Report of the Parliament's Standing Committee on Finance

In December 2011, Parliament's Standing Committee on Finance headed by Sri. Yaswanth Sinha while considering the National Identification Authority of India Bill 2010(that was to give legal backing for the whole exercise), termed the project as direction less and conceptualised with no clarity of purpose.
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The committee

also expressed its reservations on the technology used for the project calling it "untested, unproven, unreliable and unsafe".
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According to the standing committee report the scheme is riddled with serious lacunae and concernes. The UID scheme has been conceptualized with no clarity of purpose and leaving many things to be sorted out during the course of its implementation; and is being implemented in a directionless way with a lot of confusion. The report continues The scheme which was initially meant for BPL families has been extended for all residents in India and to certain other persons. The Empowered Group of Ministers (EGoM), constituted for the purpose of collating the two schemes namely, the UID and National Population Register(NPR), and to look into the methodology and specifying target for effective completion of the UID scheme, failed to take concrete decision on important issues More importantly the committee has observed that the UID scheme lacks clarity on even the basic purpose of issuing aadhaar number. [edit]Financial

Exclusion

Observation 3(f) of the standing committee reads: The full or near full coverage of marginalized sections for issuing aadhaar numbers could not be achieved mainly owing to two reasons viz. (i) the UIDAI doesnt have the statistical data relating to them; and (ii) estimated failure of biometrics is expected to be as high as 15% due to a large chunk of population being dependent on manual labour. Even the Ministry of Planning in their written reply to the standing committee stated that failure to enroll is a reality. The introducer system wont be of much use. How many introducers or GOs would be there to introduce millions of slum dwellers, tribal population, or in rural India where they hardly have electricity or internet connectivity? (friendly government school teachers who rang your door bell a year ago may perhaps know some of them) If they can find some introducers, why cant some anti-social elements too can find out some others? The result would be disastrous for our national security for innumerable foreign national (including terrorists) would be enrolled in Aadhaar database with local addresses. Chances are that many more people in rural India where there is no electricity and internet connectivity will be excluded from social welfare schemes even if they acquire aadhaar number. The committee in observation 3(d) notes: Continuance of various existing forms of identity and the requirement of furnishing other documents for proof of address, even after issue of aadhaar number, would render the claim made by the Ministry that aadhaar number is to be used as a general proof of identity and proof of address meaningless. UIDAI clearly says that UID is no substitutes for existing Ids and The Working Paper of the UIDAI which starts with a claim that UID will help the poor access various services ends with a caveat: UID will only guarantee identity, not rights, benefits and entitlements [edit]Dependency
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on Private Players

The National Informatics Centre (NIC) have pointed out that the issues relating to privacy and security of UID data could be better handled by storing in a Government data centre; . Even then the UID project is dependent on private players. The committee further notes: 9. The Committee are afraid that the scheme may end up being dependent on private agencies, despite contractual agreement made by the UIDAI with several private vendors. As a result, the beneficiaries may be forced to pay over and above the charges to be prescribed by the UIDAI for availing of benefits and services, which are now available free of cost . UIADAI has entered into contracts with several government and non-government agencies for enrollment and data collection. The private companies include foreign companies like L1 Identity solutions and Accenture that have even ex-CIA officials on board and as staff. [edit]National

Security

The committee has expressed concern over the implications of the Project Aadhaar on national security. The committee is The Committee are unable to understand the rationale of expanding the scheme to persons who are not citizens, as this entails numerous benefits proposed by the Government This will, they apprehend, make even illegal immigrants entitled for an aadhaar number. The committee especially is concerned about the efficacy of introducer system on national security. As opined by many the introducer system could result in many anti-national and anti-social elements acquiring aadhaar numbers on false addresses. [edit]Relationship

with National Population Registry

UIDAI is using data collected by the Census authorities to prepare the National Population Register(NPR) for creating the UIDs. The NPR is not an exclusive database of Indian Citizens. It contains data on all residents of the country including foreigners. Therefore, issuing UIDs based on the data in the NPR would help illegal migrants get these IDs and would allow them access the government services and programs. Nationality of the individual is one of the variables being recorded during the enumeration of NPR. But the instruction to the Census personnel says:"Nationality of each person has to be asked from the respondent and recorded as declared by him". The officials have been asked to advise people to give correct nationality and that he/she can be penalized for giving false information. Such advise may not work with illegal migrants. The responsibility of proving the identity still lies on the shoulders of residents and not on UIDAI. [edit]Potential
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privacy and civil liberty issues

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Some activists have expressed concerns violations,

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that Aadhaar has potentials for civil liberty and privacy

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especially when registrars include non-government agencies.

