NEW DELHI, March 14 (Reuters) - 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, telco Bharti

Airtel, 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.

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.

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.

Donations from Serum Institute and companies in GMR Group,

DLF Ltd and Essar Group moved to BJP immediately after

Prudent received them.

Reuters was unable to identify a similar pattern of funds

being sent to the trust and transferred to Congress immediately

afterwards.

However, Reuters found similar patterns involving two

regional parties. Megha Engineering and Infrastructure

transferred 750 million rupees to Prudent across three

transactions on July 5 and July 6, 2022. The trust issued a

750-million-rupee cheque on July 7 to Bharat Rashtra Samithi, a

centrist party in Telangana state, where Megha group is

headquartered.

And property developers Avinash Bhosale Group, based in the

western Maharashtra state, gave 50 million rupees to Prudent on

Nov. 27, 2020. The trust issued a cheque for that amount to the

Maharashtra Pradesh Nationalist Congress Party, which is

independent of the national Congress party, on Nov. 30.

The corporate groups did not immediately return requests for

comment. BRS's general secretary said he was "not aware" of

specifics about the donations, while a senior NCP official said

that the party had recently split and "every record will not be

available with us.

CAUSE OF CONCERN?

Public records and party reports show BJP's war chest has

swelled since Modi became prime minister in 2014, from 7.8

billion rupees ($94.09 million) in March 2014 to 70.4 billion

rupees in March 2023. Congress' funds increased from from 5.38

billion rupees to 7.75 billion rupees in the same time period.

The financing gap between the BJP and Congress is a cause of

concern, said Jagdeep Chhokar of Association of Democratic

Reforms, a Delhi-based civil society group that was the main

petitioner behind the electoral bonds challenge in the Supreme

Court.

"Level playing field is an essential part of democracy," he

said.

Some BJP officials have said in the past that the large sums

it has raised on its books are an example of its transparency.

BJP has been the major beneficiary of electoral bonds, a

mechanism that allowed donors to give unlimited amounts to

parties without public disclosure.

It received some 65.66 billion rupees of the 120.1 billion

rupees worth of such bonds sold between their January 2018

introduction and March 2023. Such bonds made up more than half

the contributions received by the BJP in all but one fiscal year

since their introduction.

The Supreme Court called the mechanism "unconstitutional" in

February and ordered the government-owned State Bank of India,

which issued the bonds, to release buyers' details. Specifics

are set for release by March 15.

($1 = 82.7710 Indian rupees)