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Report No. 255

(iii) Recommendations

2.30.1. A quick perusal of the recommendations of various committees on state funding of elections and comparative provisions makes it clear that complete public funding of elections or political parties in India is not a practical option; instead, indirect state subsidy is a better alternative for various reasons provided below.

2.30.2. First, prevailing economic conditions make it impossible for complete state funding of elections. Full funding should prohibit candidates and parties from accessing alternative sources of money both during election campaigns and in the inter-election period.

If full funding is a seen as a replacement for the pervasiveness of big money in elections, then it will have to be substantial enough to stop the prevalence of black money. Given the amount being spent on elections today, and the alternative use of money on poverty reduction, health, education, food etc.; it seems highly unlikely that the centre can provide such money.

2.30.3. Second, for similar reasons of financial burdens, monetary constraints, and weak enforcement, a system of matching grants as in Germany and the United Kingdom are not possible. Corporate grants are often enormous and hence will be difficult to match, while a lot of big donors give money in black, and hence will only to serve to increase the amount of total funding available with parties.

2.30.4. Third, currently, there is no clear picture on the cost of financing elections given the weak disclosure of expenditure by political parties and contributions by corporates and big donors. A system of complete monetary state support will work only if it replaces the actual demand for money in election campaigns and day-to-day administration of political parties. Hence any state support has to be in kind support, and not in cash because unless the current system satisfies the total requirement of parties, monetary support will only serve to increase party spending and invite uninterested or opportunistic candidates and parties.

2.30.5. Fourth, as the Law Commission Report in 1999 and the NCRWC Report in 2001 acknowledge, reforms on state funding of election have to be preceded by campaign finance reform; improvement in transparency, disclosure and audit provisions; decriminalisation of politics; and the introduction of inner party democracy. Funding parties (instead of candidates) with little internal democracy will only strengthen the power of the leadership and the benefits of public funding might not extend to the rank and file of the party.127

127. Gowda, supra note 94, at 245

2.30.6. Fifth, there are various associated problems with state funding such as the possible undermining of the independence of the parties due to their financial reliance on the exchequer, and can be especially problematic for new parties.128 Even otherwise, the distribution of public money may reduce party incentives to maintain their social base and generate funds through political mobilisation.129

Moreover, as the comparative table shows, in most countries subsidies are determined on the basis of past performance or current representation, and thus automatically discourage new (and weaker) parties. In case of current representation, money will have to be given upfront and subsequently, overpaid parties will have to reimburse the State, while underpaid parties will be reimbursed by the state after the results.130

128. IDEA Report, supra note 120, at 8.

129. ORF, supra note 104.

130. Gowda, supra note 94, at 246.

2.30.7. Finally, public funding of elections, including existing provisions on partial in-kind funding only extends to registered parties and hence excludes independent candidates, whilst simultaneously encouraging frivolous candidatures, with the sole intention of gaining access to public funds.

2.30.8. Instead, as the Indrajit Gupta Committee noted in its 1998 report, efforts should be made to curb the costs of campaigning by limiting or regulating the use and location of cut outs and banners; hoardings and posters; the number of public meetings; the use of vehicles during campaigns, and the publicity from moving vehicles. This will help reduce the cost of elections, although it may not reduce the incentives to raise election funds and abuse power.131

131. Gowda, supra note 94, at 241

2.30.9. With respect to indirect in-kind subsidy, reference should be made to the British practice to increase the quantum of such subsidies to include free broadcasting time on private channels, free postage and meeting rooms, access to public town halls, the cost of printing, and even provision of specified quantities of fuel and food packets. Thus, by providing a "financial floor" to parties and candidates,132 it reduces the cost of elections, without providing parties with liquid cash to spend in addition to their resources.

132. Ibid., at 242

2.30.10. On the basis of the above, the following recommendations are suggested:

1. Currently, a system of complete state funding of elections or of matching grants, wherein the government matches the private funding (by donors or corporates) raised by political parties, are not feasible given the economic conditions and developmental problems of the country.

2. Given the high cost of elections and the improbability of being able to replace the actual demand for money, the existing system of giving indirect in-kind subsidies instead of giving money via a National Election Fund, should continue.

3. The wording of Section 78B of the RPA permits the Central Government, in consultation with the ECI, to supply certain items to the electors or the candidates and this provision can be used to expand the in-kind subsidy to include free public meeting rooms, certain printing costs, free postage etc.

4. Any reform in state funding should be preceded by reforms such as the decriminalisation of politics, the introduction of inner party democracy, electoral finance reform, transparency and audit mechanisms, and stricter implementation of anti-corruption laws so as to reduce the incentive to raise money and abuse power.

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