
  • All these accounts on election expenditure and contribution filed by both candidates and political parties to be placed in public domain
  • To be done within six months of the end of the financial year by ECI


Requires strengthening of Representation of People Act, 1951, Section 33A
Projected Expenditure & Deficit
  • Total expenditure incurred under this model as per the information available on Lok Sabha elections  2009 is approximately  Rs. 1000 cr.

(This article was published in Business Standard on 30th December, 2012 and 6th January, 2013)