Political parties are sitting on a pile of cash they don’t want to talk about

This piece originally appeared on Livemint.com

Political parties demand financial probity and accountability from everyone else, but not so much from themselves. Funding patterns of political parties, both national and regional, show large chunks of donations whose source is not disclosed and in cash.

In spite of receiving tax waivers and subsidized land from the state, political parties don’t come under the Right to Information (RTI) Act. However, some information on their finances can be gleaned from their income-tax returns and disclosures to the Election Commission (EC).

The six national parties, led by the Bharatiya Janata Party (BJP), have registered an eight-fold increase in income in nine years, with almost all of it coming by way of donations by several names, shows data from the Association for Democratic Reforms.

 

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In 2014-15, 61% of their combined income of Rs 1,869 crore came from unknown sources, with every party showing a high presence of such donations.

 

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Political parties have to disclose the identity of only those donors who contribute above Rs20,000. But parties are showing nearly half their donations as being below Rs20,000, thus avoiding this disclosure.

 

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Of the six national parties, the Bahujan Samaj Party (BSP), a prime contender in next year’s Uttar Pradesh polls, relies the most on such unaccounted for cash contributions.

 

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Cash occupies a prime place in state elections as well. Parties have to disclose to EC the money raised and spent, and in what form (cash, cheque, draft or in kind), between the announcement of an election and its completion. For 71 state elections held in the last 12 years, partial disclosures made by political parties, both national and regional, show that 60% of the combined Rs3,368 crore collected was in cash.

 

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The share of cash in total collections, though falling, was still a high 42% in 2014. Meanwhile, spending in cash has all but disappeared.

 

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In another portent for the upcoming UP elections, the Samajwadi Party, another frontrunner, led all regional parties in cash collections for assembly elections in the last 12 years: Rs187 crore, of which 48% was in cash. That’s the currency whose rules have changed in one stroke. But will the rules of political funding ever change to allow tracing every rupee that political parties receive?

 

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News in numbers, Apr 20, 2016: Maggi noodles’ comeback, cash still preferred payment mode…

51%

What is it? The market share Maggi noodles has in the Rs 2,000-crore noodles market, according to Nestle India quoting Nielsen.

Why is it important? The popular snack, which was relaunched in November after a five-month ban, is yet to gain the commanding position it had before the ban – an 80.2% market share in the January-March quarter of 2015. The ban came after the food regulator found excess lead in its sample packets, which caused its net profit to shrink by over half to Rs 532 crore in the calendar year of 2015.

Tell me more: With two variants in the market, Nestle India would soon relaunch two more: atta and oats noodles. Before the ban, the market of instant noodles was estimated to be Rs 3,800 crore.

 

10%

What is it? The percentage of stake Housing Development Finance Corp. (HDFC) has agreed to sell in its insurance unit, HDFC Standard Life, to the public.

Why is it important? This will make the company the first life insurer in India to go for an initial public offering (IPO) and could set a precedent for other insurers.

Tell me more: The divestment plan is likely to roll out in the second half of 2015. HDFC Standard Life, a joint venture between HDFC and UK-based financial services provider Standard Life, recently saw the latter increasing its stake in the company by 9% to 35% for Rs 1,705 crore. This valued the company at Rs 18,951.4 crore.

 

6.7

What is it? The number of card transactions per person per year in India.

Why is it important? This is among the lowest in the world, reflecting the fact that cash is still the most preferred mode of payment in the country. The number compares poorly with other major economies: Australia (249.3), Canada (247.9), Korea (260.8), United Kingdom (201.7), Brazil (54.8) and China (14.4).

Tell me more: Another data point that highlights this is: usage of debit cards at ATMs account for 88% of volume and around 94% of the total value of debit card transactions while the corresponding figures for point of sale terminals are 12% and 6% respectively.

 

33 crore

What is it? The number of people affected by drought in 10 states in India, according to the Indian government.

