Two of the major issues concerning Aadhaar revolve around the benefits of having an identity and the risks of losing privacy. This is the first part of a two-part series
As the implementation of Aadhaar, formally known as UID, gathers steam with the project entering the prototype implementation stage, we have started hearing dissenting voices questioning the need for such an intrusive ID, incurring a lot of public money. Questions are also being asked about the constitutionality of such an exercise. While it is easy to dismiss such objections as being alarmist, it is important to go into some of the issues being raised by the critics, especially in the context of the exaggerated claims of the proponents of Aadhaar.
The ideas around Aadhaar being not new, it is pertinent to review the status of similar schemes in other countries. In the USA, the Social Security Number, initially conceived as a number to track individuals in social security programs, has been in use for more than 50 years. A recent proposal by some US senators to introduce biometric Social Security cards has run into stiff opposition by privacy advocates and civil-society groups. The
In India, there have been various attempts for the creation of a national ID for a decade or more. However, the issue gathered momentum with the reinvention of the same in the form of UID, which has recently been rechristened as Aadhaar.
Aadhaar came into public consciousness after the UIDAI was established and the head of a corporate firm roped in as the chairman of the project. Thereafter, there were a series of seminars, analogous to marketing campaigns, advocating the positive benefits of Aadhaar. Some of the champions of UID, being influenced by notions in the IT world, looked at Aadhaar as a panacea for all ills surrounding public service delivery. The chairperson of UIDAI is reported to have even gone to the extent of saying that“The slogan of bijli, sadak, pani” is passé; 'virtual things' like UID number, bank account and mobile phone numbers are the in-thing.” This was almost to indicate the dawn of a new era with different priorities, making the earlier preoccupations irrelevant. Can anything be further from the truth than this?
One of the reasons for carrying this perception is that Aadhaar, though conceived at the government level, is currently championed by technocrats turned bureaucrats. These technocrats, who are significantly influenced by the products and processing in the IT world, want to replicate the same in the public sphere, often ignoring the complex realities of the real world. While the making of the biometric data and its management by itself has a significant technological content, its impact goes far beyond it as it covers the ordinary citizen and the wide social sector. Focusing too much on technology, the social and privacy issues were probably overlooked at the infancy. While the UIDAI tried to address some of these concerns later through seminars, they were not comprehensive enough to gather diverse public opinion. Even though the initial mandate of UIDAI was to focus on technology associated with biometric data, the casual utterances of key representatives, without adequate awareness of privacy issues, went beyond that to advocate the wider adoption of UID in both public and private spheres.
Two of the major issues concerning Aadhaar revolve around the benefits of having an identity and the risks of losing privacy. Proponents of the benefits are of the opinion that a lot of social welfare programmers intended for the poor do not reach them or are denied to them because of the issues surrounding identity. By fixing the issue of identity using Aadhaar, inefficiencies and irregularities surrounding the delivery and management of social services would be resolved.
This is a claim disputed by most of the social scientists/activists who feel that to be a gross over-simplification of the reasons for failures of social welfare schemes. For example, in most of the social welfare programmes where multiple agencies are involved, fixing individual identity does not necessarily stop corruption and pilferage.
Before commenting on the second issue surrounding privacy, it is important to understand what Aadhaar stands for. Aadhaar is a 12-digit ID which is unique to any individual in the country (It is 16 digits, but only 12 digits are relevant for identification). Behind Aadhaar is biometric data, that uniquely identifies an individual. As of now, biometric data includes digital data of the face, all ten fingerprints and iris scan. Aadhaar also includes other general details like name, age, sex etc.
(The author is a Bengaluru-based technology consultant)
Essar Energy has several power projects planned but these may slow down due to lack of coal linkages and land-acquisition issues
While all eyes are on the Ambani brothers for the mega-power projects they are planning to set up, Essar Energy has drawn up ambitious plans that aim to set up around 7,850MW of power capacity over the next three years. The company is planning 13 power projects, some of which are expansions of operational power plants. The company has around 1,220MW of gross capacity which is currently operational.
However, Essar's plans will be hampered by problems of coal availability, which is a major difficulty staring at developers of power projects since most Indian coal lies in Naxalite-infested areas from where it has become difficult to extract coal.
