NEW DELHI: Behind the doors of a small, non-descript office in the heart of New Delhi lies the headquarters of an electoral trust run by just two men that is the largest-known donor to India’s ruling Bharatiya Janata Party (BJP), according to a Reuters review of public records.
The Prudent Electoral Trust has raised $272 million since its creation in 2013, funnelling roughly 75% of that to Prime Minister Narendra Modi’s party. The trust’s donations to the BJP total 10 times as much as the $20.6 million it issued to the opposition Congress party, the records show.
The previous Congress-led government introduced electoral trusts in 2013 to allow for tax-exempt contribution to parties. It said the mechanism would make campaign financing more transparent by reducing cash contributions, which are harder to trace.
But some election experts say the trusts contribute to opacity around the funding of political parties in India, where this year’s general election – due to be called within weeks – is expected to return Modi to power for a rare third term, polls predict.
While Prudent does not disclose how donations made by individual corporate donors are distributed, Reuters used public records from 2018 to 2023 to track flows from some of India’s largest companies.
Eight of India’s biggest business groups donated at least $50 million in total between 2019 and 2023 to the trust, which then issued cheques for corresponding amounts to the BJP, according to the Reuters analysis.
Four companies whose transactions were identified by Reuters – steel giant ArcelorMittal Nippon Steel (ESRG.UL), telco Bharti Airtel (BRTI.NS), infrastructure developer GMR and energy giant Essar – have not given money to the party directly and do not appear on its donors’ list.
GMR and Bharti Airtel said in response to Reuters questions that Prudent determines how their donations are distributed.
Prudent decides “as per their internal guidelines, which we are unaware of,” said a GMR spokesman. He added that the company doesn’t “like to align with any political party.”
Bharti Airtel, which created Prudent before transferring control to independent auditors Mukul Goyal and Venkatachalam Ganesh in 2014, said it has “no influence on the decisions, directions and mode of disbursal of funds.”
Spokespeople for the other groups did not respond to calls, text messages and emails.
Goyal and Ganesh did not respond to questions sent via email and post. When asked on a brief phone call about how Prudent functioned, Goyal said: “That is something we do not discuss.”
Prudent – the largest of India’s 18 electoral trusts – is legally required to declare how much it has collected from each donor and the total amounts disbursed to each party.
But it is the only one among India’s four largest electoral trusts to accept contributions from more than one corporate group.
Trusts “provide one layer of separation between firms and parties,” said Milan Vaishnav, an expert on Indian campaign finance at the Carnegie Endowment for International Peace, a Washington-based think-tank.
Political finance in India is widely seen as murky, with most political donations in India undisclosed, Vaishnav added.
BJP said in its latest public disclosure in March 2023 that its political war chest – funds it had available including cash reserves and assets – was valued at 70.4 billion rupees ($850 million). That gives it a colossal financial advantage over Congress, which had 7.75 billion rupees in funds.
BJP spokespeople did not respond to repeated requests for comment for this story.
The records show that Prudent was also the largest-known donor to the Congress party in the decade to March 2023.
PHOTO: REUTERS
Layer of separation
India’s Supreme Court said in a February campaign finance ruling that corporate contributions are “purely business transactions made with the intent of securing benefits in return.”
Reuters was unable to establish if political parties know the identities of donors that give through trusts that receive contributions from multiple groups.
MV Rajeev Gowda, head of research for Congress, told Reuters that electoral trusts are a “semi fig-leaf” and that he believed parties knew the donors’ identities. Gowda, who doesn’t manage the party’s finances, didn’t provide evidence.
BJP’s next largest known donor is Tata Group’s Progressive Electoral Trust, which has given the party 3.6 billion rupees collected from the salt-to-airline conglomerate’s companies. Progressive is also Congress’s next largest donor, having given it 655 million rupees.
Progressive’s by-laws require it to distribute funds proportionate to the number of seats held by each party in parliament. Prudent has no similar restrictions and Reuters‘ analysis of its donations found no such pattern.
Alluvial diagram showing the flow of funds. PHOTO: REUTERS
Near-instant transfers
Trusts are allowed to retain a maximum of 300,000 rupees for annual operating expenses. Remaining funds must be disbursed in the fiscal year they were received.
In its analysis of contribution reports filed by Prudent to electoral authorities, Reuters identified 18 transactions between 2019 and 2022 in which the eight corporate groups made large donations to the trust. Within days, Prudent issued cheques for the same amounts to BJP.
Before the 18 contributions, which are not exhaustive of all the donations made by the groups to Prudent, the trust did not have sufficient funds for the payments to BJP.
Companies tied to billionaire L.N. Mittal’s ArcelorMittal group were among Prudent’s most prolific donors.
On July 12, 2021, for instance, ArcelorMittal Design and Engineering Centre Private Limited gave Prudent a cheque for 500 million rupees ($6.03 million). The next day, Prudent issued a cheque to BJP for the same amount.
ArcelorMittal Nippon Steel India also issued 200 million rupees to Prudent on Nov. 1, 2021, and 500 million rupees on Nov. 16, 2022. The respective sums were sent to BJP on Nov. 5, 2021, and Nov. 17, 2022.
A spokesman for ArcelorMittal did not respond to requests for comment.
Bharti Airtel, meanwhile, issued 250 million rupees to Prudent on Jan. 13, 2022 and 150 million rupees on March 25, 2021. The trust sent out cheques to BJP for those amounts on Jan. 14, 2023 and March 25, 2021.
And three companies in the RP-Sanjiv Goenka group – Haldia Energy India, Phillips Carbon Black and Crescent Power – cut cheques for 250 million rupees, 200 million rupees and 50 million rupees on March 15, March 16, and March 19, 2021 respectively. On Mar. 17, BJP received a 450-million-rupee cheque from Prudent; a 50-million-rupee cheque followed on March 20.
The RPSG group did not respond to requests for comment.
