Aadhaar verdict – SC strikes the right balance between delivery of benefits and privacy

• by Mitul Thapliyal
• Sep 30, 2018
• 4 min

The blog highlights the Indian Supreme Court’s latest Aadhaar verdict which strikes the right balance between delivery of benefits and privacy

The long debate on the constitutionality and purpose of Aadhaar may not end with the judgement of the Supreme Court but it will certainly become more specific and narrower. In a landmark judgment, the five-judge Supreme Court bench opined with a 4:1 majority that Aadhaar is legitimate and proportional. The judges observed that although Aadhaarinfringes on the right to privacy slightly, the benefits it provides to the marginalised sections of society serves a much larger purpose. It provides rightful benefits and dignity to the marginalised that outweighs the perceived harm.

In the judgement, the judges struck down section 57 of the Aadhaar Act that deals with sharing of data with corporate bodies. It is not yet clear whether corporates are barred completely from using Aadhaar infrastructure or if they can use it as one of the options to provide services to customers but cannot mandate it. From the verdict, it is yet unclear if it is left to people to choose if they wish to share the data (or not) or if it is a blanket ban. For instance, if someone wants a mobile connection to be activated instantly, then it is still unclear if that person can use Aadhaar-based e-KYC instead of waiting for 3-4 days for paper-based KYC. This conundrum would be the same for bank account opening.

Repealing section 57 may have a huge impact on Aadhaar-enabled services, especially on e-KYC, and Aadhaar-enabled Payment System (AePS). Over the past few years, AePS has become the default method for people to withdraw money from local banking business correspondents, especially in rural India. Using biometrics to conduct a financial transaction, which in most cases is limited mainly to withdrawals and deposits, had removed several barriers. These include the need to remember the PIN for debit card and fill withdrawal or deposit slips, which become particularly difficult for illiterate and innumerate people in rural areas.

The process of using AePS is intuitive and simple for people, as they do not have to learn anything new. The only change is that they have to apply their thumb on the biometrics reader instead of on a piece of paper. This is in contrast to a debit card or other modes, which call for considerable efforts to educate users. And even then, they may need assistance to either fill up a form or enter the PIN correctly. This makes these users susceptible to fraud.

Since the government transfers most benefits, such as pensions, scholarships, and others electronically, people only need to access their bank account to withdraw this money. If AePS is scrapped, people may have to go through the ordeal of traditional technologies, such as debit cards or go back to filling and signing or putting their thumb impressions on papers!

The Supreme Court has allowed the government to continue using Aadhaar to deliver benefits and services where money is drawn from consolidated funds of India. This is a welcome move. The Direct Benefit Transfer (DBT) programme primarily relies on Aadhaar to uniquely identify and target beneficiaries. This led to reducing leakages by removing duplicate and “ghost” beneficiaries. Current government estimates point to savings under DBT to be around INR 90,000 crore. Aadhaar authentication for lifting ration through the Public Distribution System (PDS) ensures that identity fraud is reduced and denial of the ration is also controlled.

Our studies show that beneficiaries are aware that transactions now leave digital trails and the Fair Price Shop (FPS) owner can be challenged in case of identity fraud or denial. This is also altering the social fabric of rural India, where FPS owners had absolute authority on providing or denying ration to people. Our studies show that now these cases have reduced.

However, issues related to technology still exist. These include non-functioning biometrics, issues with connectivity, among others, which have led to a denial of benefits in a few cases and led to more severe implications for some. The Supreme Court clarified that the government should create alternate mechanisms for people who cannot authenticate using biometrics. A few states already use alternate methods of authentication for the population that cannot perform biometric authentication.

For instance, the Jharkhand government introduced the concept of Apwaad Pustika (exception book) to provide ration to people who cannot authenticate using Aadhaar. Similarly, Andhra Pradesh made multiple provisions to handle exceptions in case of biometric failures, such as One Time Password (OTP) and making a list of such people and granting them exception, etc. However, the efficacy of such mechanisms has come under question and needs scrutiny. The central and state governments must take note of the Supreme Court judgement and review processes and systems thoroughly to handle exceptions so that no one is denied benefits.

The Supreme Court has also clarified that banks, educational institutes, or other corporates cannot force people to provide their Aadhaar number. Even the government can seek Aadhaar only from people who want to draw benefits from the consolidated funds of India. PAN is the only exception where such linking has been made mandatory. Limiting purpose and period of storing metadata is another landmark step. This allays some fears of people around breach of privacy. However, the debate would continue and the government will have to come up with rules or legislative changes to comply with the verdict. We expect more details to emerge as the detailed copy of the judgement is read and analysed.