In your interest.
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No beating about the bush.
Those enrolling on the UID database have not been informed that their data is to yield profit for the UIDAI, Rs288.15 crore a year and its only investor, the government, does not even own the data. How many in the government are even aware of this investing of ownership in an entity that continues to remain deliberately undefined and opaque
The Unique Identification Authority of India (UIDAI) was set up by an executive notification dated 28 January 2009. As per the notification, the Planning Commission was to be the nodal agency “for providing logistics, planning and budgetary support” and to “provide initial office and IT infrastructure”. As part of its “role and responsibilities”, the UIDAI was to “issue necessary instructions to agencies that undertake creation of databases, to ensure standardisation of data elements that are collected and digitised and enable collation and correlation with UID and its partner databases”. It was to “take necessary steps to ensure collation of the National Population Register (NPR) with the UID”. And, the UIDAI “shall own and operate” the UID database.
In July 2009, Nandan Nilekani was appointed as the chairman of the UIDAI, representing a lateral entry of a person from the private sector into the government, with the rank of a Cabinet minister.
The UID project proceeded without a law, despite the seriousness of privacy and security concerns till, caving in to public pressure, a draft Bill was prepared by the UIDAI in June 2010; and it was not till December 2010, after the project had begun to collect resident data, that this Bill was introduced in Parliament. The Bill stayed close to the framework for corporate control over databases that was later enunciated in the report of Technology Advisory Group on Unique Projects (TAG-UP) of which Mr Nilekani was the chair, and which gave its report in January 2011.
The Bill to give statutory status to the UIDAI was roundly rejected by the Parliamentary Standing Committee on Finance in December 2011. The Parliamentary Committee recommended that both the Bill and the UID project be sent back to the drawing board. There has been no effort since to reintroduce the Bill. Every time the UIDAI is confronted with questions about the legality of its enterprise, its officers assert that the executive order of 28 January 2009 is the legal instrument from which they derive their authority; and that order makes them the ‘owner’ of the database.
In the context of the UID project:
• Residents from whom the data is being collected have not been informed that the government is not the owner of the data, or of the database; nor what the legal status of the ownership by the UIDAI will mean for the citizen/resident;
• the UIDAI set up a Biometrics Standards Committee in September 2009, which gave its report in December 2009. Its report reveals that the UIDAI intended to “create a platform to first collect identity details of residents, and subsequently perform identity authentication services that can be used by government and commercial service providers”;
• the “UIDAI Strategy Overview”, in April 2010, estimated that it would generate Rs288.15 crore annual revenue through address and biometric authentication once it reaches steady state, where authentication services for new mobile connections, PAN cards, gas connections, passports, LIC policies, credit cards, bank accounts, airline check-in, would net this profit. Those enrolling on the UID database have not been informed that their data is to be yield profit for the UIDAI; they were perhaps expected to read up from the UIDAI website.
• as set out in the TAG-UP report, the data we think we are giving to the government is to end up on the database of what will be in the nature of a private company once it reaches steady state. When it is still a start-up, and till it reaches steady state at least, it will be funded by the government. After that, the government, like other commercial service providers, will become the customer of the UIDAI;
• with the UIDAI owning the database, the column in the UIDAI enrolment form for “information sharing consent” acquires a new significance. The UIDAI has all along been claiming that it will only be providing authentication by saying ‘yes’ or ‘no’, and nothing more. But, when the consent to share information is recorded on the database as having been given, the UIDAI may give all data on their database to any “service provider”, a term of wide and undefined import. That is, it is not only authentication services that the UIDAI will provide; through this consent, it is also assuming the authority to make money on the data that it holds, both demographic and biometric. This will provide it one more avenue to find customers, and one more product to market. Mr Nilekani often refers to the UID database as “open architecture”, and avows that a wide array of applications can be built on it;
• the claim that enrolment is voluntary has rung hollow for some time now. For one thing, the UIDAI plainly has no authority to compel anyone to enrol or to use their service. However, the UIDAI has been hard at work urging governments, banks, oil companies and other institutions to adopt the UID, to re-engineer their databases to fit the UID and to seed all their systems with the UID. The push is for ubiquity. The UIDAI has been complicit in the coercion and bullying that is now part of the UID enrolment process, and its silent acquiescence while people are threatened with exclusion from services and benefits if they have not enrolled, for a UID is one dimension of complicity. It is easy to understand why this is happening, for, as critics have observed, the services, and the people, have little to gain from the UID, while the UIDAI finds compulsion an easy way to expand their database;
• the non-existence of a law that says where the liability will lie in the event of identity fraud, or failure of the system of authentication resulting in denial of services, for instance, places the burden on the individual with no responsibility on the UIDAI for the consequences of the failures of fraud;
• while ubiquity of the UID would be a recipe for tracking, profiling, tagging, converging of databases and result in violations of privacy in which ways that could threaten personal security, this would become a mere incidence of the business, leaving the resident/citizen unprotected;
• the 2009 notification that set up the UIDAI says that the UIDAI is to “take necessary steps to ensure collation of the NPR (National Population Register) with the UID”. Registering in the NPR is compulsory under the Citizenship Act and the Citizenship Rules of 2003. Although biometrics is not within the mandate of the NPR, they have also been collected in the process of building up the NPR database. Therefore, the data mandated to be given to the NPR is being handed over to the UIDAI to be ‘owned’ by the UIDAI!