Many eminent personalities,

including former Supreme Court Justice. V R Krishna Iyer, Historian Romila Thaper, Independent Law Researcher Dr. Usha Ramanathan, Magsaysay Award winner Aruna Roy, and Booker prize winner Arundhathi Roy have questioned the legal validity of the whole exercise. The standing committee on finance observes that: The clearance of the Ministry of Law & Justice for issuing aadhaar numbers, pending passing the Bill by Parliament, on the ground that powers of the Executive are co-extensive with the legislative power of the Government and that the Government is not debarred from exercising its Executive power in the areas which are not regulated by the legislation does not satisfy the Committee. The Committee are constrained to point out that in the instant case, since the law making is underway with the bill being pending, any executive action is as

unethical and violative of Parliaments prerogatives. The committee also observed that a National Data Protection Law is a pre-requisite for any law that deals with large scale collection of information from individuals and its linkages across separate databases. Itwould be difficult to deal with the issues like access and misuse of personal information, surveillance, profiling, linking and matching of data bases and securing confidentiality of information etc. The UIDAIs claim that it has incorporated data protection principles within its policy and implementation framework does not satisfy the committee. In another observation that could raise many questions on the legalities of collections of biometrics even for NPR, the committee notes that The collection of biometric information and its linkage with personal information of individuals without amendment to the Citizenship Act, 1955 as well as the Citizenship (Registration of Citizens and Issue of National Identity Cards) Rules, 2003, appears to be beyond the scope of subordinate legislation, which needs to be examined in detail by Parliament.
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The committee deliberated at length on the civil liberty perspective of the project and considered opinions from eminent personalities in the field of law and civil rights. And speaking on the possibilities of data misuse, it notes that The Committee are at a loss to understand as to how the UIDAI, without statutory power, could address key issues concerning their basic functioning and initiate proceedings against the defaulters and penalize them. The committee also notes that the scheme leads to ID fraud as prevalent in some countries. [edit]Cabinet
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and Parliamentary approval

The former chief minister of Kerala, V. S. Achuthanandan claimed in July 2011 that the program was being launched without "proper debate" in parliament.
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Other activists have expressed similar concerns.

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In a letter

to the Prime Minister in November 2011, home minister P. Chidambaram has also expressed discomfort about the fact that the project has no cabinet clearance, and hence, may be questioned at a later date.
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On 17 December 2011 parliamentary standing committee on finance chaired by Yashwant Sinha the Committee categorically convey their unacceptability of the National Identification Authority of India Bill, 2010The Committee would, thus, urge the Government to reconsider and review the UID scheme. This was the conclusion of Parliament's Standing Committee on Finance (SCoF), which examined the Bill to convert the Unique Identification Authority of India (UIDAI) into a statutory authority. With this categorical rebuff, the SCoF dealt a body blow to the Aadhaar project, which is being implemented from September 2010 without Parliament's approval.
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Cost of the UID Project

One of the arguments often made against UID is the enormous cost of the project. Given technology risks and limited benefits, the argument goes, such a project is not justified for a poor country, where 70 per cent of the population has no toilets. Ever since the project started in 2009, critics have been claiming that it would cost well over Rs 1.5 lakh crores -- a number repeated so often by the media that it has become an article of faith among civil society circles. Even a Standing Committee of the Parliament gave credence to that number in its recent report on the proposed UID law. What was the basis of that estimate and how does it compare to the UIDAIs actual cost experience to date? We decided to do a bit of our own research to find the source. And guess what? It was a tad easier than finding the source of The Nile, eat your heart out Stanley!
The number was first reported by the Economic Times in Jun 2009, which did not cite any source. The first major reference, however, came from Prof. R. Ramakumar of the Tata Institute of Social Sciences:

"...the costs involved in such a project are always enormous and have to be weighed against the limited benefits that are likely to follow. In India, the cost estimated by the government itself is a whopping Rs.1.5 lakh crore....The critique of the LSE group on the costing exercise of the U.K. government is a good case study of why the costs of such schemes are typically underestimated."('High-cost, High-risk', Frontline, Aug 1-14, 2009)
Ramakumar too did not cite the source for his whopping cost estimate; but when a few weeks later Karan Thapar of Devils Advocate confronted Nandan Nilekani on the Frontline article, his response was very clear: I don't agree with that estimate. I don't know what the exact figure is but it is much less than that by a factor of 10. That response, however, did not stop Praful Bidwai, a well-known anti-Nuclear activist, who came up with an even higher estimate months later, extrapolating from a UK cost estimate: "The LSE study estimated that the cost in Britain would be 10-20 billion. The proportionate cost in India would exceed Rs.2 lakh crore, enormous for a poor country...." ('Questionable Link', Frontline, Jun 05-18, 2010) Several noted civil society activists have since faithfully followed the lead of Ramakumar and Bidwai to support their case against UID stance, never mind that their cost estimates bear no resemblance to reality, as we shall see below.

