India's electoral bonds scheme, introduced by the Bharatiya Janata Party (BJP) in 2017, allows anonymous donations to political parties. A political party can receive donations by purchasing electoral bonds from the government-owned State Bank of India (SBI). Over the past five years, several large corporations have donated millions of dollars to political parties – with one standout being India-based multinational mining company Vedanta Group.

The country's Supreme Court declared the electoral bonds scheme, which had been under scrutiny, unconstitutional on 15 February 2024. In November 2023, the top court had stated that the bonds "put a premium on opacity" and could be "misused for money laundering".

Amit Shah, India’s Union Home Minister, and Prime Minister Narendra Modi claimed the court’s decision to scrap the scheme would bring black money back to political funding. However, the public was shocked by the information disclosed during the Supreme Court hearing after requesting the data to be made public.

On 4 March, the SBI requested an extension until 30 June to reveal details of every electoral bond cashed by political parties. This means details are not expected until after the outcome of India’s general elections, which will be announced on 4 June 2024.

While data initially shared by the SBI did not disclose the contributors and recipients of electoral bonds, it revealed that the BJP, led by Modi, received almost half of all contributions.

According to a report by the Association for Democratic Reforms (ADR), a non-governmental organisation, secret donors have given political parties nearly Rs16,000 crores (more than $1.9bn) through electoral bonds since 2017. Of the donations made between 2018 and March 2022, 57% went to Modi's BJP.

In mid-March, the commission released data about donations using the funding mechanism since April 2019, which showed that some of India's largest companies, such as Vedanta Group, Bharti Airtel, RPSG Group and Essel Mining, were among the top political donors over the previous five years.

The data has highlighted the political ties of large corporations in India and the benefits they receive for supporting the ruling party, including protection from investigations and major repercussions of making large donations through the electoral bonds scheme.

Vedanta’s donations to political parties

Vedanta Group reportedly donated Rs227 crores to the BJP. It was also one of the top five donors to the Congress party, contributing a total of Rs402.4 crores through the electoral bonds scheme between April 2019 and January 2024.

The Enforcement Directorate (ED) alleges evidence linking Vedanta Group to the bribe-for-visa case, where certain Chinese nationals were granted visas by allegedly bending the rules. The ED sent a reference to the Central Bureau of Investigation, which resulted in a corruption case registered in 2022. As a result, the ED has initiated a money laundering investigation.

The largest individual purchasers of electoral bonds are either heads of corporate groups and companies or their employees. Corporate houses and companies have tried to conceal their identities by deploying individual leads or making large donations in multiple small tranches. This generates suspicion of large-scale bribery, money laundering and other forms of quid pro quo, like the award of lucrative project contracts and policy changes in exchange for party donations.

“The electoral bonds policy lacked transparency regarding donations to political parties,” Meghna Mehra, a political consultant, told Mining Technology. “[It] is alarming that such a policy existed in the first place. When large corporations donate to a political party, there must be some reason behind these donations.

“Either they will take a cut in the money, or they will take political favours such as government projects. Many companies have donated to multiple political parties, and the people connected the dots between funding political parties and which companies got favours from the parties in power,” she added.

“For example – after some raids, companies made a donation, after which the charges against them dropped. The timing of the donations and dropping of charges is almost similar.”

Vedanta has also faced legal issues in the past due to its political donations.

The High Court of New Delhi ruled two months before Modi's first-term elections in 2014 that Vedanta's donations of more than Rs160m ($1.9m) to the BJP and the Congress Party from 2004 to 2012 breached the law prohibiting foreign companies from funding Indian political parties because Vedanta was incorporated in the UK. Two years after the ruling, the government redefined Vedanta as a foreign company.

The ADR filed a petition to the Supreme Court alleging that the government's change was an attempt to shield the beneficiaries of Vedanta's donations from scrutiny. According to the author of the ADR report published on 31 August 2023, the case against Vedanta is still pending.

Mehra believes that corporate funding of political parties results in undemocratic practices, often becoming a give-and-take mechanism. The electoral bonds scheme is a good example of this.

On the question of whether electoral bonds policy affects industry practices, Mehra says: “It prevents businesses from having a level playing field. There are already several problems when it comes to competition in the market, [such as] nepotism, favours and finance gaps. Now, smaller companies have to compete with companies directly or indirectly backed by political parties.”

Backroom lobbying such as this has allowed powerful and rich people in India to amend rules for their benefit, even if it hurts local communities.

In 2021, Vedanta ran a lobbying campaign to relax environmental regulations in favour of mining companies. The company claimed this would aid India's rapid recovery from the Covid-19 pandemic. Eventually, the ruling government implemented this policy, allowing mining companies to increase production without obtaining new environmental clearances.

Vedanta’s lobbying campaign

In January 2021, Vedanta wrote to the former environment minister Prakash Javadekar, saying that the government could add “impetus” to India’s “rapid” economic recovery by allowing mining companies to boost production by up to 50% without securing new environmental clearances, as shown in the Organised Crime and Corruption Reporting Project (OCCRP) website.

According to the OCCRP, a global network of investigative journalists, India's Environment Ministry has relaxed regulations for mining companies. This change permits them to increase production by up to 50% without holding public hearings. Many in the industry view this change as the most onerous requirement of the environmental clearance process.

Although the head of a major industry lobby group and India's mining secretary also advocated for the rules to be relaxed, internal documents and government sources indicate that Vedanta's lobbying was crucial.

The OCCRP findings indicate that the letters sent to Javadekar, like the one from Vedanta, show that government officials tailored the rules according to the mining industry's requests.

“When companies are given preference over others by the government at the state and centre level, their relevance increases as many flock to collaborate with them to get similar favours,” Mehra said.

Vedanta did not comment on the allegations of lobbying or the donation through electoral bonds.

What are the repercussions?

There have been no major repercussions since the electoral bonds data was revealed, despite the findings being revealed only about a month before the general elections. 

Mehra added that it would depend on “the [Supreme] Court to decide if there will be any repercussions for companies to buy electoral bonds. Apart from that, having a government-political party-companies nexus would prevent them from any legal or other actions in many parts of India”.

However, the prime minister has repeatedly vouched for the electoral bonds scheme. During an interview with news agency ANI ahead of the elections, Modi stated that electoral bonds had eliminated the use of cash and corruption in poll funding. According to Modi, electoral bonds were introduced to end unaccounted funds in elections.

For example: “There have been metrics for non-governmental organisations (NGO). These days, it is hard for NGOs to secure funding if they do not support certain ideologies. There could be laws and metrics in a similar manner but for transparency,” Mehra added.

Vedanta has been a loud supporter of Modi and his policies. The ruling party in India has benefitted to the tune of millions of dollars from the mining group – and not only through the bond scheme. According to reports filed with India's election commission, OCCRP found that a Vedanta subsidiary was affiliated with two entities and has contributed significantly to the BJP party. The combined contribution made by these entities to the party between 2016 and 2020 amounted to Rs43.5 crores.

If the BJP comes into power for the third consecutive term, Vedanta will likely continue to benefit from the government if stricter rules for corporations' involvement in political parties are not implemented.

As for the company’s financial performance in the meantime, Vedanta recorded a strong EBITDA (earnings before interest, taxes, depreciation and amortisation) of Rs35,241 crores in 2023, which was still 22% less than the previous year. The company's adjusted EBITDA margin remained strong at 28%. Higher sales volumes led to a rise of Rs641 crores in EBITDA, driven by increased volumes of zinc, aluminium and copper. According to the company, this was partially offset by decreased oil and gas, iron and steel sales volume.