Date : 03/10/2023

Relevance: GS Paper 2 - Governance - Welfare Programs

Keywords: Aadhaar, Biometric System, Direct Benefit Transfers (DBT), MNREGA

Context-

• Recently, credit rating agency Moody’s Investor Service released a report, ‘Decentralised Finance and Digital Assets,’ which advocates for decentralized digital identity systems instead of centralized biometric systems like India’s Aadhaar. Referring to “security and privacy vulnerabilities posed by centralized ID systems like Aadhaar”, the report states “the Aadhaar system faces hurdles, including the burden of establishing authorization and concerns about biometric reliability.”
• The government has strongly refuted these claims. Terming Aadhaar as “the most trusted digital ID in the world,” the government stated that “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 Significance of Aadhaar:

Aadhaar, administered by the Unique Identification Authority of India (UIDAI), assigns a unique identification number to Indian residents. During enrollment, demographic information, along with biometric data like fingerprints and iris scans, is collected. The primary goals of UIDAI are to provide every resident with a unique ID and combat corruption in accessing welfare programs, eliminating fraudulent beneficiaries.

Aadhaar in Welfare Schemes:

The government has incorporated Aadhaar in various government-to-citizen cash transfer programs to tackle issues of ghost beneficiaries and reduce duplications, resulting in significant cost savings.

• Ghost Beneficiaries: One of the primary motivations for Aadhaar integration was to eliminate "ghost" beneficiaries, individuals who fraudulently access benefits in the name of deceased or nonexistent individuals.
• Cost Savings: The usage of Aadhaar in welfare schemes has yielded substantial cost savings by reducing duplicate or fraudulent claims, thus optimizing the allocation of resources.

Aadhaar in Cash Withdrawals:

• Aadhaar plays a vital role in facilitating cash transfers. To utilize Aadhaar for MGNREGA payments, workers' Aadhaar numbers must be linked to their job cards and bank accounts. The Aadhaar-enabled Payment System (AePS) allows individuals to withdraw funds using biometric authentication.

Concerns with Aadhaar's Implementation:

Despite its widespread use, Aadhaar-based systems have encountered several challenges.

• Quantity Fraud: In the distribution of rations, the prevalent type of corruption is quantity fraud, where beneficiaries receive less than their entitled share. Aadhaar does not address this issue effectively.

• For example, several organizations and researchers 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.

• Authentication Failures: Many individuals in rural areas face authentication failures due to unreliable internet connections, fading fingerprints, or lack of phone connectivity for OTP verification. The extent of these failures remains undisclosed.

The data on the number of attempts to authenticate and the extent of authentication failures are not public. A report by the Comptroller and Auditor General of India (CAG) from 2022 states “UIDAI did not have a system to analyze the factors leading to authentication errors.”

• Authentication Errors: Discrepancies between job card information and UID data can lead to authentication errors, causing wage payment delays and complications.
• Misdirected Payments: Aadhaar payments can be misdirected when an individual's Aadhaar number gets linked to another person's bank account, making it challenging to detect and resolve such issues.

• For example, Aadhaar payments people got redirected to Airtel wallets causing much havoc. Misdirected payments through Aadhaar are difficult to detect and are nearly impossible to resolve

• Questionable Savings Claims: Claims of substantial savings through Aadhaar implementation in MGNREGA have been challenged by researchers, citing insufficient funds as the primary reason for wage payment delays. 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.

Security Concerns:

• The use of Aadhaar for banking transactions is fraught with security risks. Banking correspondents using the AePS operate without any accountability framework. Some of them ask individuals to biometrically authenticate multiple times. 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 programs without consent. The ₹10 crore scholarship scam in Jharkhand in 2020 exemplifies this.

Current Impasse:

• The government's push to mandate Aadhaar-based payments in MGNREGA has faced resistance due to issues like the deletion of active workers' job cards and dilutions of accountability. Critics express concerns about the government's intentions regarding linking voter IDs with Aadhaar.
• A recent paper by Chakradhar Buddha and Laavanya Tamang in the Economic & Political Weekly shows that the job cards of several active workers have been deleted on the grounds of being “ghosts.”

Steps to be taken:

• Invest in research and development to improve the reliability of biometric technologies, particularly in challenging environmental conditions like hot and humid climates. Continuously update and upgrade biometric hardware and software to reduce authentication errors and ensure accurate identification.
• The government must restrict mandatory Aadhaar to permissible purposes and must also provide viable alternatives when Aadhaar authentication fails.
• Benefits should not be withdrawn or suspended without prior notice. Concerned persons should be given an opportunity to respond or appeal.
• The UIDAI must ensure an easier enrolment, updation, and retrieval of lost card processes to all, for free, at the block level or below, in a well-supervised public facility.
• A comprehensive review of the Aadhaar Payment Bridge System and direct benefit transfer systems is essential.
• RBI and NPCI should monitor all types of payment problems and place detailed monthly reports in the public domain.
• The NPCI should ensure stronger safeguards against the vulnerabilities of AePS and better grievance redressal
• Informed consent norms should be reviewed.
• The Aadhaar Act could be amended to reinstate the dropped provision for independent oversight of the UIDAI by a high-powered “Identity Review Committee.”

Conclusion:

While Aadhaar has undoubtedly brought transparency and efficiency to welfare programs, it is crucial to address the challenges and concerns raised by its implementation. Balancing security, accessibility, and reliability is essential to ensure that Aadhaar continues to benefit those it was intended to serve. Addressing these concerns will help optimize the effectiveness of Aadhaar in government welfare schemes while safeguarding the rights and privacy of citizens.

Source- The Indian Express / The Hindu