We decided to subject those cost estimates to a reality check, by examining the UIDAIs actual cost experience to date, its recent budget approvals, and a bit of projection into the future. And here is what we have concluded with a fair degree of confidence: The total cost of the UID project will be about Rs 18,000 crores, nearly 1/10 of Ramakumar and Bidwais estimates.
Here is how we arrived at those numbers: 1. We started with the UIDAIs to date cumulative expenses towards operations, capital, and enrollment costs paid to Registrars, thru November 2011: Rs 673 crores (including Rs 333 crores paid to Registrars)a

2. Added reasonable projections of expenses from December 2011 through March 2012: Rs 887 crores (including Rs 667 crores paid to Registrars)b 3. Added the additional budget approval for infrastructure and maintenance costs, including a Managed Service Provider, up to 2017-19: Rs 8,815 croresc 4. Added the additional cost of enrolling all 1.2 billion people: Rs 8,000 croresd Notes: a) From the UIDAI website b) Operations and capital expenses projected using current run rates; enrollment assistance to Registrars is for 20 crore enrolments at Rs 50/person c) Per the UIDAI budget approved by the finance ministry d) Assumes Rs. 50 as assistance to Registrar and Rs 30 for letter, postage and other enrollment related expenses. NPRs estimate is reportedly smaller.

Given that we have used actual cost experience to date and approved and proposed budget figures, we have a high degree of confidence in our estimate, and there is no need any more to draw questionable conclusions from other country experiences. So we are glad to note that the media too has been climbing down from the earlier speculative numbers. Even Ramakumar now seems to have lowered his estimate a bit: over Rs 50,000 crores, he says in a December 2011 Frontline article. So much for his earlier argument that even the Rs 1.5 lakh crores number may be understated!
It may be instructive to look at the cost of UID from another perspective: The costs and wastages associated with our welfare schemes: For example, the landmark MGNREGS program, which has been hailed as the worlds largest and most innovative pro-poor program, started out in 2006-7 with an expense of Rs 8,823 crores. It had since grown exponentially to about Rs 40,000 crores in 2010-11 (about 8.1% of plan budget). Two things have dominated the debate on MGNREGS budgets over the years: 1. There have been frequent reports from both the government and watchdog NGOs of massive diversion of funds, reported at various times as between 15-40% of the allocations to a state, and 2. In an interesting role reversal, civil society architects of the program have tended to downplay the leakage numbers, especially the contribution of identity fraud and fake muster roles in fund diversions.

Conclusion/Evaluation/Critical Perspective :
Leaving politics aside, there is no question in our minds that even if a portion of the estimated fund leakages from MGNREGS can be stemmed through effective usage of Aadhaar in bank transfers and muster roll verification, it alone could conservatively save Rs 2,000 crores per year (5% of the cost). If we make similar assumptions on food subsidies (annual budget Rs 60,573 crores) and petroleum subsidies (annual budget Rs 23,640 crores), potential savings from just these three programs will be conservatively in the order of Rs 6,000 crores a year (which does not even consider potential savings in state subsidies). We honestly think that Aadhaar will be a powerful technological tool to improve the management of our welfare schemes. And we are glad to see that the Rural Development Ministry and the banking sector are championing one of the more interesting pilots in Jharkhand: Linking MGNREGS to Aadhaar. The alternative scenario of No-UID, which the opponents are advocating, could lead to every state and every large program reinventing biometric cards, whose cumulative costs (if not their efficacy) could eventually add up to many times more than the budget for UID. Perhaps for the first time in Indias history, we have a national project that is being executed by a highly committed professional team, comprising people from the government and the private sector. Despite many detractors, the project has met all of its goals thus far, unlike most

government projects, and is ahead of schedule and under budget. It holds great potential to improve the delivery of services and to reduce the bureaucratic hoops that people have to go through every day due to a lack of a national identity system. And it can be a major weapon in the arsenal to fight corruption at all levels. Let us not lend credence to highly inflated cost figures and understated benefits meant to discredit the project before it has had a chance to demonstrate its immense promise.

Note: Since we prepared this cost analysis, UIDAI has announced an estimate of Rs 18,000 crores for the entire country (reported on 20 Jan 2012 by Hindustan Times)