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Registration and the Poor: Why UIDAI wants to register the poor in India

by Taha Mehmood, 17 September 2011

print version of this article print version - 17 September 2011

The Ten Trillion Rupees subsidy

Four years ago Nandan Nilekani met P. Chidambaram for a causal chat. P. Chidambaram was the finance minister of India back then. They started talking about an aspect of the Indian market: Rural India.

Nilekani’s contention was that the agriculture economy is sinking. The supply chains of PDS do not work because of corruption. The pricing of agriculture products is difficult because of subsidies. And it is a problem to circulate the money in the agriculture market because there are lots of hurdles in giving loans to farmers.

On top of that, there is a political angle. A farmer is both a voter and a businessman. Not all voters are farmers. Some voters are poor and consumers. Therefore if the state decides that the market is to take care of all agriculture products, competition will increase, driving the prices down and benefiting the poor voter. But it will be driving the businessman-farmer-voter crazy. Consequently the prices may rise, because of the presence of agriculture cartels, and the voter who is poor will have to pay more for buying agriculture products and may not vote for the party in power.

Chidambaram said ‘we spent ten trillion rupees on subsidies alone’. Nilekani thought, ‘That’s Rs 10,000,000,000,000 funding some very bad ideas’. 1.

Not all government subsidies reach the poor in India. In Nilekani’s view the fault lies in the targeting of agriculture subsidies. He suggests we do not know the direct link between the operation of a policy on subsidy, say, subsidy on kerosene and fertilizer, and its impact on a landless rural laborer. We do not have a way to measure it. Most of the subsidies in agriculture, in Nilekani’s view, go to the owners of medium and large farms. So the targeting of subsidy is a problem in India. 2.

Direct Cash Transfers

Plato says, a good ruler must look at the state like a physician would look at an ailing body, and after thorough examination he must prescribe cure. So like a Platonic ruler Nilekani proposes a solution; would it not be good if the state were to give money directly to the poor? Can a direct cash transfer system not ‘hollow a subsidy system inside out’? 3.

Let us, for a moment, consider that Nilekani’s Direct Cash Transfer is a superb idea, although it is certainly not a novel idea. And let us think through Nandan Nilekani’s perspective how will a Direct Cash Transfer regime operate. Will not a Direct Cash Transfer regime be based on a series of processes that are linked via if/then logic?

In the India of his dreams Nandan Nilekani visualizes that a gigantic information architecture is working round the clock to transfer Direct Cash to poor. Hundreds of small nodes called national information utilities (NIU) are part of an information network that is overseeing the process. In Nandan Nilekani’s words the national information utilities would be ‘databases that amass information, streamlining it for the government’. 4. What sort of information, one may ask. Well!! Information related to land and people, the social and spatial aspects of society.

For NIU to harvest such type of information Nandan Nilekani adds layers to his dream. Let us give a unique identity card to all Indians. Let us know Indians from Non-Indians. From the set of Indians let us clearly mark poor and non poor. In order to know the poor the state will first have to register people as poor. Assuming of course that the state already knows what poverty is and who could be a poor person. And it just needs to know how many people are poor and who are they.

Registration and the Poor

In Nilekani’s view, giving a unique identity card to the poor will ensure a basic right; the right to an acknowledged existence 5. Nilekani borrows the argument of the right to an acknowledged existence from a Cambridge academic called Simon Szreter.

In 2007 Simon Szreter wrote a paper titled ‘The Right of Registration: Development, Identity Registration and Social Security’. This paper can be accessed at the History & Policy website 6.

In his paper Simon Szreter explains how human rights and development have been ‘dominant intellectual themes’ for the past six decades, how the UN and World Bank were founded in the same decade to tackle these themes.

In 1966 the UN adopted a treaty called the International Covenant on Civil and Political Rights (ICCPR). Simon refers to article 24, clause 2 of the UN International Covenant on Civil and Political Rights which states that ‘[e]very child shall be registered immediately after birth and shall have a name’. Article 7 of the UN Convention on the Rights of the Child states: ’the child shall be registered immediately after birth and shall have the right from birth to a name, the right to acquire a nationality and, as far as possible, the right to know and be cared for by his or her parents’.

In Magnesia Plato wanted families to maintain a register and parents to record the birth of every child under a heading -born- together with the month and the name of the child. But such registers were private. The right to name a child and to register its birth was a private matter. How did a council of states, the UN, become a guardian of this ‘right’?

Anyway, after this introductory bit Simon moves on to describe how England became an economic powerhouse between 1600 and 1800. Through his paper Simon suggests why registration of the poor is important if a state wants to achieve economic growth. Szreter takes the help of two academicians, Douglas North and Peter Solar, to build his argument.

Douglas North’s thesis on the story of British economic growth , in Simon’s view, rests on three factors, i.e. evolution of property rights which allowed people to play in the market, development of modern states to protect the players, and emergence of ideologies to justify ethical and moral beliefs in the market.

