CORPORATE DONATIONS AND POLITICAL PARTIES IN INDIA

Why In News?

The Association for Democratic Reforms (ADR) report for FY 2024-25 shows that donations to national political parties rose 161% to Rs 6,648.56 crore, with the corporate sector contributing over 92% of this amount, reviving the debate on transparency in political funding system. 

What are Corporate Donations to Political Parties?

Corporate donations refer to financial contributions made by companies, business houses, electoral trusts and other corporate entities to registered political parties for election campaigns and party activities. 

In India, such donations are regulated under the Representation of the People Act, 1951, the Companies Act, 2013 (as amended), and disclosure requirements prescribed by the Election Commission of India (ECI).

• Political parties must disclose donations exceeding ₹20,000 annually to the ECI under Section 29C of the Representation of the People Act, 1951. 

Eligible donors: Indian companies, electoral trusts, individuals and other eligible entities can contribute to political parties, subject to the prevailing legal framework.

Corporate funding objective: It enables parties to finance election campaigns, organisational activities and political outreach, while companies often view donations as a means of policy engagement and democratic participation.

Transparency concerns: The Supreme Court, in Association for Democratic Reforms vs Union of India (2024), struck down the Electoral Bond Scheme, holding that anonymous political funding violated the citizens' Right to Information under Article 19(1)(a) and weakened electoral transparency. 

What are the Key Findings of the ADR Report (2024–25)?

Record-high donations: National political parties declared ₹6,648.56 crore in donations above ₹20,000 through 11,343 donations, a 161% increase over FY 2023–24. The BJP received ₹6,074.02 crore.

Geographical concentration: Delhi (₹2,639.4 crore) and Maharashtra (₹2,438.8 crore) together accounted for the bulk of declared donations, indicating a concentration of political funding in major corporate and financial centres. 

Donations dominate party finances: National parties reported a total income of ₹7,960.10 crore, of which 85.08% came from donations and contributions, highlighting their heavy dependence on private funding.  

Transparency concerns: ADR observed delays in submission of audit reports by some national parties and stressed the need for timely disclosure, stronger reporting standards and greater transparency in political finance.  

ADR argued that greater transparency, disclosure of funding sources and stronger regulatory oversight are essential to reduce the influence of money power on electoral democracy and strengthen public trust. 

Concerns About the Increasing Role of Corporate Funding 

Opaque Disclosure Framework: Despite the Supreme Court striking down the Electoral Bond Scheme in 2024, disclosure remains incomplete and delayed. 31 regional parties had not submitted FY 2024-25 audit reports.

Policy Capture: Heavy concentration of funding increases the risk of regulatory capture, where large donors may gain disproportionate influence over taxation, licensing, procurement and sectoral regulation. 

• The Law Commission (255th Report) warned that opaque political finance encourages "lobbying and capture" by wealthy donors.  

Unequal Political Competition: National political parties declared ₹6,648.56 crore in donations during FY 2024-25, with one party receiving over 91% of total declared donations, raising concerns about electoral competitiveness. 

Conflict of Interest: Unlimited corporate contributions may encourage quid pro quo, particularly where donors seek government contracts, regulatory approvals, mining leases or policy concessions.

Weak Shareholder Accountability: After removal of the 7.5% profit cap under the Finance Act, 2017, companies can donate irrespective of profitability, reducing oversight by minority shareholders.  

Corporate Concentration: Corporate and business entities accounted for over 92% of donations above ₹20,000 during FY 2024-25, indicating increasing dependence of political parties on corporate funding.  

Weak Regulatory Oversight: The Election Commission lacks explicit statutory powers to de-register political parties solely for persistent financial non-compliance, limiting enforcement effectiveness.  

Declining Public Trust: Financial opacity undermines confidence in electoral fairness, political neutrality and democratic accountability, particularly when donor identities and policy outcomes appear closely linked.

Way Forward

Improve Transparency: Introduce real-time online disclosure of all political donations, irrespective of the ₹20,000 threshold, to minimise anonymous funding. 

• The 255th Law Commission recommended broader disclosure obligations and public access through the ECI. 

Strengthen Disclosure and Auditing: Require time-bound donor-wise disclosure and independent audits by Chartered Accountants drawn from a CAG-approved panel, as recommended by the 255th Law Commission. 

Empower the Election Commission: Grant the ECI statutory powers to deregister persistently non-compliant political parties and impose stronger financial penalties for inaccurate or delayed reporting. 

Reduce Dependence on Private Funding: Examine partial state funding of elections or a National Election Fund, as recommended by the Indrajit Gupta Committee (1998) and endorsed by the Law Commission's 170th Report to promote a level playing field.

Strengthen Internal Party Democracy: Mandate internal elections, transparent candidate selection and financial accountability within political parties. 

• The ADR Political Financing Report (2026) recommends statutory provisions for inner-party democracy and bringing political parties under the RTI Act.

Conclusion

Corporate money keeps India's political parties running, but without full and timely disclosure, it risks turning democracy into a contest of unequal, opaque financial power.

Source: NEWINDIANEXPRESS