Even the largest power companies, such as government-owned National Thermal Power Corporation, are looking to source coal from abroad. Other than domestic coal issues, power projects in India also face delays due to issues like land acquisition and environmental clearances. Essar Energy's proposed power plants are yet another example of this.
Out of its 13 power-generation projects, four projects-Mahan I (1,200MW), Tori I (1,200MW), Tori II (600MW) and Neptune-I are domestic equity coal-based projects. The fuel supply for the Tori plants is supposed to come from Chakla and Ashok Karkata coal blocks. According to sources, the Chakla coal block has been facing issues due to delay in surrender of the coal block by Central Coalfields Ltd. The Chakla block was allotted to Essar Power in February 2007.
On being questioned about the status of these two blocks, the company stated, "The geological report coupled with the mining, planning & environmental clearances along with land acquisition need to be finalised subjected to internal surveys of the Ashok Karkata block." The production date for this block will also depend on this survey.
On the Chakla block, it stated, "It (Essar) has applied for an environmental clearance and a hearing was also held in June 2009. Production from this block is expected to start by Q1 CY12. Applications for extending the validity of the Chakla and Ashok Karkata coal blocks have also been made."
Fuel supply for Mahan I is to be sourced from Mahan coal block in Madhya Pradesh. According to sources, the ministry of environment and forests has yet to grant environmental clearance to this coal block. The Mahan coal block was allotted for joint development in April 2006 to Hindalco Industries and Essar Power.
According to a company statement, "There has been some delay to the forest clearance on the Mahan coal block so this is unlikely to be in production by Q3 2010. We expect to give a further update with progress on this at our half-year results. We have applied for coal linkage to ensure that the Mahan power station can commence production as planned."
The fuel supply for the Mahan II power project is yet to be tied up. According to a company statement, the domestic coal linkage for the project is likely to be completed by CY10. Land acquisition and ownership formalities are also pending for the Mahan I and Mahan II power projects. Mahan I is expected to start operations in Q3CY11, six years later from the time it was first proposed in 2005.
Mahan II is expected to be commissioned by CY13. One of Essar Energy's presentation slides states that the Mahan project's Power Purchase agreement (PPA) with the State Electricity Board (SEB) is yet to be executed. The expansion project at Hazira in Gujarat was first announced in 2005. The land acquisition is yet to be completed and the company expects it to be completed by Q2CY10. The project is now expected to be commissioned by Q4CY12, seven years after the first announcement. Another 120MW power plant planned at Paradip, Orissa is also marred by land-acquisition issues with locals. The land is expected to be acquired by Q3CY10.
Essar's all four operational plants are either gas-based (1,015MW) or captive fuel based. Out of the planned 7,850MW capacity expansion, around 3,030MW capacity worth of power plants are based on totally imported coal or are imported equity coal-based projects. Vadinar Phase I which is an existing capacity expansion project is the only gas-based project. The company plans to commission this project by the third quarter of CY2010. The company plans to commission around 2,900MW worth of capacity by CY2011-Salaya I, Mahan I and Vadinar Phase II. Another 1,590MW is expected to be commissioned by CY2012.
Stung by widespread criticism of SEBI’s action in attempting to regulate ULIPs, the government has settled the issue of regulatory turf battle by changing the law
In a move that stunned the financial world and dealt a massive blow to the Securities & Exchange Board of India (SEBI), the government found a permanent solution to turf battles between regulators through a hush-hush ordinance that was promulgated late on Friday night. The news of the ordinance, which was released only on Saturday evening, caught the entire financial world by surprise. One of the key points of the ordinance is that Unit-linked Insurance Plans (ULIPs) would not be regulated by SEBI, as was its aspiration. It would be regulated by the Insurance Regulatory and Development Authority (IRDA), as before. But the ordinance is much bigger in scope and impact.
The government has amended the statute that governs the regulatory bodies in charge of banking, insurance, capital markets and pensions. On ULIPs, while the finance minister's initial reaction was to ask SEBI and IRDA to sort out jurisdiction issues over ULIPs through the court, good sense has prevailed and the ordinance creates a mechanism to resolve all future disputes.
This is in the form of a "high-level committee" headed by the finance minister, which will sort out "all issues of jurisdiction regarding hybrid products" that may lead to a turf war between regulators. This committee would include the finance secretary; secretary, department of financial services and heads of the four financial regulators-the Reserve Bank of India (RBI), IRDA, SEBI and the Pension Fund Regulatory and Development Authority (PFRDA).
