Answer

Recently, the SC concluded hearings challenging the legitimacy of the electoral bonds scheme. The primary focus was on ensuring transparency in election funding, reigniting discussions about  state funding of elections. It refers to the financial support provided by the government to political parties or candidates to help cover their campaign expenses. The goal is to foster transparency, fairness, and equal opportunities for everyone involved in the electoral process.

The Indrajit Gupta Committee in 1998 supported state funding of elections for constitutional, legal, and public interest reasons. In 2008, the Second Administrative Reforms Commission recommended partial state funding to limit "illegitimate and unnecessary funding" of election expenses. Conversely, the National Commission to Review the Working of the Constitution in 2001 did not support state funding of elections. 

Pros of state funding of election

• Reduced Corruption: State funding can help reduce the reliance of political parties on private donations, thereby minimizing the potential for corruption and undue influence by wealthy individuals or corporations.
• In Germany, state funding for political parties, tied to electoral performance, reduces corruption risks by lessening reliance on private donations.
• Level Playing Field: State funding aims to create a more level playing field by providing equal financial resources to all eligible political parties or candidates, regardless of their financial backing. This promotes fair competition in elections.
• In the case of Kanwar Lal Gupta v. Amar Nath Chawla, the Supreme Court noted that having significant financial resources equates to gaining an advantage in elections
• Increased Accountability: With public funding, there is a higher degree of transparency and accountability as parties and candidates are required to disclose their expenses and sources of income. This enhances the integrity of the electoral process.
• Encourages New Entrants: State funding can encourage new and smaller political parties to participate in the electoral process by providing them with the necessary financial resources to compete with established parties.

Cons of state funding of election 

• Burden on Taxpayers: State funding is financed by taxpayers, and critics argue that citizens may be opposed to using public funds for political campaigns, especially when there are competing priorities for government spending.
• State funding of elections may divert crucial government funds away from urgent priorities in the social sector, such as healthcare, education, and skill development.
• Potential for Misuse: There is a risk that state funds could be misused by political parties or candidates for purposes other than election campaigning. Effective monitoring mechanisms are crucial to prevent such misuse.
• State-sponsored electoral funding will exacerbate the fiscal strain on the government exchequer, further deteriorating the government's financial health.
• Inadequate Allocation: Determining the fair allocation of state funds among numerous political parties can be challenging. An inadequate allocation may still result in disparities, defeating the purpose of promoting a level playing field.
• The Election Commission of India (ECI) has objected to state funding of elections, citing its inability to restrict or monitor candidates' expenditures beyond the funds allocated by the state.
• Not a Panacea: While state funding addresses financial aspects, it may not fully eliminate other forms of corruption, such as nepotism or favoritism. Critics argue that comprehensive electoral reforms are necessary for a more effective solution.

The implementation of state funding is considered a desirable goal, but consensus among major political parties is crucial for proper fund distribution. Meanwhile, suggested reforms include exploring a National Electoral Fund, auditing political party accounts, capping expenditures and donations, and enacting comprehensive legal reforms to regulate political finances. The emphasis is on transparency, with calls for disclosure of funding sources, establishing upper limits on donations, strengthening independent oversight, and leveraging technology for enhanced financial transparency. Adopting international best practices, conducting public awareness campaigns, and continuous review of regulations are essential components to fortify India's democratic institutions and ensure transparent electoral funding.