The Aadhaar verdict: everybody lost

The recent Supreme Court judgment on Aadhaar has left confusion and dissatisfaction among various stakeholders. While the court upheld the identity scheme, it restricted its scope, leading to uncertainty over the role of the private sector in Aadhaar’s infrastructure. The judgment’s implications on government services and subsidies, many of which rely on private sector authentication, remain unclear, raising concerns about potential negative impacts on pensioners, migrant workers, and microfinance beneficiaries.

This article was first published in The Mint. You can read the original at this link.

By noon last Wednesday, it seemed as if everybody had lost. The petitioners, journalists and civil society activists, who believed that Aadhaar was a thinly veiled surveillance machine that needed to be shut down, had lost. Not only was Aadhaar upheld, the majority brusquely set aside their claims of surveillance and exclusion, declaring that the suffering of 0.23% could not deny the remaining 99.7%, their benefits.

The government had been hoping for a ringing endorsement of the identity scheme that had become the central nervous system of its system of digital governance. But it had to come to terms with an Aadhaar whose basic construct had been upheld, but whose wings had been so cruelly clipped that it was reduced to an unrecognizable shadow of what it was and might have been.

Even the Supreme Court, the venerable institution that over the last few months had covered itself with glory and become a beacon of hope in an increasingly Kafkaesque world, lost some of its lustre. Its judgment in the Aadhaar case was fractured and inconsistent, the rift between the majority and minority judgments so stark that one commentator wondered whether the judges had been sitting in the same room and listening to the same facts.

But, it is those outside Courtroom 1—the billion spectators who watched from the sidelines as this titanic battle played out—who seemed to have lost the most. This was a judgment that offered no clarity or finality, its lofty pronouncements seemingly disconnected from reality, without thought to the implications or social costs of implementation.

And at the heart of this all was the confusion over the continuing role of the private sector. The Supreme Court had held that allowing the private sector to access biometric and demographic information was tantamount to enabling their commercial exploitation of this information. So, the court ruled, that portion of Section 57 that enables bodies corporate and individuals to seek authentication, was unconstitutional. There is considerable confusion as to what this statement really means. Does it imply that no private entities whatsoever can use the authentication infrastructure? If so, how does that interpretation square with the rest of the judgment that unequivocally upholds the use of Aadhaar for the purposes of dispensing subsidies and other government benefits?

Migrant workers use the Aadhaar enabled payment system to send money home-

As a matter of fact, much of Aadhaar’s infrastructure has been built using the public private participation (PPP) model. Many of the government services whose continued use has been upheld by the Supreme Court, function on top of an authentication framework operated by the private sector. It could not have been the Supreme Court’s intention to, on the one hand uphold these schemes while at the same time striking down their means of operation.

Take, for instance Jeevan Praman, a scheme that has, since 2014, been used by over 15 million pensioners to collect their pensions. By leveraging Aadhaar authentication, retirees collect their pension from the nearest kirana store instead of having to physically present themselves before a disbursing officer. If private entities can no longer use the authentication system, the aged will have to once again make an arduous trek to collect their due.

Migrant workers use the Aadhaar-enabled payment system to send money home. It is estimated that over 125 million people use the system to conduct over 150 million transactions every month. The entire system is operated by business correspondents (often private entities) who use Aadhaar authentication to verify people making as well as receiving payment. If this infrastructure is shut down, the poorest sections of society will once again be at the mercy of hawala operators to transfer their earnings home.

Microfinance and flow-based lending companies use Aadhaar enabled e-KYC (know your customer) to drastically reduce the cost of loans — from  ₹ 1,500 down to as low as  ₹ 20 in some cases. Thanks to this, it has become possible to provide loans of a much smaller ticket size to people who were otherwise ineligible to avail them. If the Aadhaar authentication infrastructure can no longer be used to process these loans, those sections of the economy who need it the most, will once again find themselves excluded from the financial system.

The same is true for almost all the government subsidies and benefits that the Supreme Court has recognised are the legitimate purposes of the Aadhaar scheme. Since these benefits are disbursed to their intended recipients using PPP frameworks, if the private sector is completely prohibited from accessing this infrastructure, the various schemes that the Supreme Court itself has upheld as legitimate use of Aadhaar, will be forced to shut down.

This cannot have been the outcome that the Supreme Court intended. The Court’s stated objective was to prevent commercial exploitation of the biometric and demographic information of Aadhaar number holders by private entities. It could not have intended for this to come in the way of the use of Aadhaar for the very purposes that the Court has approved—providing benefits to poorer sections of the society. It should be possible to use the Aadhaar infrastructure, under its current PPP model, to provide these benefits that the judgment has endorsed, so long as commercial exploitation by the private sector can be curtailed. It will now be up to the government to figure out how to achieve this.