Column: Fix Aadhaar, dont junk it

Written by Sumita Kale | Updated: Jun 27 2014, 07:11am hrs
It is ironic, but also telling of the times we are in, that the Aadhaar programmeonce termed a game-changercurrently seems to be under a cloud. This is a pity given the huge promise and potential of the Aadhaar-enabled payments infrastructure. Of course, there are serious shortcomings in the UPA-run programme that need to be addressed, and a lot has already been said about these in the past. For instance, the Supreme Court ruling early this year pointed out the discrepancy of mandating Aadhaar for receiving government benefits, when the programme was still defined as being voluntary. Yet, this and other concerns like privacy and security of the database can be fixed through legal and operational measures; the crux of the problem, for this government, lies elsewhere.

Over the past few years there have been two enrolment programmes operating in the country: the National Population Register under the Registrar General of India, i.e., the Home Ministry, and the Aadhaar programme by the Unique Identification Authority of India (UIDAI), an executive authority under the Planning Commission. While both the NPR and the UIDAI enroll all usual residents of the country and both register biometric data, UIDAI does not verify citizenship during enrolment. This is rightfully the job for the NPR, under the Home Ministry, to distinguish between citizens and non-citizens under the broad category of usual residents. Clearly, if the UIDAI number is to be used for delivering government benefits, this lacuna has to be fixed to ensure that non-citizens are not deriving benefits. Given that the genesis of the NPR lay in internal security concerns, the work is being carried out under the amendments to the Citizenship Act of 1955 and the Citizenship Rules of 2003. On the other hand, the National Identification Authority of India Bill 2010 is still pending approval in Parliament. Unfortunately, without statutory backing, the UIDAI has remained vulnerable to criticism, even when the infrastructure built around Aadhaar-authentication has proved its utility many times over, not just in DBT but also in easing KYC requirements for the unbanked.

It is important to remember Aadhaar is not just a number, it is an enabler. Thanks to RBI and NPCI, electronic payments infrastructure has expanded and India has platforms now that support real time online authentication and transactions which connect to even banking correspondent agents across rural areas. Linking the Aadhaar authentication platform to the benefits transfer programmes of the government has already yielded good results. A recent randomised control trial of the rollout of the Aadhaar-enabled Direct Benefits Transfer over 158 sub-districts and 19 million people in Andhra Pradesh (NBER Working Paper 1999, March 2014) has shown that beneficiaries spent less time receiving payments, payment delays were reduced and became more predictable, beneficiaries reported earning more, incidence of bribe demands to obtain payments fell, incidence of ghost beneficiaries fell, etc. In fact, the reduction in leakages is much greater than the cost of implementationthis study by Kartik

Muralidharan and others set the MGNREGS leakage reduction at nine times the cost of implementation. Even more interestingly, 84% of MGNREGS job card holders and 91% of social security pension recipients who used the system reported that they prefer the new system to the old. As of now, the infrastructure for delivering benefits effectively is in place and is a win-win for the government and the beneficiaries.

Again, this is not to say that the Aadhaar-enabled DBT programme under the UPA was perfect, it was not. There were several implementation failures that have been well documented. In the urge to push a programme hastily through, especially for LPG, the system fell to pieces. But the problems lay in the absence of a well-thought-out action plan and clear communication to all rungs of government and disbursing agencies. In effect, the Aadhaar-enabled DBT programme suffered due to the systemic issues that plagued the UPA regime in its last few years.

Aadhaar data has been captured for more than 63 crore people; the NPR is way behind UIDAI in this process. Enrollments under the UIDAI and the NPR have to be coordinated effectively. There is an apprehension that with a change of guard, the benefits of using the identifier for payments will not take place to the extent of its potential. If this happens, the financial inclusion mission will be rolling back a decade. The UID-enabled platforms provide a system for e-KYC that is accessible in real time from any part of the country; it goes a long way in solving the problem of KYC that plagues so many services and stalls the financial inclusion mission. It is for the Modi government now to fix the problems, pick the best of what has been done and move towards more efficiency and inclusion, rather than ditch the entire programme completely.

The author is with the Indicus Centre for Financial Inclusion