Modi’s government freezes main opposition party’s funds before elections

Prime minister Modi (left) with owner of Reliance group Mukesh Ambani, whose vast media presence supports Modi’s BJP

The Congress party, India’s principal opposition force, has levelled serious accusations against Prime Minister Narendra Modi’s administration, alleging that the government has deliberately undermined the party’s capacity to compete in the forthcoming general elections by freezing its bank accounts due to a tax controversy.

Set against the backdrop of a six-week electoral battle commencing next month, where the Congress-led alliance challenges the financially robust Bharatiya Janata Party (BJP) led by Modi, these allegations highlight the increasing tensions in Indian politics as the BJP continues to execute on its ‘hindutva’ agenda.

Rahul Gandhi, a prominent figure within the Congress party and its most likely prime ministerial candidate in the upcoming election, expressed grave concerns to journalists in New Delhi, stating that the freezing of accounts by the income tax department has left the party financially incapacitated, thus hampering its election campaign efforts.

‘Our entire financial identity has been erased,’ Gandhi stated, emphasising the dire financial straits facing the party, which impedes its support for candidates and overall election campaign.

The tax dispute in question dates back to the fiscal year 2018-19, with a tax tribunal recently rejecting Congress’s appeal against a recovery order of 1.35 billion rupees ($16.32 million).

Congress Treasurer Ajay Maken detailed the financial constraints imposed on the party, citing a 2.1 billion rupee ($25 million) lien that effectively paralysed its banking operations.

The party views these actions by the tax department as politically motivated, aimed at crippling its challenge against Modi’s BJP, with Gandhi highlighting further notices from tax authorities dating back to the mid-1990s as evidence of targeted harassment.

Sonia Gandhi, Rahul’s mother and former Congress chief, echoed these sentiments in a rare public statement, characterising the tax penalty as a concerted effort to disable the party.

The BJP, however, refutes these allegations, attributing the partial freezing of Congress’s accounts to non-compliance with income tax filings related to cash donations received in 2017-18, thus forfeiting tax exemptions normally afforded to political parties.

BJP President, Jagat Prakash Nadda, suggested that the Congress’s complaints stem from apprehensions of a significant electoral defeat, while BJP spokesman, Ravi Shankar Prasad, confirmed that India’s Supreme Court is set to review the Congress party’s grievances next month.

This controversy unfolds in the context of recent financial disclosures to the Election Commission of India, revealing the BJP’s substantial financial advantage over Congress, a gap that has significantly widened, following the introduction of electoral bonds in 2017.

These bonds have been criticised for allowing anonymous donations, with the Supreme Court recently mandating transparency over such contributions.

Earlier this month, the court ordered the State Bank of India (SBI) to submit all the details of electoral bonds, including the unique codes linking donors to political parties, just a month before the country’s general election.

The seven-year-old election funding system, called ‘electoral bonds’, allowed individuals and companies in India to donate money to political parties anonymously and without any limits.

In February, the top court scrapped the opaque system, calling it ‘unconstitutional’.

In its order on Monday, the Supreme Court gave the SBI until Thursday to provide the Election Commission of India with the unique identification numbers of the bonds, so as to allow donors to be matched with recipients.

‘You have to disclose all details … we must have finality to it,’ Chief Justice DY Chandrachud said.

SBI has since claimed to have released this entire database to the Election Commission.

Last week, the commission made public some data on donations made since April 2019 under the funding mechanism.

Some of India’s biggest companies, such as Vedanta Ltd, Bharti Airtel, RPSG Group and Essel Mining, were among the top political funders over the last five years, the data showed.

But last week’s data did not link donors to recipients, though it showed that nearly half of all donations were received by the Bharatiya Janata Party (BJP) of Prime Minister Narendra Modi, who will seek a rare third term in the seven-phase election that starts April 19.

Corporate funding of political parties is a sensitive issue in India.

Critics say the electoral bonds helped companies hide their donations to avoid any accusations of winning favours from India’s ruling BJP party.

On Sunday, Rahul Gandhi addressed a rally in Mumbai where he accused Modi’s government of using electoral bonds to extort money from companies, an accusation the government has denied.

Meanwhile, three industry bodies – the Confederation of Indian Industry; the Federation of Indian Chambers of Commerce and Industry; and the Associated Chambers of Commerce and Industry of India (ASSOCHAM) – sought to stop the court from making public information about who donated to which party.

‘Protection of anonymity is critical for preserving donors’ privacy and guarding against any adversity by any opposing political factions to whom the investment is not made by a corporate,’ ASSOCHAM said. The court, however, did not hear their pleas.

Moreover, The Wire, an independent media publication, has highlighted significant concerns in a recent report about the influence of corporate entities on India’s media landscape, particularly those companies that have emerged as major donors through electoral bonds.

The report exposes an increasing entanglement between media ownership, big business interests, and political funding, potentially compromising the independence of the press in India.

The investigation reveals that alongside pharmaceutical, infrastructure, and mining giants, major media conglomerates have also become prominent financiers of political parties, contributing anonymously via electoral bonds. This development raises questions about the potential impact on journalistic independence when media owners, who are also significant business figures, fund political entities anonymously.

One notable example is Qwik Supply Chain Private Limited, a Mumbai-based firm that purchased electoral bonds worth Rs 410 crore and has direct links to Mukesh Ambani’s Reliance group. The company’s involvement with Reliance extends through its directors, who hold positions across various Reliance subsidiaries. This connection is significant given Reliance Industries’ vast media presence, including stakes in Network18 Media & Investments, which boasts a comprehensive spectrum of news, entertainment, and digital media outlets that take a decidedly pro-BJP slant.

The scenario is further complicated by the Supreme Court’s recent actions against the electoral bond scheme, which allowed for anonymous, unlimited political donations, calling it ‘unconstitutional’. This scheme, launched in 2017, has notably benefited the Bharatiya Janata Party (BJP), intensifying scrutiny over corporate contributions to political campaigns.

Other significant donors include individual business magnates like Laxmidas Vallabhdas Asmita Mercha, who has close ties to Reliance Industries, and Megha Engineering and Infrastructure Ltd, which indirectly controls the news network TV9 Bharatvarsh.

The latter is particularly noteworthy for its substantial donations amounting to 9.66 Billion Rupees through electoral bonds, amidst concerns about its pro-government coverage and the influence of its parent company’s infrastructure interests on its reporting.