Use of Aadhaar in Welfare Schemes

IN NEWS:

• Recently, international credit rating agency Moody’s Investor Service released a report, ‘Decentralised Finance and Digital Assets’, which advocates for decentralised digital identity systems instead of centralised biometric systems like India’s Aadhaar.
• Referring to “security and privacy vulnerabilities posed by centralised ID systems like Aadhaar”, the report states that “the Aadhaar system faces hurdles, including the burden of establishing authorization and concerns about biometric reliability”.

MORE ON NEWS:

• The government has strongly refuted these claims by Moody’s Investor Service, which terms Aadhaar “the most trusted digital ID in the world."
• Over 1 billion Indians expressed their trust in Aadhaar by using it to authenticate themselves over 100 billion times, the government stated. The government also said that apart from a billion-plus Indians who use Aadhaar, international agencies such as IMF and World Bank have also lauded the role of Aadhaar.
• The government added that the report makes an “obvious reference to the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS)” when it speaks about service denials for manual labourers through biometric technologies.
• “However, it is evident that the authors of the report are unaware that the seeding of Aadhaar in the MGNREGS database has been done without requiring the worker to authenticate using their biometrics, and that even payment to workers under the scheme is made by directly crediting money in their account and does not require the worker to authenticate using their biometrics. The report ignores that biometric submission is also possible through contactless means like face authentication and iris authentication. In addition, the option of mobile OTP is also available in many use cases," the government said.

ABOUT AADHAR:

• Aadhaar is a 12-digit unique identity number that can be obtained voluntarily by residents or passport holders of India, based on their biometric and demographic data.
• The data is collected by the Unique Identification Authority of India (UIDAI), an authority established in January 2009 and made a statutory body following the provisions of the Aadhaar (Targeted Delivery of Financial and other Subsidies, benefits and services) Act, 2016.
• Aadhaar is the world's largest biometric ID system.
• It is considered a proof of residence and not a proof of citizenship and Aadhaar does not itself grant any rights to domicile in India.
• This is the only programme of its kind globally, wherein a state-of-the-art digital and online ID is being provided free of charge to people on such a large scale, and it has the potential to change the way service delivery functions in the country.

BENEFITS OF USE OF AADHAR IN WELFARE SCHEMES:

• Plugging the leakages in the welfare schemes:
  • Huge leakage due to duplications is one of the major challenges across several welfare programmes in India, such as the Public Distribution System (PDS), MGNERGA, etc.
  • The use of Aadhar in welfare schemes helped to curb corruption in accessing welfare programmes and reduced leakages by eliminating “ghost” and “fake” individuals.
  • For instance, in PDS, to ensure that an individual accessing rations is not a ghost or a fake, the government linked the database of ration card holders with the Aadhaar database.
• Financial address of the individual:
  • Aadhaar becomes the financial address of the individual, and cash transferred by the government for various welfare schemes gets deposited into the Aadhaar-linked bank account.
  • The individual can seamlessly withdraw money from their Aadhaar-linked bank account from private banking kiosks or through private banking correspondents who use their point of sale (PoS) machines to authenticate individuals using their biometrics using the Aadhaar-enabled Payment System (AePS).
• Saved a vast amount of money:
  • As NITI Aayog Chief Executive Officer Amitabh Kant said, Aadhaar has become the "bedrock" for the government's welfare schemes and has saved over Rs 2 lakh crore to the government by "eliminating fake and duplicate identities" and by ensuring faster benefit transfers without any intervention or intermediaries.
• Inclusion of those without any existing identity documents:
  • A problem in reaching benefits to the poor and marginalised section is that they often lack the identification documents they need to receive various state benefits; the "Introducer" system, which has been approved for data verification for the UIDAI, will enable such people to establish an identity.

• Monitor development parameters:
  • It can be used to monitor development related parameters in critical sectors such as healthcare, education, etc.
  • This can also facilitate development of electronic applications to bridge any gaps observed.
• Reduce bureaucratic discretion and corruption:
  • The use of Aadhaar enables the government to directly transfer benefits to beneficiary accounts under various schemes, thereby eliminating unwanted bureaucratic interference.
• Aids state to streamline welfare policies:
  • Aadhaar provides a single view of beneficiary data and information, aiding in streamlining policy decisions for the state.

