Sleaze money oils the wheels of the world’s most populous democracy, reports Ranjit Bhushan

For connoisseurs who like chewing on numbers or for stock market analysts and the bulls and bears whose job and passion it is to look at margins, the ups and downs, and for the army of financial speculators whose life depends on how currency moves, the netherworld of electoral funding could come as quite an anti-thesis.

You don’t look at small or even big margins here; you look at mindblowing numbers, which unlike the stock exchanges, are neither listed nor accounted for. In fact, the money which exchanges hands for conducting elections in India apparently has no sources of origin and apparently no recipients.

Yet, such is the scale and volume of transactions that goes into conducting elections in India that by any fair estimate — and it cannot be called anything else - it is the most expensive holding operation in the world. So staggering is the scale of money flow that even the combined might of the Election Commission (EC) and various agencies of the state cannot arrive at conclusive figures on just how much money it takes to conduct elections in the country, apart from official figures which themselves are quite substantial.

While elections are undoubtedly costly affairs and it is indeed expensive to keep democracy going, the ambit of unofficial financial funding of elections is so vast that the country lacks the wherewithal to even begin an investigation — particularly when those involved in the clandestine operations are supposed to be the men guiding such an investigation.

There remains no account of how much is spent in campaigning, funds raised by so-called supporters, logistics, transport and travel by choppers, hotel expenses, media coverage, getting crowds on poll locations — the works. Add to it the cost of ‘buying’ a party ticket, which will continue to be a state secret not involving more than two to three political heavyweights.

At various places in the country, unaccounted money worth several crores have been discovered in the most unlikeliest of places – in transport vehicles including helicopters flying out politicians in and out of locations, milk trucks and even hearse vans. Last year, BSP supremo Mayawati’s chopper was found loaded with money but she brushed it off as ‘party contributions’ from supporters wanting a Dalit raj in the country! Not just that, the BSP has claimed that it did not receive any political donation above Rs 20,000 in the 2009 Lok Sabha elections.

In EC’s comprehensive reference handbook released this week, the use of ‘money power’ and its attendant risks has been explained succinctly: “Uneven playing field and lack of competition, political exclusion, i.e., certain sectors face disadvantage, co-opted politicians under campaign debts and tainted governance and rule of law undermined.’’

A recent study conducted by the Centre of Media Studies (CMS) says a whopping Rs 30,000 crore will be spent by the government, political parties and candidates in the ongoing 16th Lok Sabha elections. With the spending limit raised from Rs 40 lakh to Rs 70 lakh for candidates, the money spend this time is substantially higher than previous elections. While a relatively modest Rs 2,500 crore went into organising the 1996 elections, that figure jumped to Rs 10,000 crore in the 2004 Lok Sabha polls. (See Page 12-13)

So, while the government spent Rs 10.45 crore in the first general elections held in 1952, the 2009 Lok Sabha elections cost the exchequer Rs 846.67 crore. In other words, poll panel data reveals that official expenditure on conducting Lok Sabha polls has increased 20-fold — from 60 paise in 1952 to Rs 12 in 2009.

On April 9, a day before the second phase of polling for the ongoing Lok Sabha elections, sleuths of the enforcement directorate (ED) zeroed in on Rs 5.4 crore cash and over 100 kg imported silver and wads of foreign currency from a Delhi dealer in the congested by lanes of the walled city’s Chandni Chowk. The money, ED told reporters, was kept for use on April 10, voting day.

The raid was conducted by the EC-appointed expenditure monitoring wing of the ED. “Challans’ were issued under provisions of the Foreign Exchange Management Act (FEMA), against the trader whose firm was allegedly dealing in import of gold and silver through illegal hawala channels “without proper documents". This sum, a tiny one by standards of money which goes into upholding the largest democratic tradition in the world, was just the tip of the iceberg.

On the same day, all international airports, ports and land borders in the country were put on high alert by the revenue intelligence agency to check circulation of fake Indian currency notes (FICN) and black money during Lok Sabha elections.

