Largest Electoral Trust Directed 75% of Donations to the Ruling Party

Reuters Raises Concerns Over Political Funding in India

Newsreel Asia Insight #161
March 15, 2024

A New Delhi-based electoral trust has raised $272 million through major Indian corporations over the last 10 years and directed about 75% of the amount to the ruling Bharatiya Janata Party (BJP), according to Reuters, which raises concerns about the fairness and transparency of political funding in India, especially in the context of the upcoming general election.

According to the Reuters report, which analysed public records from 2018 to 2023, the Prudent Electoral Trust, the largest donor to the BJP, allocated a substantially smaller amount to the opposition Congress party. The analysis tracked the financial contributions from some of India’s major companies.

The report by the newswire details how major Indian corporations have donated large sums to the Prudent Electoral Trust, which then funnels these funds to the BJP. Companies like ArcelorMittal Nippon Steel, Bharti Airtel, GMR and Essar have made substantial contributions through the trust, which does not disclose the specifics of how individual donations are allocated.

Prudent, the largest of India’s 18 electoral trusts, is unique in accepting contributions from multiple corporate groups, says Reuters, noting that the setup provides a layer of separation between the firms and the political parties, contributing to the lack of transparency in political finance in India.

Electoral trusts are established with the primary purpose of receiving voluntary contributions and distributing these to political parties. They are part of a mechanism intended to bring more transparency to political funding.

The trusts are required to distribute at least 95% of their total income (including voluntary contributions and other income) during the financial year to eligible political parties, according to regulations governing electoral trusts. The remaining 5% can be used to cover administrative expenses.

Only those political parties that are registered under Section 29A of the Representation of the People Act, 1951, and have secured at least one percent of the votes polled in the most recent general election or legislative assembly election are eligible to receive funds from electoral trusts.

Electoral trusts must maintain a transparent record of their activities. They are required to disclose the amount of money received and the details of donors, as well as the amounts disbursed to various political parties. These details must be submitted annually to the Election Commission of India and are also required to be audited.

The trusts should operate in a manner that ensures there is no direct influence from the donors over which political parties receive the funds. The allocation of funds is supposed to be based on the internal guidelines of the trust, which should be designed to ensure fair and non-partisan distribution.

Contributions made to electoral trusts are eligible for tax exemption, provided the trusts comply with the prescribed guidelines and procedures under the Income Tax Act.

In a February ruling on campaign finance, the Supreme Court of India described corporate contributions as “purely business transactions made with the intent of securing benefits in return.” Reuters said it could not determine whether political parties are aware of the identities of donors contributing through trusts that receive funds from various groups.