An argument for the Poor Law and social security

Simon Szreter binds Douglas North’s thesis with Peter Solar’s version. In Simon’s view, Peter Solar demonstrates how the English Poor Law was able to complement two other institutions; a national identity card registration and Justices of Peace. JP’s or Justices of Peace were local enforcers of law. English Poor Law established that the state must take care of its poor, these benign intentions apart many historians believe the English Poor law emerged as a response to control both the price and quantity of labor following the outbreak of the black death. The ordinance of laborers passed in 1349 made it mandatory for all able-bodied people aged under 60 years to work. They could not collectively bargain for their labor.

Simon Szreter does not care to ask moral questions around The Poor Law, instead summarizes its impact by suggesting how the Poor Law was instrumental in securing the labor market in terms of social security. It helped the introduction of statutes such as ‘For the Relief of the Poor’.

Simon concludes his paper by making a strong case for the registration of the poor. Simon suggests how ‘identity registration systems should be created principally for the liberty and the use of private individuals, not to serve the purposes of commercial organizations or states’.

I wonder how come events like colonialism and slavery do not seem to play any role in Simon’s assessment of generating a market and giving employment to the poor people of England? Is there no relationship between a large market for British products and having colonies abroad? Regarding Simon’s suggestion of learning from the English system, I wonder can something that is particular for England be applied generally to the rest of the world?

Elsevier: A company that used to host the largest arms mela in the world

Simon Szreter published his paper ‘The Right of Registration: Development, Identity Registration and Social Security’ in a highly respected policy journal named World Development 7.

World Development is a publication of the Elsevier group.
Till 2007 Reed Elsevier used to derive a part of its multi billion dollar revenue from hosting defense exhibitions including one of the largest Defense Exhibitions in the world i.e. Defense Systems and Equipment International (DSEI) in London.

Of course by 2009 Elsevier was already out of the market not because the business ceased to be profitable but because of pressure applied through lobbying from a group led by physicians based in London.

Given Reed’s history with arms sales which makes it close with companies like L1- identity solutions, I wonder whether World Development would be interested in publishing a series of policy research papers which does not argue for registration of poor citing monopoly of information argument or the privacy argument? My search in their database didn’t reveal anything but I would be happy to be proved wrong.

A short history of Direct Cash transfers in India

One day during late winter Canada was playing a world cup cricket tie against Zimbabwe in Nagpur. In Delhi, on the same day, Pranab Mukherjee was presenting the budget speech.

About the government policy on subsidies he said: ‘To ensure greater efficiency, cost effectiveness and better delivery for both kerosene and fertilisers the Government will move towards direct transfer of cash subsidy to people living below the poverty line in a phased manner’ 9. As they say, in Bombay the Sensex ‘shot’ by 600 points before dipping down 10. Maybe the enthusiasm was not entirely because of direct cash transfers policy, more so because the state has cut surcharge on corporate tax to 5% from 7.5%. That day Nandan Nilekani was asked to head a task force to look into Direct Cash Transfer (DCT) and Zimbabwe won the match by 175 runs.

In the middle of hot Indian summer a Salman Khan film Ready was released. The sub-plot of the film involved the theme of mistaken identity. The film was a huge success. During the same month, Nandan Nilekani submitted the report on DCT to the Ministry of Finance.

Conclusion of the Interim Report on Direct Cash Transfer

The sharp 62 page document concludes with a suggestion to the Government of India: ‘In the present system of subsidy on Fertilizers, there is a need to evolve a suitable mechanism for direct subsidies to individuals who are entitled to them. If a system of direct subsidy to the farmer is adopted, it becomes possible for the Government to differentiate, and decide which segment of farmers should receive subsidy (size of land-holding could be the differentiator and/or it could be nature of crop). It also becomes possible to bring in quantum restrictions - either by way of a ceiling on amount of subsidy or amount of fertilizer. As an intermediate step, release of subsidy to retailers by using aadhaar numbers, aadhaar based transactions and aadhaar authentication service can be undertaken. Department of Fertilizers has compiled a list of all registered retailers of fertilizers. This can be considered for utilization.’ 11

Before the Nandan Nilekani led task force could submit its report, an argument broke out between Jean Dreze and Patrice Coeur Bizot on the pages of the Indian Express about the origins and implications of cash transfers.

Exchange of views between Jean Dreze and Patrice Coeur Bizot on DCT

Jean Dreze’s view was not specifically directed to Conditional or Direct Cash Transfer concerning kerosene, LPG and fertilizers but to a general idea of Conditional Cash Transfer 12. In his view the cash transfer idea has evolved from a superficial reading of Latin American countries. In Mexico and Brazil, for instance, a large part of the population is covered by social insurance systems. Therefore it was easy for the state to identify targets for cash transfer. In India this is clearly not the case. We do not know who is an intended beneficiary. So how is the state going to implement its scheme? By giving cash to targeted beneficiaries, is not the value of their cash subject to pressures of inflation?