Why is it important? The country is staring at one of the worst water crises in the recent past, with over a quarter of India’s population facing water shortage and agricultural distress. The government said it would launch large-scale water conservation and storage measures under MGNREGA, the rural employment scheme. The weather department’s forecast of an above normal rainfall this year is likely to bring some respite.

Tell me more: Uttar Pradesh is the worst-affected state accounting for nearly a third of the drought-affected people. The Indian government has disbursed Rs 19,551 crore this month under the rural employment guarantee scheme, which is half of the government’s annual budgetary allocation.

 

7,500

What is it? The number of small cases relating to service tax and customs – involving amounts less than Rs 15 lakh – that are being withdrawn by tax authorities from tribunals and High Courts.

Why is it important? This is likely to reduce the burden of pending cases on tribunals and courts. This move is also aimed at making the tax regime non-adversarial and to focus on cases based on merit alone and not on meeting collection targets.

Tell me more: Last December, the Finance Ministry had increased the threshold limit for filing appeals before the Customs Excise & Service Tax Appellate Tribunal and High Courts to Rs 10 lakh and Rs 15 lakh respectively.

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News in numbers, Jan 22, 2016: US firms have $1.9T in cash, solar system may have 9 planets…

 

Rs 657.28 crore

 

What is it? Net profit of InterGlobe Aviation, owner of India’s largest airline Indigo, in quarter ended 31 December 2015, an increase of 24% from a year ago.

 

Why is it important? This is mainly because of declining fuel prices, which account for nearly half of expenses for Indian airlines. Indigo’s fuel expenses were down by 20% to Rs 1,170 crore while number of passengers increased 28% to 8.33 million. Its market share in 2015 stood at 36.7%. In its first quarterly results after its public listing, the airline’s income from operations increased 11.4% to Rs 4,297.75 crore. It beat analyst estimates – a survey of three analysts by Bloomberg had expected the company to post a profit of Rs 642.8 crore and net income of Rs 4,176.3 crore.

 

Tell me more: Interglobe Aviation raised Rs 3,010 crore in its initial public offering (IPO) recently and its share prices have jumped 57% since its listing.

 

Rs 5,500 crore

 

What is it? The minimum annual global consolidated revenue above which Indian multinational companies have to mandatorily follow country-by-country reporting from April 1, 2016.

 

Why is this important? This is part of the base erosion and profit shifting guidelines (BEPS), a set of norms announced by the Organization for Economic Cooperation and Development (OECD) to plug loopholes in the global taxation system. The OECD estimates that countries lose up to $100 billion a year due to such loopholes. This measure is to provide all the details about the entire operations of a company, which is to help reveal if it is shifting profits to a low-tax country to evade taxes.

 

Tell me more: Governments are supposed to adopt country-by-country reporting as part of the BEPS guidelines by 2017.

 

$1.9 trillion

 

What is it? Amount American companies have in the form of cash.

 

Why is it important? Raises questions on whether keeping it idle is the best use of cash. Financial management principles hold that a company should give cash back to shareholders unless it can provide better returns. Cash in bank gets about 2% interest rate for the companies. Some believe investment opportunities might be just around the corner. Nonetheless, American companies seem to love cash now. For instance, Google’s parent company Alphabet has $80 billion in cash, which is enough to buy Uber, its Indian rival Ola and Palantir, a data-mining startup.

 

Tell me more: A study by Lee Pinkowitz and Rohan Williamson, professors at Georgetown University, shows that investors perceive a dollar of savings differently in different sectors. For example, one dollar of savings by a publishing company is seen to be worth around 40 cents while for a software company, it is perceived to be more than $2.

 

2.5%

 

What is it? Commission to be paid (including handling charges of 1.5%) to banks by the government for medium and long-term deposits under the gold monetisation scheme for one year from its launch (November 5, 2015), according to new RBI rules.

 

Why is it important? Another measure to unlock idle 20,000 tonnes of physical gold lying in households and institutions. The commission is likely to encourage bankers to push the scheme, which has mobilised over 500 kg of gold so far. Under this scheme, people can deposit jewellery, bars or coins with the banks, which can be refined to meet consumption demands and reduce imports.

