Thursday, February 5, 2015

Analysis of Contribution Report of Electoral Trusts for FY 2013-14

Introduction

The Central Government amended the Income Tax Rules, 1962 on the 31st January, 2013 to insert Rule 17CA which lists the functions of Electoral Trusts approved by the Central Bureau of Direct Taxes (CBDT). The Central Government, simultaneously, notified ‘The Electoral Trusts Scheme, 2013’ which specified the eligibility procedure and format for registration as an Electoral Trust. The amendment and the scheme were introduced for the registration of Electoral Trusts whose sole purpose was to fund registered political parties in a transparent manner. The notification can be accessed here.

The Election Commission of India (ECI) had circulated Guidelines for submission of contribution reports of Electoral Trusts on the 6th June, 2014 wherein instructions were issued to all the Electoral Trusts formed after January,’13 (hence approved by the CBDT), to submit an Annual Report containing the following details to the Commission apart from an audit report in the format specified in the amended rules, in the interest of transparency:
1.       Details of contributions received by the Electoral Trusts.
2.       Details of donations given by the Trust to political parties.
These guidelines were issued to 7 Electoral Trusts formed after January, 2013, and included Satya Electoral Trust, Pratinidhi Electoral Trust, People’s Electoral Trust, Progressive Electoral Trust, Janhit Electoral Trust, Bajaj Electoral Trust and Janpragati Electoral Trust. Of the above 7 Trusts, Satya Electoral Trust is the only Trust to submit its complete Annual Report to the ECI. Janhit Electoral Trust, Pratinidhi Electoral Trust and Janpragati Electoral Trust declared nil amounts received as donations during the FY 2013-14.

The following report of ADR/ NEW analyses the details of donors of Satya Electoral Trust and the contributions made by the Trust to political parties during FY 2013-14.

Executive Summary

Five National Parties, INC, NCP, BSP, CPI, CPM submitted their contributions statements, above Rs 20,000, for the FY 2013-14 to the ECI. BJP is the only  National Party which has not submitted its contribution report. While BSP declared nil income above Rs 20,000, the total income of the four National Parties from known sources of funding was Rs 76.93 crores. But the total donations declared by Satya Electoral Trust to National Parties amounts to Rs 81.87 crores (including donations to BJP).

1.       Format for submission of contributions report by the Electoral Trusts to the ECI

a.       The Electoral Trusts are required to submit the following 3 documents to the Election Commission of India:
  i.      Annexure
        aa.   Part A – Basic information of the Electoral Trust
ab. Part B – Details of contributions received in the financial year
ac. Part C – Details of donations made by the Trust to political parties
ad. Part D – Verification by a person authorized by the Trust
  ii.      Audit report by a certified Chartered Accountant
  iii.      Compliance certificates from Corporate donors

2.       List of Electoral Trusts formed after 31st January, 2013
Based on the information available with the Ministry of Corporate Affairs, a list of all Electoral Trusts formed after January, 2013 and approved by the CBDT is given below. Details of ownership of the Electoral Trusts were collected based on media reports and research on directorships in other companies.

S. No.
Name of the Electoral Trust
Company/ conglomerate which set up the Trust*
1
Janhit Electoral Trust
Vedanta Group
2
Satya Electoral Trust
Bharti Group
3
People’s Electoral Trust
Reliance Group
4
Mahindra Electoral Trust Company
Mahindra Group
5
Progressive Electoral Trust
Tata Group
6
Paribartan Electoral Trust
MP Birla Group
7
Bajaj Electoral Trust
Bajaj Group
8
Triumph Electoral Trust
Murugappa Group
9
Kalyan Electoral Trust
Bharat Group
10
Janta Nirvachak Electoral Trust
Kotak Group
11
Jagrut Electoral Trust
Lodha Group
12
New Democratic Electoral Trust
Mahindra Group
13
Samaj Electoral Trust Association
KK Birla Group
14
Gauri Welfare Association Electoral Trust
Jain Group
15
Sardar Vallabhbhai Patel Electoral Trust
Sardar Vallabhbhai Patel Party (Political Party)



1
Pratinidhi Electoral Trust
Not known
2
Reformative Electoral Trust of India
Not known
3
Bhartiya Socialist Republican Electoral Trust
Not known
4
Harmony Electoral Trust
Not known
5
Jankalyan Electoral Trust
Not known
6
Janpragati Electoral Trust
Not known
7
Ambar Electoral trust
Not known
8
Swadeshi Electoral trust
Not known
9
Ashmita Electoral trust
Not known
            * Details of ownership of the Electoral Trusts were collected based on media reports, research on directorships in other companies and registration address of the company/ Trust
 3.       Contributions received and disbursed by Satya Electoral Trust during FY 2013-14
a.       According to the rules formulated by the Central Government, Electoral Trusts are required to donate 95% of their total income to registered political parties in a financial year.
b.      Satya Electoral Trust received a total amount of Rs 85.406 crores from corporates and individuals and distributed Rs 85.37 crores (99.96%) to various political parties.
                                               Inline image 1 
4.       Contributions made by Corporates

a.       Bharti Airtel Ltd. contributed the maximum amount of Rs 28 crores which formed 33% of total donations to Satya Electoral Trust followed by DLF Ltd. which donated Rs 20 crores and constituted 23% of total donations.
b.      Shri Akhil Gupta, Vice Chairman of Bharti Enterprises and Executive Chairman of Bharti Infratel Ltd. is the only individual to contribute to political parties through Satya Electoral Trust. He donated Rs 2 crores (2% of total donations to Satya Electoral Trust).

