Report of the Committee on Party Finances

Background

The Committee on Party Finances was set up as a follow-up to the Congress President's speech at the 81st Plenary Session of the AICC at Bangalore on March 18th. The Committee that was announced on April 20th had been given time till May 30th to submit its report. It consisted of:

• Dr. Manmohan Singh, Chairman
• Shri Ram Niwas Mirdha
• Shri Motilal Vora
• Shri Jag Pravesh Chandra
• Smt. Margaret Alva
• Shri K.M. Khan
• Shri Pawan Bansal
• Shri Oscar Fernandes

Shri Jairam Ramesh assisted the Committee in its deliberations.

The objective of the Congress President in her speech was to commit the Congress to a "transparent and effective mechanism and systems for strengthening the finances of the Party at all levels". At a time when public confidence in the integrity of the political class has been badly shaken with the tehelka exposures, the Congress President felt it imperative that the Congress take the lead and bring about basic changes in the way funds are collected by political parties.

Methodology

The Committee has met four times among itself. It invited written suggestions from all PCC Presidents and CLP Leaders. Some members have also interacted with outside experts who have studied political financing systems in other countries. Consultations have also been held with former officials of the CBDT (Central Board of Direct Taxes).

The Committee has been acutely aware of the urgent need to raise finances for the Party from within the Party organization itself in a vastly increased measure while at the same time ensuring that the party does not become captive to money power. The Committee has been very conscious that its recommendations should reinforce the mass-based, pro-poor character of the Congress Party.

Approach

At the outset, the Committee decided to focus on finances required for running the party, other than for elections. The Committee felt that the amount required for running the Congress Party organisation in its totality in a non-election year is approximately Rs 7- 8 crore. This, in the opinion of the Committee, is the amount that has to be mobilized annually in a transparent and accountable manner.

Current Provisions for Finances in the Party Constitution

Presently, there are three provisions in the Congress's Constitution and Rules that deal with finances.

• Active Members
  • The Rule under Article VII (2) stipulates that each Active Member shall contribute to the Party Fund as categorized below.
  • Rs 1 per month for net monthly income upto Rs 500; 1% of net monthly income above Rs 500.
  • Active Member has to send to the PCC Office a statement declaring his/her net monthly income (after deducting income tax). The contributions received from Active Members are to be distributed as follows: 50% to the Central Election Fund under the control of the AICC; 25% for the AICC; 12.5% for the PCC; and 12.5% for the DCC.
• PCC Delegates
  • Article XI stipulates that every member of the PCC shall pay an annual fee of Rs 50 to the PCC of which Rs 25 is to be remitted to the AICC. Further, every member of the PCC is to collect Rs 100 for the Congress Fund triennially.
• AICC Delegates
  • Article XIII stipulates that every member of the AICC shall pay an annual subscription of Rs 100 and shall collect Rs 200 for the Congress Election Fund.