 

Tell me more: Banks can accept gold under medium (5-7 years) and long-term deposit (12-15 years) schemes where customers can earn 2.25% and 2.5% interest per annum respectively.

 

9

 

What is it? Likely number of planets in the solar system. A recent research indicates the existence of a possible ninth planet.

 

Why is it important? California Institute of Technology researchers Konstantin Batygin and Mike Brown provided theoretical evidence of the existence of the ninth planet based on mathematical modelling and computer simulations. The planet has not been observed directly yet. Brown said there have been two true planets discovered since ancient times and this could be the third. Pluto was relegated to being a dwarf planet in 2006 and if this ninth planet exists, the solar system can be back to having nine planets.

 
Tell me more: The likely ninth planet nicknamed ‘Planet Nine’ is 10 times bigger than the earth and is orbiting far beyond Neptune.

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News in numbers, Oct 19, 2015: Reliance’s e-commerce plans, MFIs’ lending in rural areas…

150,000

What is it? The number of sellers Reliance Industries plan to enroll by March 2016 for its proposed e-commerce site.    

Why is it important? Alters Indian e-commerce industry dynamics substantially. The strategy to compete directly with existing online marketplace sites like Flipkart, Snapdeal and Amazon could lead to more competition in an environment where current players are losing money on daily basis to boost their sales. Bringing 150,000 vendors under its fold is also huge, given the fact Snapdeal and Amazon has got 200,000 and 50,000 sellers respectively.     

Tell me more: As on September, Reliance Industries has cash or cash equivalents of Rs 85,720 crore (or $ 13.1 billion), a luxury not many of its online competitors don’t have. 

 

601

What is it? The number of coal allocations cancelled by the Rajasthan government after opposition parties alleged irregularities.

Why is it important? Public pressure works. The mines were allocated without any competition under ‘first-come-first-serve’ basis, leading to a loss of Rs 45,000 crore, the opposition Congress party claimed. Only last year, the Supreme Court cancelled allocation of 218 coal blocks by the centre citing the opaqueness of the whole process. This led to government giving out coal blocks under open tender.   

Tell me more: After the Supreme Court cancelled coal allocation, Union government auctioned coal blocks under three rounds. This, the government claimed, would fetch more than Rs 2 lakh crore in terms of up-front payments and royalties – spread over two rounds.

 

4

What is it? The number of domestic airlines that would be listed on the stock market next year if GoAir goes public, as it intends to do March 2016.

Why is it important? Most domestic airlines need more capital to improve their financial position and to expand operations. GoAir needs capital to buy more planes to start flying abroad, as well as shore up its falling domestic share, which has dropped from 8.9% in January to 8.1% in August.

Tell me more? SpiceJet and Jet Airways are the two domestic airlines that are listed. Market leader IndiGo is looking to list this month.

33%

What is it? Percentage of lending by India’s Microfinance Institutions (MFIs) in rural areas.

Why is it important? It has fallen below 50% mark for the first time in its 25-year history.  MFIs, which had a star status when SKS Microfinance raised money from the public, were seen as a successful business model of reaching rural customers who borrowed in small amounts. Over the last few years, MFIs have shrunk their rural loan portfolio to contain operational cost. It was 70% in 2012.   

Tell me more: Urban focus has also increased the average loan size to Rs 13,162 in March 2015, as compared to Rs 10,079 in previous fiscal.

17 days

What is it? The number of days spent in non-academic work by primary teachers in urban areas. In percentage terms, it works out to 8% of academic year consisted of 224 days in 2014-15.

Why is it important? A Supreme Court verdict had prohibited engaging school teachers from doing non-academic work like election duty or Census data collection. Only non-teaching staff were to be deployed. This study show disregard for the verdict in almost all states with varying degrees.   

Tell me more: In rural areas, only 9 days were spent by teachers in non-teaching work.     

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