India’s Aadhaar scheme brings benefits

Tuesday, 30 July 2013 00:25 -     - {{hitsCtrl.values.hits}}

India has launched an identity management scheme called Aadhaar, to issue biometric identity cards to all 1.2 billion citizens. This was announced in January 2009. In June 2009, Nandan Nilekani, a businessman and entrepreneur, co-founder of the famed, computer services and software giant, Infosys, was given Cabinet status and appointed to run the scheme. Nilekani, a thoughtful man and author of the bestselling book ‘Imagining India,’ in which he makes out a case for such a biometric identity card for all Indians, must now deliver, with a budget of Rs. 1 billion. Nilekani, using his software jargon, sees his Unique Identity Authority of India (UIDAI) ‘as a vast server, loaded with biometric and other details of every Indian, which will be accessed using the new identity card. Biometrics of this scale have not been tried before, the data will be stored on line and accessible for instant on line verification of the identity of every Indian’. Benefits of the Aadhaar scheme The benefits of the Aadhaar scheme in providing services to the poor and marginalised have been clearly shown in two studies recently concluded in the East Godavari District of Andhra Pradesh and the Aurangabad District of Maharashtra. By December 2012 the officials in East Godavari had enrolled over 95.5% of the population into the Aadhaar Scheme. They now use Aadhaar cards to deliver rations under the Indian Government’s Public Distribution Scheme (PDS) through the Fair Price Shops (FPS) of the Government to families living below the poverty line (BPL). The Indian Government spends around Indian Rs. 750 billion to provide food security to people living below the poverty line. Yet as per the International Food Policy Research Institute report, 27% of India’s population remains undernourished. This is notwithstanding the fact that in India, food production has increased by 60% over the last few years. Huge problems in the FPS system There are huge problems in the FPS system; these range from underweight issues, no regular opening/closing hours, food quality issues, ‘ghost’ and bogus beneficiaries, impersonation of beneficiaries, etc. While the Government of India is responsible for procurement, storage, transportation and bulk allocation of food grains under the PDS, the state governments are responsible for the allocation and identification of families below the poverty line (BPL), issue of ration card and supervision and monitoring of FPSs. To incorporate the Aadhaar card into the food security scheme, the District Administration of East Godavari strengthened their database of BPL families by including data such as ration card details, bank account details, mobile phone number and Aadhaar number of BPLs into their data. A pilot project was launched in 47 FPSs and a recent study showed that there was a saving of Rs. 44,274 (US$ 800) in each FPS merely by the elimination of ‘ghost’ and duplicate beneficiaries – by insisting on the Aadhaar card and checking the data online before issuing the rations. Beneficiaries are sent a text message on their mobile phones when the rations are delivered to the FPS. When they come to the FPS they produce the Aadhaar card which is checked and verified online, in real time, and the rations issued. In Aurangabad too, ‘ghost’ beneficiaries using false or forged papers were a problem, not only at the FPS but also in the state pension scheme. Aadhaar enabled distribution was introduced for the FPS and old age, widows and disabled pension schemes in Aurangabad. Five social assistance programs were also selected. An agreement was entered into with a bank for the management of the cash and disbursement of cash to the beneficiaries on proof of identity through Aadhaar. Customer service points – bank agent outlets – to help beneficiaries receive payments upon providing the authentication/biometric details were identified, thus helping to leverage the Aadhaar identity to ensure targeted delivery. By this method of eliminating ‘ghost’ beneficiaries the District Administration saved Rs. 7.7 crore. Effective system Aadhaar identity ensured effective targeting, increased transparency and enhanced accountability, while delivering payments. Before the Aadhaar card, in which all relevant data is recorded, a widow to draw her pension entitlement had to provide documents to establish her identity, prove that her husband was dead, prove her address and age, month after month. The Aadhaar card has all this information embedded and can be checked in real time, online, using the Aadhaar data base on its servers. It is envisaged that the system will be used by central, state and local government bodies and enterprises in India, to swiftly confirm the cardholder’s identity for a variety of purposes, such as collecting revenue, customs and tariff, dispensing welfare, issuing passports, updating land records, registration of births and marriages, etc., the existing data bases of 800 million income tax payers, 200 million account holders in public and private banks, 500 million mobile phone users, 600 million Indians who have election voting cards, Indian passport holders and PDS card holders (equivalent to our Samurdhi). The unique number will