Rs 50k crore a year: reason Modi backed Aadhaar

The decision to continue with the Aadhaar scheme shows how Narendra Modi intends to run his government: pragmatism, instead of ideology


Pratap Vikram Singh | July 26, 2014

Ashish Asthana
Ashish Asthana

July 5 was the day of reckoning for the unique identification authority of India (UIDAI). Its director-general and mission director Vijay Madan was to make a presentation before Narendra Modi, as part of the ongoing series of briefings all departments and secretaries were making before the new prime minister. If Madan and his team were a little nervous, that would have been understandable.

The BJP, now the ruling party, has been highly critical of the ambitious though controversial project – the biggest of its kind in the world by far – to collect biometrics of all residents of India and grant them a unique ID number. Modi himself had raised questions about it (even though Gujarat under his leadership had been doing well in implementing and making best use of Aadhaar). Addressing an election rally in Bangalore on April 8, Modi told the gathering: “I asked several questions on the Aadhaar project. I asked them (the UPA government) questions relating to illegal migrants and national security. They did not have any answer.” He chose to make this point in Bangalore, because it was from this city that the face of Aadhaar, Nandan Nilekani, was contesting elections on a Congress ticket, after quitting the UIDAI that he had helped set up.

Ahead of the crucial July 5 meet, media reports were not predicting a bright future for the project, and were quoting sources who believed Aadhaar would be merged with the national population register (NPR, a home ministry initiative to provide ID cards to all citizens), doing away with a functional overlap that has been one of the many controversies dragging the UID.

But Madan and his team were in for a surprise. As the meeting got under way, Modi lost no time in coming straight to business. When the UID team spoke of the potential savings from plugging subsidy leakages, Modi asked them to give a precise estimate.

The defining idea of Aadhaar is that subsidies and welfare funds – in the form of cheaper ration and cooking gas, pensions and scholarships and so on – often go in the pockets of people for whom they were not intended. Such ‘ghost’ beneficiaries can be weeded out of the official lists or databases if every genuine beneficiary’s identity was well established, which was what Aadhaar does by collecting everybody’s fingerprints and eye scans.

Before Madan could reply to Modi’s query, a prime minister’s office (PMO) official informed him that making all subsidy or welfare related payments only through the fail-proof Aadhaar mode can save “up to '50,000 crore a year”, says a senior official who is in the know. '50,000 crore would come to a good 9.4 percent of India’s fiscal deficit (currently estimated at '5,31,177 crore). Given the fact that the humongous and ever widening fiscal deficit, an indicator of the government’s spending beyond its means, is Modi’s topmost challenge and the first hurdle to his promised “Achchhe Din”, he did not have to think twice before giving his vote of confidence to the project.

Soon, the word was out that the Modi government was once again proving media pundits wrong and pumping in '2,000 crore for Aadhaar for the remaining part of the current fiscal (a development first reported on the Governance Now website ahead of the meet).

The funding was formalised in the union budget presented a week later. The budget document notes, “A sum of '2,039.64 crore has been provided for 2014-15 to execute the task of implementing unique identification as entrusted to Unique Identification Authority of India (UIDAI).”

The amount will be used to create infrastructure to enrol 30 crore people. The authority has so far enrolled 70 crore people, and issued the 12-digit unique IDs to 65 crore of them. Thus, the UIDAI targets to achieve the 1 billion mark by the end of the fiscal – a worldwide milestone.

Not only that, once Modi decided to take up this ambitious project under his wings, he also decided to push for the long-pending bill to give the legal backing to the UIDAI.

At the end of the meeting, which was also attended by cabinet ministers Arun Jaitley and Rajnath Singh and minister of state for planning Rao Inderjit Singh, it was clear that the ambitious project of the UPA will not only survive but could also flourish in a way that it could not under the previous leadership.

Relieved UIDAI officials later said they had been not much worried as only a foolhardy government could ignore the Aadhaar benefits and jettison '4,000 crore that has already gone into it.

Nilekani too would have reacted the same way. Earlier this year, the then UIDAI chairman had termed as baseless the apprehensions about the future of Aadhaar in case BJP came to power. “In Gujarat we haven’t faced any objection from the government to the enrolment drive. It is being implemented without any hassle in the state,” Nilekani had told Governance Now in an informal interaction.
The decision, taken without any fanfare, also shows how Modi intends to run the government: pragmatism instead of ideology, continuity instead of ruptures. It also shows Modi is not averse to welfare-centric programmes that defined the government led by Sonia Gandhi’s Congress. He does not see welfare and growth as mutually exclusive but more as complementary to each other.

Subsidy Sudoku
Fine-tuning the subsidies, directing them only to those in the need, is the raison d’etre of Aadhaar. Take the case of the subsidy for LPG, or cooking gas. There are 14 crore LPG consumers and the government spends roughly '40,000 crore in subsidy annually to make the cylinder affordable enough. Though meant for domestic users, a large number of cylinders used to be diverted to commercial users, thus increasing the subsidy burden. Since January 1 last year, the government has been trying to curtail the misuse through the much-hyped direct benefit transfer (DBT) – though the efforts leave much to be desired. No wonder it turned out to be, for the Congress, a game changer that wasn’t.