Since the ordinance and the government press statement unambiguously clarified that "the life Insurance business shall include any Unit Linked Insurance Policy (ULIPs) or scrips or any such instruments," these would remain under IRDA. The action was welcomed by insurers and independent financial planners (IFAs) who have been in turmoil since 9th April, when SEBI barred 14 insurance companies-Aegon Religare, Aviva, Bajaj Allianz, Bharti AXA, Birla Sun, HDFC Standard, ICICI Prudential, ING Vyasa, Kotak Mahindra, Max New York, Metlife India, Reliance Life Insurance, SBI Life Insurance and TATA AIG-from selling ULIPs.
This also means that several lawsuits filed in connection with the SEBI action will now be irrelevant.
"We are happy that all confusion regarding ULIPs has been comprehensively removed. The setting up of a joint committee under the Union finance minister and the heads of regulators is a good step and an effective mechanism to resolve issues regarding jurisdiction of any financial instrument in the future," said Kamesh Goyal, managing director and chief executive officer of Bajaj Allianz Life Insurance.
"This is good news for the policyholder, because ULIPs are insurance products and it also will help in regulations," said Yogin Sabnis, a certified planner for VSK Financial Consultancy Service Pvt Ltd. He said that IRDA must now focus on improving regulations and the mis-selling of insurance. Another financial planner, while welcoming the news, said, "The ministry should have taken action long back, instead of opting for the status quo. But this is good news for investors in ULIPs."
Deepak Sood, MD & CEO, Future Generali India Life Insurance Co Ltd said, "The long-awaited clarity in the regulatory framework is welcomed by insurers and customers alike. The uncertainty had led to insurers delaying their distribution thrust and customers delaying the decision to invest in insurance cover. Now with this ordinance and the clarity it offers, both IRDA as the regulator and us as insurers can focus on our efforts to provide total insurance solutions to Indian customers and focus on the bigger macro-economic need. There is a crying need to rapidly grow the real penetration (per capita) of insurance cover among our people, to help ensure the financial security and happiness that this provides."
He added, "It has also been clarified that pension products need not compulsorily offer life insurance cover or health insurance cover as was required by an earlier IRDA circular. Now an insurance contract offering one out of three-life insurance cover, health insurance cover or annuitisation on human life is sufficient to categorise it as a life insurance product. Going forward, we are confident that customers will benefit from the awaited fresh guidelines on ULIPs from IRDA."
Those who deal with mutual funds are not so happy. They believe that IRDA is soft on insurers and will not regulate them as well as is required. However, this is not the indication from knowledgeable sources. They say that the government has backed IRDA, but it will have to tighten regulation which it seems to be progressively doing.
SEBI's April diktat that insurers launching new ULIPs would need its clearance has also fallen by the wayside. So insurance companies are gearing up for new product launches. "It didn't matter who would regulate ULIPs. Now that there is clarity, we are glad to be able to focus on the business. We were not allowed to launch any new ULIPs, but now we will be able to," said an official from Reliance Life Insurance, who spoke to Moneylife on the condition of anonymity.
However, insurers will have to comply with new stricter guidelines issued by IRDA in the last few months. These include measures such as a cap on charges, extending the minimum term of the policy to five years, bringing the concept of compulsory annuitisation in pension policies and the proposal of fixing the maximum limits of surrender charges.
Life Insurance Council of India's secretary general SB Mathur said that the move was expected. In retrospect, the move by the finance ministry isn't one of complete surprise. At a recent inauguration of a new building for the Insurance Institute of India, finance minister Pranab Mukherjee said, "I understand that IRDA has taken some very positive steps in respect of regulations of ULIPs which are in the interest of both the insurance industry as also the policyholders." He also commended the role of intermediaries, especially agents in the insurance sector, who contribute in ensuring that insurance products reach everyone in the country.
The writing on the wall was clear, ever since Deepak Parekh, chairman of HDFC openly said that the row between regulators has made us a "laughing stock" in front of the world. However, few expected that the action would be in the form of such a decisive ordinance. The latest government action has triggered speculation that several other controversial actions and decisions by SEBI may also come in for scrutiny.