I wonder how many in government are even aware of this investing of ownership in an entity that continues to remain deliberately undefined and opaque.
(Dr Usha Ramanathan is an independent law researcher and has been critically following the policy and practices of the UIDAI since 2009)
As per the report of the TAG-UP Committee headed by Nandan Nilekani, government data and databases would be privatised through the creation of NIUs, which will then ‘own’ the data and the government would become a ‘customer’ to whoever controls the data!
It is no secret that data is the new property. The potential for evolving technologies to record, collate, converge, retrieve, mine, share, profile and otherwise conjure with data has given life to this form of property, and to spiralling ambitions around it. The Unique Identification Authority of India (UIDAI) was set up with its push to enrol the entire Indian resident population, and with Nandan Nilekani as both its chairman and as chair of committees set up by Dr Manmohan Singh’s government. In this set-up, we are witnessing the emergence of an information infrastructure, which the government helps—by financing and facilitating the ‘start-up’, and by the use of coercion to get people on to the database—which it will then hand over to corporate interests when it reaches a ‘steady state’.
Since Mr Nilekani was appointed the chairperson of the UIDAI, in the rank of a Cabinet minister, he has chaired multiple committees, each of which pushes for the collection of data and the creation of databases, and steers the government to become a customer of whoever controls the database. Several reports on e-governance as part of the report of the National Knowledge Commission: Report to the Nation 2006-2009 as well as Report of the Committee for Unified Toll Collection Technology (June 2010), the National e-governance plan (November 2011, Background Papers), Interim Report of the Task Force on direct transfer of subsidies on kerosene (June 2011), LPG and fertiliser’ Report of the Task Force on IT Strategy and an implementable solution for the direct transfer of subsidy for food and kerosene (October 2011: Final report), Report of the Task Force on an Aadhaar-enabled unified payment infrastructure (February 2012), and, of course, the TAG-UP report, are testimony to how Mr Nilekani has been used to promote a set of database-related ambitions.
It was in the January 2011 report of the Nilekani-chaired Technology Advisory Group on Unique Projects (TAG-UP) that the framework for the private ownership of databases was elaborated and explained. These were about databases constructed out of data that is given to the government to hold in a fiduciary capacity, and expected to be used for specified, and limited, purposes. The Nilekani Committee report directly dealt with five projects—Goods and Services Tax Network (GSTN), Tax Information Network (TIN), Expenditure Information Network (EIN), National Treasury Management Agency (NTMA) and the New Pension System (NPS). It recommended that the suggested framework “be more generally applicable to the complex IT-intensive systems, which are increasingly coming to prominence in the craft of Indian public administration”.
As the Nilekani Committee understood it, the government has two major tasks: policymaking and implementation. Implementation is fettered by absence of leadership and active ownership of projects, outdated recruitment processes and methodology, inability to pay market salaries for specialised skills, lack of avenues for continued enhancement of professional skills and career growth, non-conducive work environment, outdated performance evaluation and preference for seniority over merit, and untimely transfer of officers. Rather than expend time on finding correctives to the system, the Nilekani committee found in this an opportunity for private business interest. Without further ado, and without considering, for instance the capacities and deficiencies in privatising databases, and what this means for citizens and residents, the Nilekani committee found its answer in National Information Utilities (NIUs).
“NIUs would be private companies with a public purpose: profit-making, not-profit maximising”. The government would have “strategic control”, that is, it would be focussed on how it would achieve the objectives and outcomes, leaving the NIU ‘flexible’ in its functioning. Total private ownership should be at least 51%. The government should have at least 26% share. Once it reaches a steady state, the government would be a “paying customer” and, as a paying customer, “the government would be free to take its business to another NIU”. Except, of course, given the “large upfront sunk-cost, economies of scale, and network externalities from a surrounding ecosystem (and what this means is not explained any further), NIUs are ... essentially set up as natural monopolies”.
