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Undercutting Aadhaar

How the court’s order has complicated the UPA’s cash transfer plans.


October 1, 2013 2:53:34 am

How the court’s order has complicated the UPA’s cash transfer plans.

The Supreme Court interim ruling against the UPA’s biometrics-based identity scheme,Aadhaar,touched on two aspects of the project: enforcement and eligibility. It has ruled that enrolment for the Aadhaar card should be voluntary; it cannot be made mandatory to claim public services and subsidies. With regard to eligibility,it has declared that the card cannot be issued to illegal migrants; it can only be issued after verifying citizenship.

Since Aadhaar is considered critical to targeting public services and subsidies,to ensure comprehensive coverage of the poor at minimum cost by reducing corruption and improving transparency,the court’s order will have major implications for these objectives. To examine the possible implications,we need to know how Aadhaar was conceived and how it works.

It is a multipurpose national identity card project,a 12-digit unique identification number issued by the Unique Identification Authority of India (UIDAI) on behalf of the government of India. Enrolment is not mandatory. The number is linked to demographic and biometric information — photograph,10 fingerprints and iris recognition — about each individual. This serves as evidence of identity and address for an Indian resident. Such information would establish individual identity and eliminate duplication.

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Such foolproof identification is imperative today because there is an urgent need to contain the fiscal deficit by reducing excessive public expenditure due to leakages and inefficiencies in the implementation of safety nets. For instance,according to Census 2011,there are 21 million households in Andhra Pradesh,but the number of ration cards in circulation is 24.5 million. This is due to “duplicates” (where the same individual benefits multiple times) and “ghosts” (non-existent beneficiaries).

To address these issues,the government has created what is called the Direct Benefit Transfer System (DBTS). The DBTS aims to credit funds for scholarships,pensions and wages under public works directly to the bank accounts of the beneficiaries identified,using their Aadhaar numbers. This would eliminate duplicates and ghosts and therefore minimise leakages or undue public expenditure.

Thus,the very design of the DBTS is such that the benefits of various welfare programmes would be conditional on Aadhaar enrolment. This is what has motivated the public to pursue enrolment despite the inconvenience. The UIDAI has already issued more than 400 million cards.

The government launched the DBTS on January 1 this year. To begin with,it covered seven welfare schemes in 20 districts,spread over 16 states. The schemes include scholarships,pension for widows and unemployment allowances. In the long run,it is proposed to cover food,fertilisers,and fuel subsidies by working out their cash equivalents and transferring them directly to the beneficiary accounts. The DBTS for LPG has already benefited three million households in 18 districts since its launch in June.

Now,what are the implications of the Supreme Court’s order for the relevance of Aadhaar in claiming welfare benefits? One immediate fallout will be that citizens will have limited incentive to pursue Aadhaar enrolment. This is particularly so for those who already possess other identification documents and were enrolling for Aadhaar only because it was made mandatory for access to certain government schemes. If Aadhaar enrolment is delinked from various welfare programmes,only those who need it as a proof of identity and address will seek it out.

What are the likely implications for the targeting and efficient implementation of public welfare programmes? A singular advantage of the Aadhaar scheme,as planned,is that it can be the one thing that verifies the credentials and eligibility of claimants for multiple public welfare programmes. However,the benefits of targeting would accrue only if and when the rules for identification of the beneficiaries are valid and the identification is undertaken efficiently.

To achieve efficiency in the implementation of welfare programmes,the government could explore alternative options,such as the conditional cash transfer programmes in Latin American countries. Brazil and Mexico have implemented conditional cash transfer programmes that provide financial assistance to poor households,subject to certain specifications on children’s healthcare and education. However,their successful implementation presupposes a well-developed infrastructure for the provision of health and education. In fact,even the MGNREGA requires some degree of self-targeting and involves DBTS without the Aadhaar link. Delinking the DBTS from Aadhaar would call for a programme-specific targeting design,which would be cumbersome and costly in a scenario where there are multiple welfare programmes and schemes.

The court’s order raises a couple of questions that call for a policy response: What will happen to the millions,including illegal migrants,who have already been enrolled into Aadhaar with perfunctory verification of their proof of identity? How will the government verify the nationality claims of the poorest of the poor,who do not have identification documents? These are issues that call for a serious rethink on the design and implementation of the DBTS.

The writer M.H. Suryanarayana is professor at the Indira Gandhi Institute of Development Research,Mumbai

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