  Inline image 2 


5.       Total contributions as a Group of Companies
a.       The parent companies of all the corporate donors have been termed as Group of companies and is not a part of the submission made by Satya Electoral Trust
b.      As Satya Electoral Trust was set up by the Bharti Enterprises, the parent company donated the maximum amount of Rs 36 crores to be disbursed to political parties and formed 42.16% of total donations to the Electoral Trust.
c.       Donations from other groups of companies include: Jubilant Bhartia Group – Rs 6.38 crores (7.47%); CK Birla Group – Rs 4.003 crores (4.69%); Interglobe enterprises – Rs 4.004 crores (4.69%) and KK Birla Group – Rs 2.002 crores (2.34%).
                                     Inline image 3
6.       Donations made by Satya Electoral Trust to Political Parties
a.       BJP, INC and NCP were the three National Parties to which Satya Electoral Trust made contributions.
b.      BJP was the recipient of the maximum amount of Rs 41.37 crores (48.44% of total donations to the Trust) followed by INC with Rs 36.50 crores (42.74% of donations to the Trust).
c.       SAD, RJD and J&KNC are the three Regional Parties to which the Trust made donations. SAD received Rs 2 crores and RJD received Rs 1 crore.
Name of the Political Party
Total Donations disbursed to political parties (Rs. in crores)
% of donations made from income of Trust
BJP
41.37
48.44%
INC
36.5
42.74%
NCP
4
4.68%
SAD
2
2.34%
RJD
1
1.17%
J&KNC
0.5
0.59%
Total donations
Rs 85.37  crores
99.96%

                                                         Inline image 4 

7.       Direct donations made by the corporates to political parties

a.       Apart from the donations by corporates to Satya Electoral Trust, ADR/NEW analysed the donations by the same corporates who also donated separately to political parties between FY 2004-05 and 2013-14.
b.      National Engineering Industries Ltd. of C.K.Birla Group donated 5 times to INC and BJP between FY 2004-05 and 2012-13. The company donated a total amount of Rs 87.50 lakhs to BJP and Rs 1.875 crores to INC.
c.       It is to be noted that National Engineering Industries Ltd. donated Rs 1 crore to INC directly and Rs 2 crores to Satya Electoral Trust during FY 2013-14.
d.      GMMCO Ltd. is the only other corporate which donated to Satya Electoral Trust but had also made donations directly to political parties between FY 2004-05 and 2012-13. The company donated an amount of Rs 37.50 lakhs each to INC and BJP during FY 2009-10.

Name of the corporate
Political party donated to*
Amount of contribution
Financial Year
National Engineering Industries Ltd.
BJP
Rs 37.50 lakhs
2009-10
BJP
Rs 50 lakhs
2012-13
INC
Rs 37.50 lakhs
2009-10
INC
Rs 50 lakhs
2012-13
INC
Rs 100 lakhs
2013-14
Total
                        Rs 2.75 crores



GMMCO Ltd.
BJP
Rs 37.50 lakhs
2009-10
INC
Rs 37.50 lakhs
2009-10
Total
                            Rs 75 lakhs
*BJP has not submitted its donations report for FY 2013-14 hence donations from the above corporates for FY 2013-14 cannot be verified

Recommendations of ADR

1.       6 Electoral Trusts had donated a total amount of Rs 105 crores to the National Parties between FY 2004-05 and 2011-12, before the transparency rules governing contributions to Electoral Trusts were formulated by the Central Government. As the rules are not retrospective, these 6 Electoral Trusts are not required to follow the transparency rules and declare their donor details. Thus, details of donors to these 6 Electoral Trusts remain unknown thereby leading to speculation on whether donations to these Trusts was only a means of getting tax exemption or a way to convert black money stashed in tax havens to white money in India.

Therefore details of donors of Rs 105 crores donated to political parties by the six Electoral Trusts which were formed before the CBDT rules came into existence, should also be disclosed. These Trusts include General Electoral Trust, Electoral Trust, Harmony Electoral Trust, Corporate Electoral Trust, Bharti Electoral Trust and Satya Electoral Trust. Also, the same rules which apply to those Trusts formed after 31st January, 2013, should also apply to the above mentioned Trusts so as to improve transparency.

2.       The names of Electoral Trusts, currently, do not indicate the name of the Company/ group of companies which set up the Trusts. In order to have greater transparency regarding details of corporates which fund political parties, it would be ideal to include the name of the parent company in the name of the Electoral Trust.

3.       Those Electoral Trusts which have not responded to and complied with the guidelines circulated by the ECI should be heavily penalized as indicated in the notification to the Trusts.

For detailed report on the donations received by Satya Electoral Trust and the contributions made by the Trust to political parties during FY 2013-14, kindly refer to the attached report.


Contacts

Media and Journalist Helpline

+91 80103 94248
Maj Gen Anil Verma (Retd.)
Head

National Election Watch and Association for Democratic Reforms

+91 8826479910

Prof Jagdeep Chhokar
IIM Ahmedabad (Retd)
Founder Member National Election Watch, Association for Democratic
Reforms
+919999620944

Prof Trilochan Sastry
IIM Bangalore
Founder Member,
National Election Watch,
Association for Democratic Reforms
+919448353285,



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Association for Democratic Reforms
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(Near Gulmohar Commercial Complex)
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