August 04, 2020
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Democracy For A Dime

In 1970, company donations to political parties was banned, opening the field to power brokers whose strengths lay in their skill in raising funds.

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Democracy For A Dime
Both Bangaru Laxman and Jaya Jaitly claimed that the money they accepted from Tehelka during its sting operation was for the party. In Jaitly's case, this was undoubtedly true. But Atal Behari Vajpayee seems to be the only Indian leader who has so far had the courage to concede that the kickbacks exposed by Tehelka are not isolated examples of corruption but part of an elaborate, corrupt—and therefore criminal—system of funding that has evolved over decades, and without which it would not have been possible to run a democratic polity in India. This evolution has occurred over more than three decades and grown out of a lacuna in the Constitution, whose consequences none of the founding fathers was able to foresee. This was that, in contrast to European constitutions, the unwritten British and the written American constitutions—on which the Indian one is based—make no mention of political parties. That being so, it naturally did not mention the need to ensure a fair and adequate system for their funding.

Till 1970, Indian political parties were free to accept donations and indeed obtained most of their funding from Indian firms. These were allowed to claim a tax deduction on their donations and so preferred to give money 'in white'. Till 1962, this sufficed to meet the needs of most—if not all—parties and certainly that of the Congress. The party felt the pinch for the first time in December 1966 before the fourth general election when then treasurer Atulya Ghosh bemoaned the drying up of contributions and resultant shortage of funds.

The Congress won that election by a hair, winning just 282 seats. The Syndicate, as the high command was then called, immediately concluded that this was because it had fallen short of funds. It blamed industry for diverting contributions to the much more business-friendly Swatantra Party and the princes for giving a good part of their contributions to the Jana Sangh (now bjp).

Out of this grew the resolve, implemented in 1970, to deprive the princes of their privy purses and to ban company donations to political parties. But Indira Gandhi did not create an alternative source of funding. In the very next year, an early election to Parliament separated parliamentary from state assembly elections and doubled the political parties' need for funds. That opened the floodgates for the entry of black money into politics.

In 1971 and 1972, the Congress went back to the same industrialists as before. But this time, it demanded contributions in cash. Large, professionally-managed companies found it more difficult to meet these demands than owner-managed companies. This shifted the support base of the Congress and opened the way for the spate of anti-big business legislation that followed in the '70s. But it had another less noticed but much more pernicious effect.

The need to break the law to collect funds made it necessary for party high commands to appoint intermediaries to do the collection. No one knew how much these middlemen were collecting so, over time, there emerged a new class of power brokers within each party on whom the high command became dependent to collect money. Power shifted gradually out of its hands into those of the power brokers. Power brokers whose candidates were denied tickets simply set up rebel candidates. Each such humiliation made the party's elected leaders weaker and weaker. Paradoxically, therefore, political parties began to resort to kickbacks on foreign contracts as a way of restoring the power and autonomy of the formal leaders over the party.

The stratagem was successful inasmuch as it stabilised political funding but it made political parties and leaders extraordinarily vulnerable to exposure and blackmail. The first time a kickback to a party came to light was when a Swiss firm, Compagnie Noga d'Importation-Exportation, filed a suit in a Swiss court to recover front-end commissions it had paid to Indians amounting to $6 million on three sugar export deals in 1975, on which the Indian supplier, the State Trading Corporation (stc), had reneged but not returned the commission. The respondents named were V.V. Parekh, then chairman of the stc, Swraj Paul, and a third person whose name the Swiss courts were forbidden by law from making public. Enquiries by the Janata government that came to power in 1977 revealed that the law applied usually to heads of state or government but the Janata was unable to ferret out the name of the third respondent.

The next two revelations, which came within weeks of each other in 1987, were the Bofors deal which, had it gone through, would have involved three separate commissions adding up to 17 per cent of the $1.2-billion deal, i.e. a total of Rs 200 crore, not Rs 64 crore, and the German hdw submarine deal in which the suppliers had agreed to pay a commission of 6 per cent to a company called Globetech, owned and run by former chief of naval staff Admiral S.M. Nanda. The way these deals forced Rajiv Gandhi onto the defensive, and led to the Congress' defeat in 1989, is too fresh in people's minds to need repetition.

Lack of space prevents me from detailing two other exposures—the purchase of a power pack for the Arjun battle tank and the implications of the Jain diaries. But suffice it to say that this spate of revelations confirmed what most in Delhi already suspected. The Tehelka videotapes, therefore, only provided visual proof of what they already knew.

Vajpayee is therefore right: there is no point in either trying to pick holes in Tehelka's evidence and camera work, or in trying to score points off one's political opponents. If Indian democracy is to be saved from further degradation, all political parties must treat this as a common problem and find a common solution. That can only be generous, fully-audited state funding.
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