Run-up to general polls: Companies set up 10 electoral trusts

11  Feb,2014

NEW DELHI: With the Lok Sabha polls drawing near, the count of electoral trusts set up by companies to channelise their political funding is on the rise and at least 10 such entities have been registered, including those by Reliance, Tatas, Mahindras and Birlas. 

The trusts are being set up under a new framework that provides tax benefits for funds extended by corporates to political outfits. The norms require inclusion of the words 'Electoral Trust' in the names. 

Five of the 10 trusts were registered in the past one month, according to data from the Corporate Affairs Ministry. 

While the Tata conglomerate has set up the Progressive Electoral Trust, the Reliance group has established the People's Electoral Trust. 

The K K Birla group has registered the Samaj Electoral Trust Association, while Anil Agarwal-led Vedanta has set up the Janhit Electoral Trust. The Bharti group has formed the Satya Electoral Trust and the MP Birla group has incorporated the Paribartan Electoral Trust. 

Others registered are Reformative Electoral Trust of India (Delhi), Mahindra Electoral Trust Company, Gauri Welfare Association 'Electoral Trust' and Pratinidhi Electoral Trust. 

Companies seem to be rushing to register the trusts as the Lok Sabha elections are likely to be held in the next two to three months. 

Going by government officials and executives at leading consultancy and legal firms dealing in corporate affairs, more business houses plan to register electoral trusts. 

Although the new structure has been put in place with the aim of bringing greater transparency in the corporate funding of political parties, most of the names of these trusts do not indicate the business groups they're associated with. 

Some trusts have shared their addresses and the names of directors with certain companies belonging to related groups. 

While business houses have made political donations previously, the government notified an 'Electoral Trusts Scheme' last year to streamline the process and bring in more transparency in the corporate funding of election-related expenses by parties. 

The scheme allows corporate and other entities to register non-profit trusts to differentiate them from other group companies with business interests. 

To facilitate the registration of electoral trusts, the Corporate Affairs Ministry has amended its 'Name Availability Guidelines.' 

The trusts are registered as non-profit ventures under Section 8 of the Companies Act. Earlier, such companies could be formed under Section 25 of the Companies Act, 1956, under the tax department's Electoral Trusts Scheme, 2013. 

Companies can get tax benefits only if they distribute 95 per cent of the contributions received in a financial year to registered political parties in that year itself. 

The electoral trusts are barred from accepting donations in cash. They are required to take the Permanent Account Numbers of all resident Indian contributors and the passport numbers of non-resident Indians when accepting funds. 

The trusts are not allowed to accept contributions from foreign citizens or companies.