Governance in India is defined by hasty and unplanned decision-making. Take Aadhaar for example.

So what if Aadhaar is yet to get the parliamentary approval? That did not stop the government from aligning various welfare schemes to it. So what if there was no central privacy law to oversee collection of citizen’s data under Aadhaar or its storage or to check its misuse by private authorities? That did not stop the government from making it mandatory for marriage registration or even availing benefits such as the scholarships and provident fund.

In fact, since UIDAI is not empowered to mandate a citizen to give her biometrics, the scheme has been voluntary in nature right from the beginning, but surreptitiously it is being made mandatory – since the citizen will have to quote the UID number to avail a host of benefits.

Now the supreme court has ended that ambiguity. It has ruled that it is voluntary, and various welfare benefits must be given to the intended beneficiaries even if they don’t have Aadhaar number. Acting on a PIL, justices B S Chauhan and S A Bode on September 23 said that writ petitions on Aadhaar should be presented to a constitutional bench and till then no citizen should be denied any services on the basis of not having an Aadhaar card. Effectively, Aadhaar is not mandatory and government services should be aligned and designed accordingly.

The ruling is crucial for the direct benefit transfer (DBT) programme of the UPA government: the Congress has been banking on DBT to win the 2014 elections, and finance minister P Chidambaram has called it the game-changer, but its future is uncertain if Aadhaar, the very foundation of DBT, is not mandatory.

Aadhaar enrolment and its seeding with bank accounts lie at the core of DBT. Without Aadhaar, the scheme faces two roadblocks: how to identify the beneficiary and how to pay subsidy to her.

A P Singh, deputy director general, UIDAI, said that the SC judgment was not surprising as Aadhaar was never mandatory, and the criteria for 'exception management' were always present for identification of beneficiaries. “More than half of the people, who have received the subsidy amount form the government, did not have Aadhaar. Hence, Aadhaar has not been mandatory for DBT since the beginning,” he said.

Singh is right, only Rs 64 crore of the total Rs 234 crore disbursed under DBT so far has been routed through the Aadhaar payment bridge. Only 10 percent of the beneficiaries in 121 districts have their Aadhaar numbers linked with their bank accounts so far. However, this is not by design but due to the slow progress of Aadhaar enrolment in various districts.

“There are many ways of transferring the subsidy amount in the bank account of a beneficiary. However, it is difficult to ensure that the money is going into the right account,” said Singh.

The issue of identification of the right beneficiary, however, seems to have been played up by the government. According to a report by the National Institute of Public Finance and Policy (NIPFP), the ghost beneficiaries amount to, on an average, 10 to 12 percent of the total of beneficiaries. Reetika Khera, fellow at the Institute of Economic Growth, argues in an article editorial in the Economic and Political Weekly (EPW), that the numbers are lower in reality. According to Khera, the number of ghost beneficiaries in many schemes such as MNREGS, PDS and pensions hardly come to an average of five to seven percent and it would have been easier and more economical to remove them using local technologies rather than venturing into Aadhaar.

Recently, DBT was expanded to cover 289 districts or nearly half the country where Aadhaar enrolment was going on in full force. Though most government officials refuse to comment on the apex court ruling, they will have to figure out the way forward quickly. As Delhi revenue secretary Dharam Pal said, “We had linked a number of schemes to Aadhaar and the decision is indeed a setback.” 

UPDATE: According to a report in The Hindu, the government is likely to approach Supreme Court regarding the above ruling on Aadhaar. Union Minister for Petroleum, M Veerappa Moily said that roll-out of the Direct Benefit Transfer for LPG will continue as planned with Aadhaar being mandatory for the process. The National Identification Bill, 2010 would be presented in the Parliament in the forthcoming winter session to provide statutory status to unique identification authority of India (UIDAI).