Recommendations

• Active Members
  • The Committee finds the present provisions concerning contributions from Active Members cumbersome and impractical. It recommends that instead there be a simple and straightforward provision that stipulates that every Active Member shall collect for or contribute directly to the PCC a sum of Rs 100 per year. The Committee recommends the present pattern of distribution among the AICC, PCC and DCC be retained: 75% coming to the AICC, 12.5% going to the PCC and the balance 12.5% to the DCC.
  • There are at present an estimated 11 lakh Active Members in the Congress. If this recommendation of the Committee is implemented, the Congress will be able to raise Rs 11 crore a year from Active Members alone. This amount is more than sufficient to run the entire Congress organization comfortably in a non-election year.
  • The Committee reiterates that the intimate involvement of Active Members is vital for the continued strength of the Congress and crucial for the effectiveness of its political mobilization and campaigns.
• PCC Members
  • The Committee recommends that the annual contribution from a PCC delegate be fixed at Rs 300 to be collected and retained entirely by the PCC.
• AICC Members
  • The Committee recommends that the annual contribution from an AICC delegate be fixed at Rs 600 to be collected and retained completely by the AICC.
• MPs and MLAs
  • The Committee recommends that all Congress MPs and MLAs make a contribution of one month's salary to the Party organization. The contribution from the MPs will accrue to the AICC and that from the MLAs to the PCC.
• Chairpersons and Others
  • The Committee recommends that all Congress Chairpersons of Boards/Autonomous bodies and similar designated institutions known by different names also contribute one month's salary to be collected and retained by the PCC.
  • The Committee recommends that members of municipal corporations, municipal committees and zilla parishads donate a sum of Rs 200 per year to the Party from their allowance. This amount should be retained by the PCC.
• Ticket Aspirants
  • The Committee recommends that all applicants applying for party tickets should deposit Rs 10,000 for Lok Sabha, Rs 5000 for Vidhan Sabha and Rs 1000 for local body elections. No refund will be given to those who get the ticket. But those who fail to be nominated will receive half the amount back. The deposit for scheduled caste and scheduled tribe aspirants should be half of what the Committee has recommended for all others. The amount collected from Lok Sabha aspirants should accrue to the AICC and that collected from the Vidhan Sabha and local body aspirants should accrue to the PCC.
• Penalty for Non-Payments
  • The Committee recommends that all payment provisions be strictly enforced. Where possible like in the case of Active Members, PCC and AICC delegates, default on payments stipulated should automatically invite forfeiture of benefits of membership or office.
• No Multiple Payments
  • The Committee recommends that in case where a particular person falls into more than one category from whom contributions are sought, the higher amount be applicable as his/her contribution to the Party.
• Creation of a Congress Corpus Fund
  • The Committee recommends that a separate corpus fund be created. Contributions to this corpus should be solicited from companies, well-wishers and sympathizers of the Congress and also from the general public. The objective should be to raise at least Rs 50 crore over the next two years for the corpus of this Fund. The annual income from such a corpus can be used to finance the Party. The Committee is well aware that it will not be easy to build up such a corpus quickly. However, the first steps must be taken now and no effort spared to achieve the objective.
  • The Committee believes that there is a great desire among the general public for political parties to clean up their financing systems. If properly marketed through individual appeals and through the mass media in a systematic and sustained manner, the public corpus will signal our commitment to raising money from the general public in a legitimate manner for legitimate political activities. All payments to the corpus should be taken only by cheque/draft and be duly acknowledged. Once the Fund becomes operational, an annual statement of sources and uses of the funds should also be prepared.
  • The Committee also recommends that the Congress Party take up with the central government the issue of making all contributions--individual and corporate-- made to such a corpus (whether it be of the Congress or any other political party) tax deductible under Section 80G of the Income tax Act, 1961.
  • The Committee is of the view that income of all political parties registered under Section 13A of the Income Tax Act, 1961 should be fully tax exempt under Section 10 of the Income Tax Act, 1961. The Congress should take up this matter also with the central government.
• Income from Properties
  • The Committee recognizes that the development and use of properties owned by the Congress in different states will yield income that can then be used by respective PCCs. This option should be pursued quickly.
• The Coupon System
  • The Committee deliberated upon the use of coupons for collecting funds. Such coupons have been used effectively in Kerala. The Committee has concluded that the coupon system be used in all states but under tight supervision of the AICC.
  • Coupons must be used during a few designated periods of fund-raising campaigns. The Committee recommends a special fund-raising week be launched every year between December 22nd and 28th (the Congress's Foundation Day). Coupons may be issued in denominations of Rs 1000, Rs 500, Rs 100, Rs 50, Rs 20 and Rs 10. PCCs will print these coupons according to the instructions from the AICC and they will also maintain detailed accounts. 50% of the money raised by the coupons should be retained by the PCCs for supporting DCCs and other bodies in the state and the balance 50% should accrue to the AICC.
  • The Committee also recommends that each DCC be given the target of collecting a minimum Rs 1 lakh annually which it could retain. This collection could be by coupon or cheque with due acknowledgement being given to the donor. This amount could be retained by the DCC. Appropriate records of collections made and acknowledgements given should be maintained and periodically checked by the AICC.
• Friends of Congress
  • The Committee recommends that a major campaign be launched to identify 1 lakh friends, sympathizers and well-wishers of the Congress each year for a donation of Rs 10,000 each by cheque to be duly acknowledged.
• Contributions from Overseas Indians
  • The Committee has received suggestions that the Congress make efforts to raise funds from NRIs and overseas Indians.
  • The factual position is that under Section 4 (1), Chapter II of the Foreign Contribution (Regulation) Act, 1976 (FCRA), no political party can accept foreign contributions. Section 4 (2) bars even NRIs having Indian citizenship from delivering any currency, Indian or foreign, to any political party.
  • However, Section 5, Chapter II of FCRA allows an organization of a political nature but not being a political party, to accept a foreign contribution with the prior permission of the Central Government. The organistion can be associated with the activities of a political party.
  • Thus, under the FCRA, theoretically the Congress Party could (i) establish a Congress Foundation registered, as say a trust under the Indian Trusts Act 1888; and (ii) seek permission from the Central Government to mobilize funds from NRIs for specified functions that the Foundation would undertake like training, education, publications and conventions. It is clear from the FCRA that activities of the Foundation alone can be financed in such a manner.
• Contributions from Indian Companies
  • Currently, political donations by Indian companies to political parties is permitted under Section 293A of the Companies Act, 1956. There are three conditions to be fulfilled. The annual donation must (i) not exceed 5% of average net profits during the immediately preceding three years; (ii) be approved by a resolution of the Board of the company; and (iii) be disclosed in its profit and loss account of the company. The Confederation of Indian Industry has suggested that such donations be made tax-deductible under Section 80G of the Income Tax Act, 1961 and that the decision of the company's Board be approved by its shareholders.
  • The Committee recommends that all efforts continue to be made to raise corporate donations consistent with Section 293A of the Companies Act, 1956. The Committee also recommends that a dialogue be initiated by the Congress with industry and trade associations both at the national and state levels to bring about greater transparency in the flow of funds from companies to the Party.
• State Funding of Elections
  • Although this issue does not form part of its terms of reference, the Committee nevertheless feels its necessary to express its support to the idea of state funding of elections of nationally recognized parties on the basis of well-formulated norms. In recent years, support for state funding of elections has grown and the Committee's view is that the Congress should take a leadership role in bringing the idea to fruition soon.

Conclusion

The Committee's recommendations, if accepted, should then be incorporated into the Party's Constitution and Rules. The Committee is convinced that the Congress must take the lead in bringing about a new culture of transparency, accountability and integrity in financing. A systematic and well-planned campaign to strengthen the Party's financial positions will yield significant results.