Demonetisation could lead to long-pending electoral reforms | analysis | Hindustan Times
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Demonetisation could lead to long-pending electoral reforms

The demonetisation has come at the right time, just ahead of five state elections. Parties and candidates who were ready with the bonanza would not know what to do with that money now. Even fake money from across the borders will be hit. However, politicians are ingenuous

analysis Updated: Nov 12, 2016 07:06 IST
A cashier counts 500 and 1000 rupee notes inside a bank in Jammu, November 10, 2016
A cashier counts 500 and 1000 rupee notes inside a bank in Jammu, November 10, 2016(REUTERS)

The demonetisation of currency notes of the denominations of 1,000 and 500 has rattled the nation. Experts are divided on whether the government’s decision will curb corruption in the country. The actual impact will be seen after some time.

Meanwhile, I have been flooded with questions about the impact of this drastic step on elections, particularly in view of the impending polls in five states — Uttar Pradesh, Punjab, Uttarakhand, Puducherry and Goa.

An electoral democracy cannot function without political finance. This includes expenditure on reaching out to voters and raising funds to meet this expenditure. To ensure a level playing field, the law prescribes a ceiling to be fixed periodically. The objective is to limit “the pernicious influence” of big money in controlling the democratic process. But violations have been rampant which made the redoubtable Justice JS Verma to comment that the prescription of ceiling on expenditure by a candidate is a mere eyewash.

Read | Why the currency switch is a political blunder by the BJP

Over the years, the role of money power has gone from bad to worse. All political parties have been expressing verbal concern without taking any action on the reforms proposed by the Election Commission of India (ECI). Instead, political parties and candidates have devised ingenious ways for distributing cash and liquor.

The ECI has been deeply concerned about the use of money to bribe voters ahead of polls. In my inaugural press conference on taking over as chief election commissioner (CEC), I had given myself two challenges — abuse of money and voter apathy. Two new divisions were created to addressing these issues seriously. Both met with tremendous success, one achieving the highest-ever voter turnouts ever since and the other unearthing crores of rupees and goods including liquor. Our proactive steps led to some landmark achievements including unseating and disqualifying a sitting MLA in UP and countermanding two Rajya Sabha elections in Jharkhand.

This year, in an unprecedented step, the ECI was forced to cancel elections to two Tamil Nadu assembly seats, Aravakurichi and Thanjavur, for the uncontrolled use of money. The poll panel then wrote to the government seeking permanent legal powers to countermand polls on credible evidence of the use of black money.

Read | Banks struggle to handle panicked customers, ATMs run dry within hours

Cash-for-votes notoriety as a regular feature in our elections was conveyed by US diplomatic cables, leaked by WikiLeaks. A cable quoted a confidante of a Union minister from Tamil Nadu distributing up to ₹5,000 per voter in a by-election in 2009. After his victory, the politician announced that his formula was a sure winner. This notorious “Thirumangalam formula” became our biggest challenge.

Around ₹300 crore of unaccounted cash was seized by the commission during the 2014 election. Cash seizure across all assembly elections since 2014 has been at an all-time high. Bihar, for instance, registered the highest seizure of cash (₹19 crore) during the assembly polls in 2015. In Tamil Nadu, the figure crossed ₹100 crore.

Money power and its pernicious effects on electoral outcomes universally affect all countries, and not just India. Several conferences in the last few of years have sought to address the issue. A conference of Saarc countries on “Regulating Campaign Finance: Ensuring Free and Fair Elections” was organised by FEMBoSA (Forum of Election Management Bodies of South Asia) in November, 2014, at Kathmandu, Nepal.

Read | Govt says deposits above ₹2.5 lakh to be taxed: Your 4 questions answered

The culmination of these deliberations was a regional conference on “The Money in Politics and its effects on Peoples’ Representations”, held jointly by the international IDEA and ECI in New Delhi in December, 2015. Based on the collective wisdom and shared experience, the conference unanimously adopted a resolution christened “New Delhi Declaration on Political Finance Regulation” laying down nine “Overarching Principles” and an equal number of implementation guidelines.

Ever since the ECI started coming down hard on black money in polls, candidates and parties have started distributing money early, much before the ECI enforces a model code of conduct.

The demonetisation has come at the right time, just ahead of five state elections. Parties and candidates who were ready with the bonanza will not know what to do with that money now. Even fake money from across the borders will be hit. However, politicians are ingenuous. In my book, I had documented 40 methods of illegal distribution of funds to seduce the voters. Many more have been invented since. Money may still be distributed — with some possible increment to compensate for the effort of each voter in getting it exchanged in the banks.

Read | ATMs functioning at 10% capacity, quick relief unlikely for customers

My fear is that a money-laundering industry will mushroom with the complicity of bank officials. The government must watch out for the omnipresent touts and colluding bank officials. This advice is based on experience. Once our IT vigilance team intercepted a vehicle carrying over ₹2 crore. We were told that the money was going to refill the ATM. So we let it off with an apology. The next day, another team caught a vehicle with double the amount, and a third vehicle was interrupted with ₹11 crore — in both cases the explanation was the same. We investigated and found that the van was not accompanied by an armed guard and did not follow other security protocols. I immediately spoke to RBI governor D Subba Rao who was shocked to hear of this mode of money laundering.

Money in elections is the mother of all corruption. The more they spend, the more they need to collect by all means, fair or foul. As much as 80% of political funds (in hundreds of crores) is from undisclosed sources. This opacity is not acceptable. I hope the time for long-pending electoral reforms has finally come.

SY Quraishi is former CEC and author of An Undocumented Wonder - The Making of the Great Indian Election

The views expressed are personal