CONCERNS:

• Inefficiencies in biometric authentication and updating:
  • Generation of “false negatives” have always persisted, more so for labourers and tribal people.
  • For instance, those engaged in manual and hard labour are susceptible to fingerprint changes over time.
  • In many rural areas, people have to make multiple trips to ration shops to authenticate, with no guarantee that the authentication will work. Lack of reliable internet, lack of phone connectivity to get an OTP, etc. lead to denials.
• Failures in authentication have led to delays in the disbursal of benefits:
  • For example, reports from states such as Jharkhand from 2017 indicate that there have been starvation deaths because of the denial of benefits and subsidies.
  • A report by the Comptroller and Auditor General of India (CAG) from 2022 states “UIDAI did not have a system to analyse the factors leading to authentication errors.”
• Increase in transaction costs for beneficiary:
  • Aadhaar-based biometric authentication increased transaction costs for beneficiaries.
  • Beneficiaries in the Aadhaar system incurred an additional 17% extra cost than those in the old system, because of multiple trips to authenticate themselves and the opportunity cost of time spent.
• Inability to detect some frauds:
  • For instance, in the case of rations (PDS), several studies have provided evidence demonstrating that the main type of corruption is quantity fraud, which happens when, say, the entitlement for a ration card holder is 35 kg of rice but the dealer only gives 30 kg. Aadhaar has no role in either detecting or preventing this fraud.
• Concerns associated with AePS:
  • Banking correspondents using the AePS operate without any accountability framework.
  • Some of them ask individuals to biometrically authenticate multiple times, and each authentication gives access to the banking correspondents to operate the individual’s bank account.
  • Several studies and news reports have highlighted how, using AePS, money from workers’ accounts has been withdrawn or that they have been signed up for government insurance programmes and other schemes without their knowledge. For instance, the ?10 crore scholarship scam in Jharkhand.
• Error of exclusion:
  • Aadhaar authentication falsely rejected genuine PDS beneficiaries who were then denied their ration supplies.
  • The study finds that nearly 10% of legitimate beneficiaries were denied their ration either because they did not have their Aadhaar linked to their ration card or due to an exclusion error.
• Misdirected payments through Aadhaar:
  • Most workers, for instance, in the case of MGNREGA, are unaware of which account their Aadhaar was last linked to, as financial institutions in rural areas tend to coerce workers to link their Aadhaar with bank accounts without consent.
  • This leads to wages getting diverted to some account without the worker’s knowledge. For example, Aadhaar payments of people got redirected to Airtel wallets, causing much havoc.
  • Misdirected payments through Aadhaar are difficult to detect and nearly impossible to resolve. These happen when one person’s Aadhaar number gets linked to somebody else’s bank account.
• Absence of evidence on reduced delays:
  • For instance, the government has claimed that using Aadhaar in MGNREGA has reduced delays in wage payments. However, various studies have demonstrated that the savings claims of governments are misleading. 
  • A recent working paper using 31 million MGNREGA wage transactions demonstrates no statistical evidence of these claims and points to a lack of sufficient funds as the reason for delays.
• Identification without consent:
  • It may become possible to track an individual's activities across multiple domains of service using their global Aadhaar IDs, which are valid across these domains.
  • This would lead to identification without consent.
• Absence of exit option:
  • The absence of an exit option to get out of the UIDAI data base is a serious concern
• Identity theft:
  • Aadhaar is vulnerable to illegal harvesting of biometrics and identity frauds because biometrics are not secret information.
  • Moreover, possible leakage of biometric and demographic data, either from the central Aadhaar repository or from a point-of-sale or an enrollment device, adds to the risk.
• Lack of accountability:
  • The UIDAI also lacks accountability to Parliament if there is a failure in the system and someone suffers in consequence.
• Violation of rights:
  • The critics of the Aadhaar has always maintained that the UIDAI might share the  biometric information of people with other government agencies thereby violating people’s right to privacy.
  • They also thought that using the biometric data, people might be singled out, tracked, harassed and have their rights violated

WAY FORWARD:

• Inefficiencies in the Aadhaar project should not come in the way of welfare delivery
  • Central and State governments should allow alternative identification so that genuine beneficiaries are not denied due subsidies.
• Allay privacy concerns:
  • The government should factor in privacy risks and include procedures and systems to protect citizen information in any system of data collection.
  • It should create institutional mechanism such as Privacy Commissioner to prevent unauthorised disclosure of or access to such data.
• Undertake a pilot project
  • It would have been better to have undertaken a robust pilot project to test the efficacy of Aadhar linking before making it mandatory for any welfare schemes, including MGNREGA, especially when the government’s push to make Aadhaar-based payments mandatory in MGNREGA has faced much resistance from workers and field officials.

PRACTICE QUESTION

Q. The government favours Aadhaar for several government-to-citizen cash transfer programmes. In this context, discuss the benefits and challenges of using Aadhaar in welfare delivery.