Electoral Bonds vs Electoral Trusts: A Comprehensive Comparison

Electoral bonds and electoral trusts are two mechanisms for funding political parties in India. They were introduced by the Government of India in 2018 and 2013, respectively.

Electoral bonds are bearer instruments that can be purchased by any Indian citizen or body incorporated in India for any amount in multiples of Rs. 1,000, Rs. 10,000, Rs. 1,00,000, Rs. 10,00,000, and Rs. 1,00,00,000. The bonds are issued by the State Bank of India (SBI) during specified periods of the year.

Electoral trusts are non-profit companies registered under Section 25 of the Companies Act, 1956. They are set up by companies with the sole objective of receiving and distributing donations to political parties. Only companies registered under Section 25 can make donations to electoral trusts.

Electoral Bonds

• Electoral bonds are bearer instruments, similar to promissory notes.
• They can be purchased from designated branches of the State Bank of India (SBI) for a period of 10 days each in the months of January, April, July, and October.
• The bonds are available in denominations of Rs. 1,000, Rs. 10,000, Rs. 1 lakh, Rs. 10 lakh, and Rs. 1 crore.
• The bonds can be donated to any political party registered under Section 29A of the Representation of the Peoples Act, 1951, and which secured not less than one percent of the votes polled in the last general election to the House of the People or a Legislative Assembly.
• The bonds must be encashed by the political party within 15 days of purchase.

Electoral Trusts

• Electoral trusts are non-profit companies established under Section 25 of the Companies Act, 1956.
• They are set up by corporate houses and individuals to receive donations for political parties.
• Electoral trusts are required to disclose the names of their donors to the Election Commission of India (ECI), but they are not required to disclose the identities of the political parties to which they donate money.
• Electoral trusts are required to submit an annual report to the ECI on their income and expenditures.

Key differences between electoral bonds and electoral trusts

The key differences between electoral bonds and electoral trusts are as follows:

• Anonymity: Electoral bonds offer anonymity to donors, while electoral trusts are required to disclose the names of their donors to the ECI.
• Transparency: Electoral trusts are more transparent than electoral bonds, as they are required to submit an annual report to the ECI on their income and expenditure.
• Mode of purchase: Electoral bonds can be purchased from designated branches of the SBI, while electoral trusts can be donated directly by corporate houses and individuals.

How electoral bonds and electoral trusts work:

Electoral Bonds:

• Electoral bonds can be purchased from designated branches of SBI during specified periods of the year.
• The bonds are valid for 15 days from the date of purchase.
• The bonds can be donated to any registered political party by depositing them in the party's designated bank account.
• The political party can then encash the bonds through its bank account.

Electoral Trusts:

• Companies can make donations to electoral trusts through checks or demand drafts.
• The electoral trusts then distribute the donations to registered political parties in accordance with their own criteria.
• The electoral trusts are required to submit a report to the Election Commission of India on the donations received and distributed by them each year.

Which mechanism is more transparent?

Electoral trusts are more transparent than electoral bonds. Electoral trusts are required to disclose the names of the companies that have donated to them and the political parties to which they have distributed the donations. Electoral bonds, on the other hand, are anonymous, meaning that the identities of the donors and the recipients of the donations are not known to the public.

Which mechanism is more popular?

Electoral bonds have become more popular than electoral trusts since their introduction in 2018. In the 2019 general election cycle, electoral bonds accounted for over 90% of the total donations received by political parties.

Current status:

Electoral bonds have become the primary route of political funding in India since they were launched in 2018. Electoral trusts, on the other hand, have received much less funding.

The Electoral Bonds scheme has been challenged in the Supreme Court of India on the grounds that it violates the right to know and the right to equality. The Court is currently hearing the case.

Conclusion:

Electoral bonds and electoral trusts are two mechanisms for funding political parties in India. Electoral bonds are more anonymous, while electoral trusts are more transparent. Electoral bonds have become more popular than electoral trusts since their introduction in 2018.