According to the directorate of revenue intelligence (DRI), the lead agency to check smuggling and import duty evasion, customs officials posted at international transit points have been asked to remain extra vigilant during the Lok Sabha polls and keep a check on passengers and baggage coming from sensitive sectors, including the Gulf.

The alert was issued recently following an input that there may be a spurt in smuggling of fake currency notes during the polls. As a result, 18 international airports in the country — Amritsar, Jaipur, Delhi, Ahmedabad, Guwahati, Nagpur, Mumbai, Kolkata, Hyderabad, Goa, Bengaluru, Chennai, Kozhikode, Coimbatore, Tiruchirapalli, Kochi, Thiruvananthapuram and Port Blair — are currently looking out for such baggage.

Also on check are international transit land routes, including the Attari-Wagah border, Punjab and Munabao railway station in Jodhpur, Rajasthan, among others. Ports along the country's coastlines bringing in cargo from other nations have also been alerted to keep a check on smuggling currency and black money. High too on the radar are frequent passengers to and from Gulf nations and South East Asia.

DRI officials had during April 2013 and in January this year registered five such cases with cooperation of authorities outside India and seized a vast tranche of Indian currency. “Authorities and intelligence agencies are keeping a strict vigil on movement of illegal money during the ongoing polls,’’ a finance ministry official told this paper.

Last fortnight, during a confidential meeting with the investigation wing of Mumbai income-tax department, chief election commissioner V S Sampat instructed taxmen to get aggressive and nab those using all kinds of routes to insert black money in the system for election activities.

According to those present, the CEC pulled up the IT department for not taking enough action against those who are diverting black money for election campaigning and poll-related activities.

On March 19, 2014, the IT department in Mumbai had set up a round-the-clock control room and complaint monitoring cell to check the use of black money in elections. Officials say they have zeroed in on some real estate developers, hawala operators and bullion traders.

In response to EC’s tough talk, Mumbai’s IT department has formed six quick response teams (QRT), a special squad for each Lok Sabha constituency in Mumbai, whose brief it is to check the possible use of unaccounted money for wooing voters. These squads would randomly check passenger baggage at airports, railway stations and bus stands. The squads would also check railway parcel vans, vehicles of courier services and cargo holds of buses conducting long-distance services to detect the movement of cash, jewels, gold, and high-value contraband — besides peeking into sudden and hefty bank withdrawals.

Besides this, the department would track suspicious bank transactions. Also on track are sources of money spent for campaigning through digital means, including expenses incurred for making cell phone calls, sending text messages, creating websites, using the social media, internet, and media advertising for campaign purposes.

Now consider this:

n Earlier this week, the Ghaziabad police in Uttar Pradesh seized over Rs 6 crore of unaccounted cash from different locations in the district during a drive to check the flow of money in view of the parliamentary elections. This included a seizure of Rs 4.16 crore from four vehicles.

n In December last year, flying squads of EC and the income tax department seized over Rs 26 crore unaccounted cash from political activists in Delhi; this when the EC had fixed a Rs 16 lakh ceiling for candidates contesting the assembly poll.

n Going back a little further, since 2011, more than Rs 189 crore in unaccounted cash has been seized from several poll-bound states.

n A little over Rs 58 crore of unaccounted cash was seized from political activists in the five states that went to polls in December 2013. Party workers who were apprehended with cash failed to explain the source of the money seized.

Former chief election commissioner SY Quraishi believes that elections have become the biggest source of corruption in India — indeed the basis of corruption begins, tragically, during the world’s most comprehensive democratic exercise. “The money spend by candidates is much beyond the legally prescribed limits. Candidates who win are in a hurry to get that money, preferably with interest, and that is the root source of corruption in India. The real problem is that it has become a competitive phenomenon. If one party spends a lot of money, naturally his or her rival has to do the same,’’ he told Financial Chronicle.