There is more. I have pointed out above how four years ago, when Nandan Nilekani met Chidambaram, he seemed sad about ten trillion rupees going into funding very bad ideas.

For a moment let us imagine the state pays 5,000 rupees as subsidy to an under privileged farmer to buy fertilizer. What is the guarantee that when he has that money he is going to spend it on buying fertilizers? Can he not use that money to buy something else, like a mobile phone maybe watch a film or have a bottle of nice whiskey for a change?

Lets us assume that people spent 10% of the cash transfers on buying unintended products, will it not result in additional revenue of one trillion rupees for the manufacturers of goods and services? Members of the task force led by Nilekani do not appear to be unaware of a possibility of such a pilferage. So they included a rider: ‘The cash subsidy to customers will be proportional to the actual quantity of kerosene lifted by the customer.’

Jean Dreze may have known about the possibility of these riders but he seems unconvinced. He proposes that Direct Cash Transfers could work in some areas like scholarships for education; giving pensions to widows and the elderly but maybe not for transferring money to in the name of fertilizer, LPG or kerosene subsidy. Jean Dreze’s suggestion was to think more in terms of Direct Kind Transfers. Perhaps if a deserving person is given food he may use it wisely, but if given 2,000 rupees to buy food then options to spend the money are endless.

The Interim report of the task force suggested a mix of conditional cash and direct cash transfers to the government. Jean Dreze’s view did manage to create a concern.

During the period between Pranab Mukherjee’s announcement to make Nandan Nilekani the head of the task force and Jean Dreze’s expression of concern another story caught my attention.

At what price governance

The day when the film Ready was released, the Economic Times published a story about a paper written by an IIM professor. Rajnish Dass works for IIM Ahemdabad 13. He wrote a paper, titled ’Unique Identity Project in India: A Divine Dream or a Miscalculated Heroism?’ In his paper Rajnish Das wonders why no one has cared to do a cost benefit analysis of the UIDAI scheme. How come countries like the UK and Australia, who did a thorough cost benefit analysis on a national identity card scheme, abandoned it. A reader wrote in the comments section speculating why the state is going after this scheme if it is not mandatory and why there is no time-line for its implementation?

Nandan Nilekani maintains UIDAI is not mandatory, but various institutions of the state are slowly converted to work with a UIDAI based system. Why this double speak? There might be an explanation: In the early days of UIDAI, during press conferences whenever some reporter would raise a question about privacy issues Nandan Nilekani would reply with a smile; ‘But the scheme is not mandatory’, thereby preempting or limiting speculation anchored around privacy. Perhaps not projecting the scheme as mandatory was part of a well thought out strategy to blunt set attacks which could come from the privacy advocacy sector. Such a smart approach may work very well with the corporate sector, but should the state not communicate a new policy with a bit of earnestness? If the scheme is called Aadhar (foundation) how the hell can it not be mandatory? If it is mandatory, who mandates it? The Parliament of India has certainly not mandated UIDAI, so who has?

A person thought that the professor Rajnish Das is ‘foolish’, because in management governance is more essential than cost benefit analysis. In my view, the point which he wanted to stress was that one can govern even if it is more costly than its intended benefits. How nice!!

Is not UID, at least theoretically, a smart way to enlarge the tax base of the state? For eons we have heard how less than approximately 40 million Indians pay income tax. With a potential to map 1.2 billion people, would the state not know who is getting how much and if there is an increase income will the tax not increase accordingly?

Few days after the appearance of Jean Dreze’s piece, Patrice Coeur Bizot wrote a piece in the Indian Express countering Jean’s views:

Why can’t we trust the poor with choices?

Patrice Coeur Bizot is the UN resident coordinator and UNDP representative in India. He seemed worried about Jean Dreze’s points and chooses to take them head on 14.

The state is planning to give money directly or conditionally to the poor. The poor will have a bank account. The account will be linked to a random number generated by UIDAI. By looking at the UID number and tallying it with the amount spend the state will know who is who, who is getting how much and who is spending on what. If someone does not spend on what she is supposed to spend the state will know and may reduce the payment amount proportionally.

As far as the state is concerned it does not seem to matter what is poverty, who is poor or how can the essence of a person i.e. her identity be tagged with a number.

Jean Dreze questioned how do we know that a person will spend the money given to her on buying what the state wants her to buy at market prices and not spend it on other stuff.

