Has India’s biometrics-based identity project Aadhaar already become essential for the implementation of social welfare schemes? The Modi government steadfastly suggests so, even though there is no evidence on the ground to prove this.

On October 15, when the Supreme Court was hearing a clutch of petitions challenging the validity of the project, the government defended Aadhaar vehemently. It pointed to the court that the Aadhaar card has become the most widely held identity document in India, with an enrolment of around 92 crore people. More importantly, it claimed that Aadhaar is used to provide wages to 1 crore workers under the national rural employment guarantee scheme and to reach 30 lakh pensioners.

Disrupting the unique identification system now by limiting it to voluntary use, the government claimed, will shut off social schemes to a large section of the population. It requested the court to instead permit it to make Aadhaar mandatory in around 80 social schemes.

Once the arguments were heard, the Supreme Court permitted the voluntary use of Aadhaar in four schemes: the National Rural Employment Guarantee Scheme, the Pradhan Mantri Jan Dhan Yojana and schemes related to pension and provident fund. The court reasoned that if the Aadhaar card could be voluntarily used to avail LPG subsidy and ration – permitted through a court order on August 11 – then why not other social schemes.

But how factual were the government’s arguments in court? Has Aadhaar already become an indispensible welfare delivery system? Official data shows it hasn’t really.

Even now, Direct Benefit Transfers – subsidies given directly to people through their bank accounts – is carried out through the National Electronic Funds Transfer, not through Aadhaar. Contrary to the government’s claim, therefore, restricting the project even at this stage would neither impact a large section of beneficiaries nor disrupt their payments.

Ways of welfare delivery

The government wants to use the Aadhaar project in social schemes in three ways.

1. Every time a person enrols for Aadhaar, their biometric and demographic information is recorded and checked against the Aadhaar and welfare databases to weed out duplication. Called “de-duplication”, the idea behind this process is to identify and remove fake entries in the rolls and those who have duplicate cards. However, the procedure has counterproductively struck off genuine beneficiaries from welfare schemes, simply because they either missed Aadhaar enrolment or were not interested in it.

2. The second planned use is the Aadhaar Payment Bridge System. Under this, a welfare beneficiary’s unique Aadhaar number is added to – or “seeded in” – the government database. Banks carry out the same procedure, linking the Aadhaar number to the bank account number of their account holders. Next, banks report this “seeding” to the Reserve Bank of India’s National Payments Corporation of India to add it to a “mapper”. Once these steps are over, the government can make a Direct Benefit Transfer – that is, transfer benefits such as wages and pensions directly into a beneficiary’s bank account – using the Aadhaar Payment Bridge System.

3. The third use is doorstep delivery, or the Aadhaar Enabled Payment System. The government is giving accredited agents, called banking correspondents, a hand-held micro-ATM to take banking services right to the doorsteps of beneficiaries. These agents authenticate beneficiaries’ biometric information against the Aadhaar database on the micro-ATM using real-time internet, allowing on-the-spot payments of wages and pensions. This idea too has run into many problems – including poor mobile and internet connectivity, slow bank technology upgradation, problems in hiring enough banking correspondents.

Limited in reach

The second use of the unique identification project, the Aadhaar Payment Bridge System, has its own set of problems – it is still at a nascent stage and the government has found it difficult to scale it up. Concerted enrolment drives since 2011 have helped government enrol crores of people in Aadhaar. But officials acknowledge that the number of welfare recipients for whom seeding has been completed and who hold Aadhaar-mapped accounts is too low for the government to shift to the Aadhaar Payment Bridge System.

Given the lack of legal framework for Aadhaar and the many Supreme Court orders specifying that it can’t be made mandatory for social schemes, the government could not seed beneficiaries’ welfare schemes data at the time of enrolment. Even after beneficiaries enrolled in Aadhaar, a senior government official explained, they had to be physically located a second time to collect their data for seeding. In most states, however, banks did not deploy staff to seed data at their end, or they didn’t forward mapping requests to the National Payments Corporation of India.

As a result, the government couldn’t push Direct Benefit Transfers through the Aadhaar Payment Bridge System. Instead, it is making these transfers through the National Electronic Funds Transfer, which does not use Aadhaar.

Data from the Ministry of Finance shows that in both MNREGA and National Social Assistance Programme on pensions for the poor, the government is transferring funds using Aadhaar only in minuscule cases. Most funds are being routed through National Electronic Funds Transfers.

Finance Ministry data also reveals that although 65.3% of MNREGA beneficiaries have an Aadhaar number, their details have been seeded in 16.3% cases only. As for pensions, while 55.1% beneficiaries have enrolled in Aadhaar, “seeding” has been done for 10.6% of them.

In March, for instance, 98.3% of MNREGA workers received wages through NEFT. Only 1.6% of wages were paid through the Aadhaar Payment Bridge System, and 0.1% through another system, called the Public Financial Management System, which again doesn’t require Aadhaar.

Direct Benefit Transfers (in crores).

For social pensions, the government directed 92.6% of Direct Benefits Transfers through NEFT in March and only 5.2% through the Aadhaar Payment Bridge System.

Direct Benefit Transfers through various modes (%).

“Direct Benefit Transfer does not need Aadhaar. They can proceed without Aadhaar,” said Reetika Khera, an economist at the Indian Institute of Technology-Delhi. “Most of the DBTs so far have been using the NEFT transfer route very successfully.” Khera adds that in the last few years, corruption has reduced significantly in public schemes such as the Public Distribution System and MNREGA through simpler technology such as SMS alerts and computerisation of records.

Senior officials acknowledge that the actual number of Aadhaar payments is very low and the number of Aadhaar-seeded accounts even lower. They say the government is trying to bring every worker with an Aadhaar number under the Aadhaar Payment Bridge System and, for this, it needs the court to include “voluntary use” of Aadhaar in a greater number of social schemes.

“The court order has laid the ground for continuing our immediate work in Aadhaar,” said a senior official in the Direct Benefit Transfer department, which was recently placed under the Cabinet Secretariat. “We will continue to push banks and different ministries and departments to achieve higher seeding in MNREGA, pensions, Jan Dhan. We have discussed a proposal to draft a law for a new legal and statutory framework for Aadhaar.”