The key question is this: where is all this money coming from? Well-placed sources say there are many channels through which funds are accumulated for elections. The various powerful lobbies who are also, in a sense, pressure groups and who have virtually unlimited cash reserves, put their best foot forward paying money liberally to get their man or woman elected. Real estate magnates, mining lobbies who have demonstrated their strength in states like Karnataka, Andhra Pradesh and Jharkhand, liquor mafia, cash-rich middlemen operating out of India’s tier II and III towns, bullion and diamond traders, these are the usual suspects who are said to be supporting political parties and individual candidates financially — not because they like the party’s ideology or the candidate’s face — but because they hope to reap the benefits in the eventuality of their patron saint winning the elections.

There is another sinister insinuation to it in elections 2014. BJP leader Subramaniam Swamy set the cat among the pigeons when he claimed that there was no Indian money hoarded in Swiss banks or foreign havens any longer. Why? Because, it has all come back to India for the elections and the scare that if Modi becomes PM, he is certain to investigate foreign accounts of Indians who have stashed their money abroad, that being a long-standing party demand.

The Congress, has on the other hand, tried to seize the initiative from the BJP as far as black money is concerned. Union minister Anand Sharma claimed that 90 per cent of Narendra Modi’s estimated Rs 10,000 crore is black money. “I have never seen this kind of media blitzkrieg. He promises to bring back black money stashed abroad but of that 90 per cent is being used in these elections,’’ Sharma told reporters.

Media reports have quoted a certain Vijay Jadhav from Mumbai, a self-proclaimed forensic auditor, who has calculated that black money pegged at Rs 23 lakh crore is already circulating in the market. He arrived at this conclusion after sifting through statements of bullion traders, commodity and forex exchange experts and other financial whizzes. While none of it can be conclusively proved, the fact is that this is the same man who was unofficially probing the software of FTIL promoter Jignesh Shah.

Interestingly, while mainline political parties have welcomed the decision to increase the upper limit of poll expenditure in the 2014 elections, an Association of Democratic Right (ADR) probe which scrutinised the expenditure statements declared by the MPs in the Lok Sabha Elections, 2009, shows that on average, MPs declared an election expenditure of Rs 14.62 lakh i.e. about 59 per cent of the average expense limit in 2009.

So where did the rest of the money go and even more important, where did it come from? The Delhi High Court has recently directed the central government to crack down on the two national parties, the BJP and Congress, for accepting foreign funds in gross violation of law, the Foreign Contribution (Regulation) Act, which strictly prohibits financial contribution to political parties. The court was responding to a PIL filed by anti-corruption activist Prashant Bhushan, who claimed that UK-based Vedanta Resources and its subsidiary companies in India had illegally donated several crores to the two political parties.

Bhushan told Financial Chronicle, “There is a mass of evidence to suggest how money was being laundered into India for the elections. Unfortunately, the rot runs so deep that everyone, political parties, the executive, legislature and even the judiciary, is involved.” Well, if that is the case then it would indeed be difficult to get to the bottom of the pit.

The EC handbook says several steps have been initiated by them. These include opening up of a separate bank account by candidates for incurring all poll expenditures through cheque or demand draft through the mentioned account, flying squads and quick response teams in each constituency to track down illegal cash transactions, all transport points to look at ‘hawala’ agents, cash couriers and pawn brokers, video surveillance, shadow observation register, accounting teams, media expenditure monitoring committee and expenditure observers from the income tax department assigned to each district.

“The above measures have gone a long way in curbing the pernicious effect of money po­wer…There is still a lot of distance to be covered …The intelligentsia, med­ia and civil society organisations should join hands with the Election Commission of India to create general awareness…’’ Sage advice but the main issue is that in the absence of political will — and that is the difficult part — any intention will continue to remain noble without its impact being felt on ground. The critical point is this: will those who become ministers at the back of such a system be inclined to dismantle it?

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