The Nilekani Committee evinces a deep disinterest in the various rungs of government. It asks for the “total support and involvement of the top management within the government” -- words reflecting the UIDAI’s experience, with the Prime Minister and Montek Singh Ahluwalia being its staunch supporters, and much of the rest of the administration seemingly unclear about what the project entails. To get a buy-in from the bureaucracy, “in-service officers” are to be deployed in the NIUs and are to be given an allowance of 30% of their remuneration.
“Once the rollout is completed,” the Nilekani committee says, “the government’s role shifts to that of a customer.”
On the question of open source, the Nilekani committee “recognises the intellectual property of the NIU”, but considers that it may be counterproductive to the business planning and profitability of the NIU to release all source as open source.
The report is littered with references to the UIDAI, and suggests that the way the UIDAI has been functioning is what an NIU should use as its model.
What emerges is this:
• Governmental data and databases are to be privatised through the creation of NIUs, which will then `own’ the data;
• NIUs will be natural monopolies;
• NIUs will use the data and the database to be profit-making and not profit-maximising, and the definition of these terms may, of course, vary;
• Government will support the NIUs through funding them till they reach a steady state, and by doing what is needed to gather the data and create the database using governmental authority;
• Once the NIU reaches steady state, the government will reappear as the customer of the NIU;
• Government officers will be deployed in NIUs and be paid 30% over their salaries, which, even if the report does not say it explicitly, is expected to forge loyalties and vested interests;
• The notion of holding citizens’ data in a fiduciary capacity cedes place to the vesting of ownership over citizens’ data in an entity which will then have the government as their customer.
This notion of private companies owning our data has not been discussed with state governments, nor with people from whom information is being collected. This might have been treated as another report without a future; except, in the budget presented by Pranab Mukherjee as finance minister in March 2012, he announced that the “GSTN (Goods and Sales Tax Network) will be set up as a National Information Utility”.
The NIU was not explained to Parliament, and no one seems to have raised any questions about what it is. This, then, is the story of how the ownership of governmental data by private entities is silently slipping into the system.
(Dr Usha Ramanathan is an independent law researcher on jurisprudence, poverty and rights.)
With the WB government bailing out Saradha, we have set a dangerous precedent and reached a new low in accountability
In mid-April, the Saradha group, a Ponzi scheme in Kolkata, went down, taking the savings of poor people from across the state. This will not be a surprise to readers of Moneylife. Our regular readers know that we have been badgering various authorities—from the Reserve Bank of India (RBI) to the prime minister’s office (PMO) to the ministry of corporate affairs (MCA) to do something about multi-level marketing schemes (MLMs) and Ponzis. We have pointed out that:
• Unregulated chit funds, pyramid/Ponzi or MLM companies are able to lure people to part with several thousand crore rupees each without any regulation, investigation or supervision.
• A massive group, like Sahara, with its logo emblazoned on the shirts of cricketers in a cricket-worshipping nation, operates almost entirely outside any formal regulation. It flaunts its cosy equation with politicians across the spectrum, sports stars, film stars, media stars, judges, god-men, bureaucrats and sundry fixers. Nobody questions its business arithmetic and no one can tell us which of its businesses earns it the kind of post-tax returns that allow for mega-sponsorship deals or Subrata Roy’s lavish lifestyle. Details of taxes paid by the group in the past 10 years are unknown. Yet, according to its own advertisements, it has raised and repaid a mind-boggling Rs73,000 crore as deposits in a residuary non-banking finance company supervised by RBI.
• Multinational MLMs, registered abroad such as Amway, Herbalife, Tupperware and more dubious ones such as QNet, are known to be in violation of the Prize Chits & Money Circulation Act, but the government makes no effort to act against them. They are big sponsors of television programmes with top sporting stars as their endorsers.
• Whether SpeakaAsia, Saradha, Rose Valley or MPS Greenery—the business model has a pattern—media support through advertisements or by setting up television channels and newspapers and cosy relationship with regional political parties. Moneylife’s website has many articles on these.
• In May 2011, Moneylife Foundation wrote to the prime minister about the need to act against SpeakAsia and other MLM schemes. Moneylife has repeatedly reported that over 10,000 Ponzi companies and dubious chit funds (as collective investment or chain schemes masquerading as chit funds) operate in every Indian state. The big ones raise upwards of Rs1,000 crore in a matter of months by handing out returns in excess of 100%, which are tied to luring new investors into the scheme.
