Citizens' Issues
Which companies are funding political parties and how legal is it

After reports about Vedanta’s $8 million donation to Indian political parties EAS Sarma discovers that two companies which funded the BJP, two public sector entities which funded the Congress and one company which funded SP have all made illegal donations. Here's how

Vedanta Resources Plc, Anil Agarwal’s controversial multinational company is not the only one to have made illegal donations to Indian political parties, says EAS Sarma, former secretary with the Union Government. In another letter to the Chief Election Commissioner, Mr Sarma has pointed out that as per information compiled by Association for Democratic Reforms (ADR), during 2007 to 2009 the Bharatiya Janata Party (BJP) received donations from two companies. Similarly, the Indian National Congress or INC (yes, this is the real name of Sonia Gandhi-led party, which is often referred as just ‘Congress’ or “Indira Congress” or Congress-I) and Samajwadi Party (SP) also received donations.
Nippon Investment and Finance Pvt Ltd, one of the promoters of Videocon Industries, donated Rs1 crore while a Honda group unit gave Rs15 lakh to the BJP as donation. Venugopal N Dhoot, chairman and managing director of the Videocon Group is one of the directors of Nippon Investment and Finance. During the same period, Mulayam Singh Yadav-led SP also received Rs10 lakh from the Honda group while Congress received Rs2 lakh from State Trading Corporation of India (STC) and MMTC, both owned by the Union government.
“Under Sections 3 & 4 of Foreign Contributions (Regulation) Act (FCRA), 1976, political parties are not permitted to accept contributions from foreign companies or companies controlled in India by foreign companies. In addition, under Section 293A (1)(a) of Companies Act, political parties cannot receive contributions from government companies,” Mr Sarma pointed out.
He said, “These contributions are clearly illegal. There are other companies which seem to be foreign companies the details of which need to be ascertained by Election Commission (EC) on its own. If there are other foreign companies, political parties would have violated FCRA provisions. They need to be proceeded against.”
Here is the report prepared by ADR...

Mr Sarma had earlier written to the Election Commission about Vedanta, with extracts from its annual report. “The company (Vedanta) is not permitted to make such a dubious contribution in the UK and other European countries. However, the company has condescended to contribute to our own political parties for ‘supporting the political processes...’ and encourage and strengthen the democratic process!” said the former secretary.
Calling Vedanta’s action as “violation of the laws of the land”, Mr Sarma, requested the Election Commission (EC) to consider imposing an outright ban on all such contributions, as is the case with the democracies of Europe.
According to the former secretary, donations to political parties should not amount to blatant corruption and bribery and an affront to the rule of law. Here are the three concerns raised by Mr Sarma in his previous letter to the EC...
1. The Vedanta group is a London-based foreign multinational company and its contributions attract the prohibition envisaged under Sections 3 & 4 of Foreign Contributions (Regulation) Act, 1976 (as amended from time to time). Under Section 3(1)(e), in particular, “no foreign contribution shall be accepted by any political party or office bearer thereof”. This stipulation applies to Vedanta and all other companies controlled by it. As such, both Vedanta and those political parties that have received the donations are liable to prosecution under this Act. ECI should quickly consult the ministry of home affairs on the legal aspects involved.
2. Sections 29B & 29C of the Representation of the People’s Act, 1951, requires that the concerned political parties should make a declaration to ECI on the donations received thus from private companies. ECI should ascertain whether the concerned parties have complied with this.
3. Section 293 A(4) of the Companies Act requires the companies making the donations to political parties to disclose the same with the details explicitly in their respective profit & loss account statements. The ministry of corporate affairs should cause a verification of this and take necessary action in case there is any infringement. 
Requesting EC to investigate expeditiously these statutory violations and proceed against both the political parties and companies involved, Mr Sarma said the Commission should carry out the investigation transparently so that there may be public accountability.



Nem Chandra Singhal

5 years ago

Are the corporates donating willingly or forced to donate ? Who knows ? Why to target the donars ? The receipants are also be blamed who have all sort of powers to snatch, loot, or whatever you may call it. Who is guilty, or more guilty or who is perpetrating such trends. Who made the laws & who is defying it? The culprit is to be find out, not the intention of cherity.