Aadhaar: the story so far

  • A unique identification scheme was first discussed in 2006; later the department of IT gave administrative approval for the scheme ‘Unique ID for BPL Families’
  • UIDAI was set up in 2009 under the planning commission through an executive order
  • Nandan Nilekani left Infosys in 2009 to join UIDAI as its chairman following request from PM Manmohan Singh
  • The bill to grant UIDAI statutory status tabled in 2010; sent to the standing committee on finance which severely criticised the concept, stating that it  doesn’t have a clear purpose
  • First Aadhaar number issued to Ranjana of Tembhli village in Nandurbar district of Maharashtra on September 29, 2010
  • Government gives enrollment target of 60 crore by end of 2014; UIDAI completes task seven months in advance
  • Direct benefit transfer (DBT) launched in 20 districts on January 1, 2013, DBT-L (for cooking gas) launched in June 2013
  • In January 2014, Aadhaar delinked from disbursal of LPG subsidy
  • Nilekani resigns in March to contest Lok Sabha elections
  • PM Modi gives his nod, '2039 crore allocated for the rest of fiscal

If LPG cylinders are distributed only on the basis of unique ID of the beneficiary, it would result in 10-12 percent savings for the exchequer, that is, about '4,000 crore a year. That was the estimate S Sundareshan, mission director, DBT, mentioned in a press conference October last year. When the component of DBT dealing with LPG (called DBT-L) was expanded from 100 districts to 281 districts in January-February, petroleum ministry officials estimated that the savings could be '12,000 crore.

“Even after taking all costs into account and making modest assumptions of leakages of about 7-12 percent of the value of transfer subsidy, we find that Aadhaar project would yield an internal rate of return in real terms of 52.85 percent to the government,” noted the national institute of public finance and policy (NIPFP) in a cost-benefit analysis study of the project in 2012. “We find that substantial benefits would accrue to the government by integrating Aadhaar with schemes such as PDS, MNREGS, fertiliser and LPG subsidies, as well as housing, education and health programmes,” said the NIPFP study.

Citizens or residents?
One of the many controversies associated with Aadhaar is that the UID is being issued to the “normal residents” of the country, and not the citizens – even if the identity card gives the impression of citizenship. This subtle distinction becomes crucial in case of illegal migrants – the bone of contention between home ministry and UIDAI even in the UPA times, not to mention the BJP’s opposition to it.

When contacted, UIDAI deputy director general AP Singh reiterated the position the organisation took in a case before the supreme court and said, “The UIDAI, as a matter of policy, is not issuing Aadhaar to illegal immigrants. Not even a single case of illegal immigrants getting Aadhaar has been brought to our notice so far.” In fact, the UIDAI sees merit in capturing biometric data of illegal immigrants. “It will make tracking (illegal migrants) easy. If a court approves and the home ministry gives the authority a negative list, a system can be put in place wherein if an immigrant tries to authenticate itself at any terminal an automatic alert can be sent to security agencies,” Singh said.

Meanwhile, the home ministry has also reviewed the NPR, the initiative started in 2007 to create a national register of Indian citizens and giving a citizen ID card only to the genuine Indian citizens. During the budget session, home minister Rajnath Singh told the Lok Sabha that the registrar general of India (RGI) and UIDAI will together ascertain the total population and the number of India citizens among them through “mutual coordination”. “Who is an infiltrator and who is not an Indian identify them we are devising a foolproof way. Concerned over this, the PM had called a meeting in which officials preparing the NPR and UIDAI were called,” he said. “Whoever is an Indian citizen, we will issue them a national identity card,” he added.

The contours of this “mutual coordination” are yet to be defined.The national register of Indian citizens (NRIC) will be created by verifying the citizenship status of every resident. The home ministry is in the process of finalising a concrete plan for undertaking the mammoth exercise. Under the new strategy the ministry is expected to expand the parameters to be used to establish citizenship, according to media reports.

Legal backing
The UIDAI, as of now, lacks statutory backing. It was set up in 2009 under the planning commission, through an executive order. A bill to make it a statutory body was introduced in 2010, but the parliamentary standing committee on finance, headed by former finance minister Yashwant Sinha of BJP, severely criticised the concept. The Manmohan Singh cabinet revised and approved a new version in October 2013. Here is the irony: the government that conceived it, called it a game-changer and banked on it to win the third term had no guts to back it up. The revised bill could not be introduced after the election season began late last year.

Modi has not only given Aadhaar a reprieve, he is bringing in the long-pending bill too. AP Singh said that the preamble of the revised version explicitly states that Aadhaar will be used for service delivery – a fact not mentioned in the initial version of the bill. The rest of the bill has not been changed much. In fact, the standing committee had not objected to any specific provision of the bill either. Its observations were generic in nature, Singh said.  
The authority is currently reviewing the bill before sending it to the law ministry and the cabinet secretariat for vetting. It will then go for inter-ministerial consultations. The reworked bill, after incorporating feedback from other ministries, will be sent to the cabinet for final approval. The law ministry will do the final vetting before introducing it in parliament.

Modi’s backing, meanwhile, does not necessarily mean some of the questions over Aadhaar his own party had raised need not be answered. Indeed, there are several problem areas, several wrinkles that need to  be ironed out (see box). The bottom-line, though, is clear: Aadhaar has got a solid foundation.



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