• In July 2012, former union secretary, EAS Sarma, at our request, wrote to the prime minster, revenue secretary, MCA and the RBI governor about the dangerous proliferation of MLM/pyramid or money circulation schemes that “swindle the unwary public by offering them misleading inducements and depriving them of their hard-earned savings.” He called them a ‘scourge on society’ and asked that they be dealt with an iron hand. Mr Sarma also pointed to their political links. Nothing happened.
This is the India that we live in. Yet, as soon as a big collective scheme blows up, intellectuals and columnists clamber on to a high moral platform to berate people for their greed and gullibility in falling for the promise of extraordinarily high returns offered by these Ponzis. My question is the opposite. Why should an ordinary person assume that a company that owns IPL teams, or whose founder shares the stage at public events with top political leaders, be anything but law-abiding? And, if this is untrue, why shouldn’t the buck stop at the very top?
Every politician who protected and helped legitimise the dubious Saradha group, Rose Valley and MPS Greenery in West Bengal—to name just a few—should be held accountable for its collapse. Would a group like Saradha have been allowed to start a newspaper and a television channel if union ministries had questioned and scrutinised its source of funds?
It is time we, the people, began to ask these questions. Over the past two decades of a liberalised economy, we have allowed policy-makers, regulators and ministers (Union ministers and state governments are equally culpable) to obliterate the distance that used to be maintained between government and the businesses that it regulates. Now, many of the shadiest businessmen are inside parliament and involved in policy-making. Meanwhile, each new scam is buried after some perfunctory noise in parliament largely to empty benches. Even joint parliamentary committee (JPC) reports have only served to delay investigation until public anger cools down.
Independent regulators are all IAS officers who owe their jobs to being compliant or their willingness to act as hatchet persons for politicians (barring the singular exception of Vinod Rai as comptroller & auditor general, CAG). Nobody in the system is under pressure to prevent wrongdoing; hence, no regulator, bank chairman or union minister has lost his job in the past 20 years, despite the sharp increase in the size and number of scams. If this is true of massive scams and misappropriation of funds unearthed by the CAG (2G, coalgate, irrigation, aviation, mining, defence procurement, disbursement of government subsidies, etc), where is the question of holding anyone accountable for failing to go after MLMs, Ponzis and chit funds?
Even in the Saradha case, West Bengal chief minister, Mamata Banerjee is only containing the political fallout of a situation where some distraught investors committed suicide. But her hasty action sets a dangerous new precedent. Mamata Banerjee has created a Rs500-crore ‘relief fund’ to be raised through a 10% tax on tobacco and tobacco products; this will be supplemented by proceeds of the seizure and auction of Saradha group’s property. A commission will ensure that ‘most ordinary and small investors’ are taken care of. She is mum about the fact that Trinamool nominee to the Rajya Sabha, Kunal Ghosh, headed the now shuttered media business of Saradha.
It is ironic that the former FICCI general secretary, Amit Mitra, will rubber-stamp this desperate idea of his financially illiterate chief minister, which is likely to be emulated by corrupt state governments across the country in future Ponzi failures. Consider the consequences.
West Bengal came up with a tax on tobacco companies, probably because ITC Ltd is headquartered there. Other state governments may tax alcohol or automobiles, depending on their presence in the state. Some may come up with a populist tax on multinational company products—especially if a global Ponzi goes bust. Where does it stop? Can taxes be raised to pay for losses caused by the failure of Ponzi schemes?
Mamata Banerjee’s bailout for Saradha investors signals that the gullible will be protected if the Ponzi collapse is big enough to have political consequences. Those who avoid such schemes, opting for safe, taxable and bank fixed deposits with lower returns, will feel foolish and end up paying the bailout tax. Does the government really want to signal that it is stupid to be prudent and careful? Do we really want to allow politicians to start a new bailout tax or scam tax to pay for the financial scandals caused by their inaction or complicity?
We are, indeed, in a strange situation. Regulators and tax authorities will harass and hound legitimate businesses over compliances, taxes and permissions, while the most dubious businesses will be allowed to lure people and destroy their wealth with impunity. We have now moved to yet another level of lunacy, when the exchequer will foot the bill for such private scams. We need to do something to stop this madness now.
Sucheta Dalal is an award-winning journalist and the managing editor of Moneylife. She can be reached at [email protected]