5 years ago

Corporates need to be encouraged to make political donations in more transparent manner. That is the only solution.

Dolphy Dsouza

5 years ago

I do endorse the demand of Mr.Sarma that the Election Commission take punitive action against both the Political parties who are recipients of the donations and the companies involved in such illegal contributions. But does the Election Commission have the teeth to punish the guilty?

Vedanta is also part of this illegal contribution.

I was reading the Sept 16 issue of Business Today and the lead article is The Best Advice I ever Got.

Mr. Anil Agarwal,Chairman of Vedanta said the following: Quote "Two pieces of advice from my father have remained the guiding force of my journey.

His first was to keep trying till one succeeded, but never at the cost of principles.

The second one was to be empathetic to the cause of the underprivileged". Unquote.

There is been an outcry by rights groups all over the world including India against Vedanta and its methods utilized to displace the underprivileged.

On matters of principle, what has Vedanta have to say about such illegal donations to the Political parties.

Mario Puzo's magnum opus, Godfather begins with a illuminating quote: Behind every fortune there is a crime.

Mr. Agarwal can you put your hand on your heart and say you are following the very inspiring message of your Father???

Dolphy Dsouza

Kamal Shah

5 years ago

Together we sit
Together we eat
Together we loot
Together we share ....and show some CSR.

India’s fiscal deficit to be higher than budget estimates, says Morgan Stanley

A Morgan Stanley Research report warns that slow economic growth along with continued acceleration in government spending will lead to an increase in the fiscal deficit against the government’s budget estimate

A Morgan Stanley Research report anticipates that the FY13 fiscal deficit will be higher than the budget estimates. It warns that slow economic growth along with continued acceleration in government spending will lead to an increase in the fiscal deficit versus the government’s budget estimate. It expects the central government fiscal deficit to be at 6.1% of gross domestic product (GDP) in FY13 versus the budget estimate of 5.1%. The report expects the consolidated national fiscal deficit (including off-budget expenditure) to be 8.9% in F2013 compared with 9% in FY12.
The report adds that the persistently high international oil prices and the government’s inability to increase domestic fuel prices are resulting in a much higher than budgeted oil subsidy burden for the government as well as government-owned oil companies. The oil subsidy, the fertiliser subsidy and the defence bill are the biggest factors in expenditure growth leading to the uncontrollable fiscal deficit. There is little help from the revenues side as weakening economic activity will keep revenues from corporate income tax and indirect tax (excise and customs) weak in FY13.
The Morgan Stanley report has the figures to back its conclusion. 
Tax revenue growth at budget estimate levels in April-July period: The central government's aggregate gross tax collections growth decelerated to 21% y-o-y (year-on-year) in April-July from 25% y-o-y in April-June. However, it is still in line with the budget estimate (BE) of gross tax revenue growth of 21% in FY13. Similarly, growth in net tax collections (after transfer of share of state governments) decelerated to 25.2% y-o-y in April-July (versus 32.8% in April-May). This is higher than the budget estimate growth of 22%.
The deceleration in April to July versus April-June mainly reflected the fall of corporate tax collections in July (-22.9% y-o-y). 
Within direct tax collections, on a FYTD basis, growth for both personal tax and corporate tax collections decelerated but remained robust, well above budget estimates. Personal tax collections grew by 34% y-o-y in April-July versus 40.2% y-o-y in April-June; corporate tax collection grew by 34.2% y-o-y in April-July versus 53% in April-June. Budget estimate growth is 18% y-o-y for personal taxes and 15% y-o-y for corporate taxes in FY13. 
As for indirect tax collections, growth in excise duty collections improved slightly to 8.3% y-o-y in April-July (versus 8% in April-June) while customs duty collection growth picked up to 3.3% y-o-y (versus -1.2% in April-June). Both excise and custom duty collections are lagging the budget estimate growth targets of 34% and 25%, respectively. “We expect that weakening economic activity will keep revenues from corporate income tax and indirect tax (excise and customs) weak in FY13,” Morgan Stanley said in its report.
Non-tax revenue growth was below budget estimate in April-July: Total non-tax revenue growth decelerated to 12.8% y-o-y in April-July vs. 16.3% in April-June 2012. This is lower than the budget estimate of 32.4% for FY13. Total revenue receipts growth decelerated to 23.1% y-o-y in April-July versus 30.6% in Apr-June owing to slower growth in both tax and non-tax revenues. Total revenue receipts collections growth slipped below the budget estimate target of 24% y-o-y for FY13. 
Expenditure growth remained above budget estimate: Total expenditure growth decelerated to 16.6% y-o-y in Apr-July from 19.3% in Apr-June 2012 but remained above the budget estimate target of 14.8% y-o-y for FY13. Revenue expenditure growth stood at 15.5% y-o-y on a FYTD basis compared to BE of 12.7% y-o-y while capital expenditure growth was 24.7% y-o-y compared to BE of 30% y-o-y. According to the details available for total expenditure growth, interest payments grew by 19% in April-July and accounted for 25% of total non-plan expenditure. Further, expenditure of the Department of Fertilizers (68% y-o-y), ministry of petroleum and natural gas (38%), ministry of rural development (19%) and ministry of defence (17%) grew substantially y-o-y in April-July.
FYTD fiscal deficit at 51.5% of BE: On a FYTD basis, fiscal deficit was at 51.5% of BE compared with 37.1% in April-June 2012. The fiscal deficit in April-July grew by 15.6% y-o-y versus budget estimate of 0.8% for F2013. On an FYTD annualized basis, the fiscal deficit widened to 8.6% of GDP in the April-July period from 8.4% in the April-June period. The revenue deficit too grew by 10.2% y-o-y versus budget estimate of -8.9% y-o-y. 