be included in all other documents where identity is critical for instant certification and checking. Such a system, by boosting technology and cooperation across the bureaucracy, would improve performance. It would also provide a standard form of identification for collecting benefits, opening a bank account, paying taxes, voting at elections or obtaining insurance cover. Looking further ahead, it could inspire computer service providers to develop new technologies to give consumers a wider range of financial services. As Nilekani says: “The technology we have available to us at our stage of current development was not available to America and Europe at the same stage of their development and we have to take advantage of that.” Other than identity, the UID records will capture a whole set of information, the head of family, address, assets – such as cattle and livestock, annual income, religion, educational qualifications, etc. Financial institutions are looking forward to use the status that the UID number gives those issued with the Aadhaar card, to bring them into their lending and deposit taking systems to unlock the financial power of the famed ‘Bottom of the Pyramid’ articulated by the late management guru Dr. C.K. Prahalad of the University of Michigan, in his book ‘Fortune at the Bottom of the Pyramid’ – the poor and marginalised who cannot be reached by providers of financial services now due to the lack of documents certifying identity. Food security India has just passed by Ordinance a Food Security Bill, which has to be ratified by Parliament. While the ruling Congress Party says this was in their election manifesto, the Opposition says it is an election gimmick for the 2014 Parliamentary elections, which will push the budget deficit out of sync. The Bill makes food a legal right for two-thirds of the country’s population and provides five kgs of subsidised food grain per person per month, free meals and maternity benefits for pregnant and lactating mothers, children between the ages of six months and 14 years and destitute and homeless people. Given the leakage and corruption in India’s FPS system, which will be used to operate the Food Security Bill, it would be essential that the Aadhaar scheme be made universal or at least cover the majority of the population before the distribution under the Bill begins. Redefining welfare systems Such a national biometric ID system, with instant certification, would make the present porous and leaky welfare distribution systems found in Sri Lanka and India, which is dependent on the discretion and the moral scruples of the bureaucracy, redundant. The State could transfer benefits such as Samurdhi or Internally Displaced People allowances directly, in the form of cash, to bank accounts of eligible citizens, based on their income returns or assets. Benefits could be specifically targeted to the women of the household to maximise the proper and effective utilisation. This would in one stroke, not only bring all citizens within the financial system, achieving 100% financial inclusion, but would give them real financial power. This would in effect redefine our welfare system as we know it. The gains in efficiency and transparency would be unprecedented. It would help to eliminate corruption a great deal, as there would be no human interface at the point of disbursement, as the biometric Aadhaar smart ID card could be used to withdraw funds at a bank ATM, in amounts and denominations the beneficiary actually requires, at the relevant time, and thereby avoid monthly lump sum disbursements by a Government functionary at which point there are often corrupt rent seeker’s leakages. A networked national ID infrastructure , as being envisaged by Nilekani for India, would mainstream many localised, pro-poor reforms in our financial and revenue system, pensions, healthcare, agricultural extension, etc. The national ID when integrated with savings and credit groups and micro finance institutions would provide financing options for the poor and marginalised more closely with bank accounts, creating large organised systems, which would provide gains on the basis of economies of scale and at the same time tailored to local specific requirements. Pakistan Some time ago in a neighbouring country Pakistan, we had an excellent example of the use of biometric smart cards. When the Pakistan Army began its advance into the Swat Valley to oust the Taliban Terrorists, more than 1.5 million residents of the North Western Frontier Province were displaced from their homes. The NWFP is a region where the proud tribesmen’s honour code frowns on the acceptance of cash handouts and as a solution the Government of Pakistan, in collaboration with a local bank and the Visa credit card company, issued biometric smart debit cards to the displaced families, each preloaded with $ 3,000 per month, which could only be spent on food or medicine at any of the 500 outlets in and around the temporary welfare centres. Corruption was minimised, as there was no human interface at the point of disbursement and the beneficiaries could utilise such amounts of money as they really needed at any given time instead of being forced to take a lump sum on a given day of the month, for which they have to stand in queues