Report No. 255
(a) On Expenses and Contribution
2.28.1. Section 77 of the RPA imposes a ceiling on the election expenses of a candidate from the date of nomination to the date of declaration of results and hence does not cover any period before the nomination, even though it constitutes a major part of candidates' expenses.
This form of regulation on election expenditure should be amended to extend from the date of notification of the elections to the date of declaration of results, given that many candidates file their nominations only on the last date of filing, to prevent the application of section 77 limiting their expenses. Campaigning commences before or at least once the ECI announces the date of elections, and the filing of nominations is often viewed only as a formality.
2.28.2. Although the UK system of covering both the pre-candidacy long-campaign period, namely a certain specified time, such as a year, before the date of nomination; and the short-campaign period, namely from the date of nomination to the declaration of results is desirable, it may not be feasible in India.
Unlike the UK, India is a much larger and more diverse country, which would make the task of determining what constitutes election expenses in the pre-candidacy period, and then regulating it, difficult. Instead, an amendment to section 77 extending its scope as suggested above, may be a better mid-way solution and a more practical alternative.
2.28.3. Furthermore, Section 77 of the RPA only regulates the election expenses of candidates. Political parties are free to spend any amount as long as it is for the general party propaganda, and not towards an independent candidate. Thus, there is no ceiling on party expenditure. It is recommended that the law on this point does not change, namely that there are no caps on party expenditure under the RPA given that it would be very difficult to fix an actual, viable limit of such a cap and then implement such a cap.
In any event, as the experience with section 77(1) discussed above reveals, in the 2009 Lok Sabha elections, on average candidates showed election expenditures of 59% of the total expenses limit. There is no reason why the same phenomenon of under-reporting will not transpire amongst parties.
2.28.4. Placing legislative ceilings on party expenditure or contributions will not automatically solve the problem, especially without putting in place a viable alternative of complete state funding of elections (which in itself is next to impossible right now). Our previous experience in prohibiting corporate donations in 1969 did not lead to a reduction in corporate donations. Instead, in the absence of any alternative model for raising funds, it greatly increased illegal, under the table and black money donations.
2.28.5. Although the problem of black money and under-reporting will remain under the existing regime of no caps on individual contribution and party expenses, it has to be tackled through a stricter implementation of the anti-corruption laws and RTI and improved disclosure norms. It might be desirable to regularly re-examine the 7.5% profit cap on company's contributions in light of the intended rationale, since the former can become a meaningless limit in the context of big companies.
2.28.6. On a separate note, the authorisation of corporate contribution through a resolution passed at the meeting of the Board of Directors under Section 182(1) of the Companies Act, 2013 should be amended to empower a larger group of people, such as the company's shareholders, in deciding how to use the funds of a company for political purposes. This has been done in the United Kingdom as well. Section 182(1) should be amended to this effect.