India’s manufacturing growth eases to 9-month low in Aug

The poor showing by the manufacturing sector has pulled down the GDP growth to 5.5% in the first quarter of this fiscal

New Delhi: India’s manufacturing sector witnessed the weakest growth rate in nine months in August because of shrinking export orders and disruptions caused by power failures, an HSBC survey said, reports PTI.
The HSBC India Manufacturing Purchasing Managers’ Index (PMI), a measure of factory production, eased to 52.8 in August, from 52.9 in July. The index, however, has remained above the 50 mark below which it indicates contraction for more than three years now.
Electricity outages across India in August caused disruption in production as factories went without power for hours on end. It also led to rise in work backlog.
“The momentum in the manufacturing sector eased further on the back of weak external demand and output disruptions caused by the major power failures in early August,” HSBC chief economist for India & ASEAN Leif Eskesen said, adding, “power failures also partly contributed to a rise in backlogs of work.”
On one hand, power cuts continued to hamper production and on the other, export orders witnessed the second consecutive monthly dip because of “weaker international demand and unfavourable exchange rate conditions”, HSBC said.
Besides, while input price rose at a slightly slower pace, output inflation picked up due to higher import costs and taxes.
“With the slowdown partly supply-driven and inflation risks still lingering, these numbers underscore that the room for policy rate cuts is very limited at the moment,” Mr Eskesen said.
In its last quarterly monetary policy review, the Reserve Bank of India (RBI) left key interest rates unchanged amid fears of a deficient monsoon and high inflation.
RBI also lowered the economic growth projection for the current fiscal to 6.5% from its earlier estimate of 7.3%, stating that the rising government expenditure poses risks to economic stability.
Besides, the RBI raised inflation forecast for the fiscal ending March 2013 to 7% from the earlier projection of 6.5%.
Meanwhile, according to official data, the poor showing by the manufacturing sector has pulled down the GDP growth to 5.5% in the first quarter of this fiscal.
The growth rate in the April-June quarter, according to the data released by the government last Friday, slipped to 5.5% from 8% in the same period last fiscal on account of flat growth in manufacturing and quarrying sectors.


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