for hours, as is in normal disaster situations. The availability of a biometric information data base eliminated fraud. Ali Hakim, the Head of the National Data Base and Registration Authority of Pakistan sees this scheme as a massive financial inclusion program, as the vast majority of the recipients had no prior link to the formal financial system, and would be encouraged to utilise their cards in the future as a way to save and purchase their necessities. Using smart cards to channel benefits is not a new phenomenon; Visa is doing so for many governments, including Philippines, Mexico, Brazil, Costa Rica and the Dominican Republic. Master Card is active in Poland and Peru. 38 states in the USA also distribute benefits on biometric smart debit cards or plan to do so. The victims of the recent unprecedented once-in-a-century monsoon floods in Pakistan, it is hoped, will be provided with benefits through a similar smart card scheme. In fact it is reported that the Government of Pakistan has in September 2010, begun dispensing cash to flood affected displaced families by electronic debit card, building on the previous experience of the conflict in Swat. Sri Lanka It would be a great boon if smart biometric debit cards were introduced for distribution of Samurdhi, IDP benefits, pensions and other numerous social welfare handouts in Sri Lanka. Due to the security situation which has prevailed in this country for the last few decades, the National Identity Card had become an essential document for all Sri Lankans. Every adult Sri Lankan is assigned a unique number by his NIC, a number based on a formula called modulus eleven based on the digits of the holder’s birthday. An individual’s number, having only nine digits, worked out on this formula, would not reoccur for a century. The first two digits in the number represent the year of birth. The next three digits represent the date and the month of birth. In the NIC of a male these three digits consist of a number ranging from 001 to 366, in the case of an NIC of a woman, the numbers range from 501 to 866. The balance four digits are allocated by the department based on their database requirements. The other details on the NIC are photograph, date of issue, full name and address, sex, date of birth and employment. The Registration of Persons Act No. 32 of 1968 is the law under which NICs are issued in Sri Lanka. Proposals have been made to convert the present Sri Lankan NICs to biometric smart cards. Less complex task The task for Sri Lanka is less much complex than the one which faces Nilekani and his UIDIA. Every Sri Lankan over 18 years already has his or her unique number – we only have to issue a smart card with the biometric data and get it all on a server which would be universally accessible – A much simpler task than trying to give 1.2 billion Indians, their own unique number. Then include that unique number on all other relevant data bases, passports, tax files, Customs documents, vehicle registration, voters’ registers, Samurdhi, pensions and other welfare registers, bank databases, even as a mobile phone number, etc. Then create a quick access system to the computer servers to verify the information on the smart card. It will truly create a revolution in identity management and communication for development. The greatest advantage will be the ability to verify identity for purposes of providing financial services that will really unleash the financial capacity at the bottom of the pyramid, which currently lays dormant and marginalised from the mainstream. Major milestone Aadhaar will confirm the identity of 1.2 billion Indians online, in real time, simply with a swipe of a smart card, when up and running. It will be the largest identity management program in the world. The scope of work for the companies selected includes the design, supply, installation, commissioning, maintenance and support of multi-modal Automatic Biometric Identification Subsystems (ABIS) and a multi-modal Software Development Kit (SDK) for client enrolment stations, verification servers, manual adjudication and monitoring the functioning of the system. The selection of the service providers is a major and commendable milestone in India’s aspiration to manage, verify the identity of and financial empower every Indian, 24/7 in real time, online and thereby mainstream and empower the marginalised and poor as has never done in the entire history of the world. As far back as in 1968, Sri Lanka set about giving every Sri Lankan a unique identity number, which we have successfully done, but we have not, unfortunately, progressed beyond that, to date, we are as usual bogged down in self-satisfied complacency. The proposal to issue biometric NICs with data which can be verified in real time, online, which said to be in the pipeline, is indeed welcome and will cause substantial improvement in the administration and management of information and most of all achieve 100% financial inclusion. (The writer is a lawyer, who has over 30 years experience as a CEO in both government and private sectors. He retired from the office of Secretary, Ministry of Finance and currently is the Managing Director of the Sri Lanka Business Development Centre.)

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