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Understanding the Electoral Trust Scheme (ETS)



  Feb 19, 2024

Understanding the Electoral Trust Scheme (ETS)



The Electoral Trust Scheme (ETS) was introduced by the Government of India in 2013 as a transparent mechanism for channeling contributions from corporate entities and individuals to political parties. Its primary aim is to enhance transparency in political funding, ensuring that the process of political contributions is clear and accountable to the public. Here’s a detailed overview of how ETS works and its significance in the context of political donations in India.

Objective and Functioning of ETS

ETS allows for the establishment of electoral trusts that act as intermediaries between donors (corporates and individuals) and political parties. These trusts are specifically designed to collect contributions and distribute them to various political parties, based on the instructions of the donors or the objectives of the trust. The key features of ETS include:

Registration and Approval: Electoral trusts must be registered under the Companies Act and approved by the Central Board of Direct Taxes (CBDT), ensuring they meet specific criteria set by the government.

Mandatory Disclosure: To foster transparency, electoral trusts are required to disclose the details of their donors as well as the beneficiaries (political parties) of their contributions. This information must be made publicly available, typically through filings with the Election Commission of India (ECI) and annual reports.

Tax Exemptions: Donations made through electoral trusts are eligible for tax exemptions, providing a fiscal incentive for donors to channel their political contributions through these trusts.

Significance of ETS

The introduction of the ETS marked a significant step towards addressing concerns over the transparency of political funding in India. By mandating disclosures of both donors to the trusts and the subsequent distributions to political parties, the scheme aims to create a more open environment where the flow of political contributions can be tracked and scrutinized by the public and regulatory bodies.

Challenges and Criticisms

Despite its objectives, the ETS has faced scrutiny and criticism, particularly regarding the enforcement of disclosure norms and the actual level of transparency achieved. Critics argue that while the scheme mandates disclosures, the granularity and timeliness of these disclosures may not be sufficient to provide a complete picture of the influence of corporate and individual donations on political processes.

Comparison with Electoral Bonds Scheme (EBS)

The ETS is often compared to the Electoral Bonds Scheme (EBS), introduced in 2017. Unlike ETS, EBS allowed donors to purchase bonds anonymously and donate them to political parties, which could then encash the bonds. This anonymity raised significant concerns over transparency and accountability in political funding, leading to the Supreme Court’s judgment declaring EBS unconstitutional for violating the voters’ right to information under the Constitution.

Conclusion

The ETS represents an effort to balance the need for private funding in politics with the public’s right to transparency and accountability in political contributions. While it provides a framework for more transparent political funding, ongoing discussions and reforms are necessary to address its limitations and ensure it effectively serves its purpose in the context of India’s democratic and electoral processes.


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