Cannot ascertained whether parties have accepted foreign funds, the poll body told Supreme Court

The government's new rules allowing anonymous donations and unlimited contributions to political parties will have a "serious impact" on transparency in political funding, the Election Commission has told the Supreme Court just weeks before the general election.

The rules have "opened the floodgates to unlimited corporate donations to political parties and anonymous financing by Indian as well as foreign companies, which can have serious repercussions on the Indian democracy," the powerful election body has said in response to petitions challenging "electoral bonds" and seeking a ban on cash donations.

The government had claimed that changes to the law would cleanse political funding. On March 14, the Centre had told the court that electoral bonds were aimed at ensuring "enhanced accountability" and pushing electoral reforms "to defeat the growing menace of black money".

The changes allow anonymous contributions through electoral bonds that don't carry the name of the donor and are tax-exempt. The bonds can be bought at a bank in denominations ranging from Rs 1,000 rupees to Rs 10 million, and given to a political party, which can exchange them for cash.

The election commission told the court that the rule allowing political parties to receive donations from foreign companies having majority stake in an Indian company would "allow unchecked foreign funding of political parties in India, which could lead to Indian policies being influenced by foreign companies."

Donations received by political parties through bonds would not be reported to the Election Commission and it cannot be ascertained whether political parties have accepted foreign contributions, the poll body said.

"Political parties are major stakeholders in a democracy and should be accountable to public," it said, adding that it had on May 26, 2017, expressed its objections to the Law Ministry.

The Association of Democratic Reforms (ADR), one of the petitioners, had said in a document to the court that the rules legalize large anonymous donations by businesses and foreign companies.

The non-profit group said electoral bonds were made available in the three months leading to the April-May elections and "it is expected that enormous amount of corporate funding would be received by political parties and this would play a critical role in the elections."

Citing research and data compiled on electoral bonds, ADR told the court that close to 97 per cent of all the bonds purchased so far were in denomination of Rs 10 lakh and Rs 1 crore with no demand for bonds of smaller denominations.

"The fear with regard to electoral bonds has been proven right in light of the BJP's annual audit report for 2017-18 according to which the party received the largest chunk of the funds received through electoral bonds. The party has earned more than Rs 1,000 crore in 2017-18 and is all set to be the maximum gainer of political funding in the last financial year, according to its annual returns submitted to the Election Commission," alleged the ADR document.

The Supreme Court will hear the case again on April 2