Patrice Coeur Bizot’s core argument was we could trust the poor. He took refuge in UNDP’s experience while framing his reply, which was as follows:

UNDP has a presence in 134 countries. Brazil runs a program for CCT known as Bolsa Familia. In Chile they are running a program on a similar model called Solidario. In Mexico the program is called Opportunidades. In India two schemes based on CCT called Dhanlaxmi and Ladli are underway. Although these schemes are based on CCT or DCT, thereasons behind its policy vary from state to state, people to people, geography to geography and history to history.

If in Chile Solidario targets the indigent population, in Mexico the scheme is used to give incentives the rural and urban poor to invest in education, health and nutrition of their children. In Brazil Bolsa Familia targets the family instead of an individual. The program was field tested provincially for A DECADE before it was applied nationally. And in India they want to apply a scheme to give direct cash subsidy to all farmers to begin with.

[While reading Patrice’s piece I thought what’s the hurry in applying UIDAI. Why can a policy that could potentially have an effect on millions of Indians not be thought though? Why this urgency? In his book Imagining India Nilekani stresses a sense of urgency bordering on desperation time and again. The running theme in is - URGENCY OF NOW. Why? What’s the need to hurry? Why has haste suddenly become a virtue?]

In Patrice’s view the UNDP’s assessment that CCT is a potential tool to fight poverty is not entirely wrong. He cites a World Bank report to suggest that there is an unacceptable level of leakage in PDS. I wonder why Patrice Coeur Bizot did not write a single word about the successes of the Conditional and direct Cash Transfer schemes in bringing about regime change and revolutions in the Middle East and North Africa.

World Bank and Cash Transfer Programs of Middle East and North Africa

After the World Bank brokered structural adjustments in 1986, Tunisia started a new program called the Programme Nationale d’Aide aux Familles Necessiteuses. According to the World Bank ‘the main form of assistance to poor and needy families is provided by the Ministry of Social Affairs through the Familles Necessiteuses program.’ 15 Till 1994 the program had a coverage of 60% in rural areas.

Under the guidance of the World Bank the Egyptian Ministry of Social Affairs and Insurance (MOASI) used to run a program called Ma’ash Daman for disabled, orphans, widows, divorced women and children. In 2001-02, according to World Bank data, the state transferred 500 Million Egyptian pounds to approximately 9,00,000 families. 16

The World Bank helped establish a direct cast transfer scheme in Jordan in 1986, it was called the National Aid Fund (NAF). The NAF removed the generalized food subsidy system in 1999. NAF’s main program was the income support system that was directed at the chronically poor households.

In the Republic of Yemen the World Bank runs a project called Social Welfare Fund (SWF). The Social Welfare Fund was established in 1996 to ‘mitigate adverse effect of subsidy removal on the poor. It had a two tier targeting system. First was geographic targeting and second category targeting given the geographic allocation. The grand idea was to enable chronically poor overcome poverty 17.

In 2011 in Tunisia a young fruit seller named Muhamed Bouazizi committed suicide by an act of self immolation. Muhamed Bouazizi was unable to cope with lack of opportunities. Bouazizi’s suicide was an event that prompted thousands of angry Tunisians to come out in protest. The head of the state had to run carrying his thawb over his knees. In Egypt, Yemen and Jordan despite World Bank’s excellent efforts to alleviate poverty through Direct Cash Transfers thousands upon thousands of people protested against rising prices of essential foods and commodities, increasing poverty and insufferable conditions. Why. Why after more than 25 years of running Direct Cash or Conditional Cash Transfer Schemes the state in these countries was not able to contain poverty? Why is this method suddenly seen as a panacea in India? No one seems to know. It was at this point when Yoginder Alagh came up with an interesting view on what could go wrong while transferring cash to farmers in India.

Yoginder Alagh’s story of meeting invisible farmers at a chaupal

In order to explain his view Yoginder Alagh tells a story 18. Once he was chairing an expert committee for pricing of fertilizers. He went to a village in northern Gujarat to discuss the pricing of fertilizers with farmers. He reached the chaupal of a village in the hope of talking to a farmer. 11 people were listed as farmers in the local records. No one was listed as a tenant. But 45 farmers tilled the lands as tenants. The farmers did not come to the chaupal because that place is reserved for Patels. From this experience Yoginder Alagh came to some conclusions. Of all people who work as farmers only some are listed as farmers. Not all non-farm people work on non-farm jobs, some work on farms and few lease farms from others in order to work. Perhaps such transactions are carried out on the basis of word of mouth, as there appears to be no paper trails to detect such transactions. Not on all occasions records are maintained. How will the state know if x is a farmer when x says he is not but works as a tenant or has leased his neighbor y’s farm for a season?

Yoginder Alagh mentioned Sutanu Behuria, who is the fertilizer secretary, to underscore his observations. Sutanu Behria is reported by Yoginder Alagh to have said ‘State-level land records cannot be relied upon to identify the farmer as many of them do not own land. Besides, these records may not indicate whether the title holder does agricultural activity himself’.

So yes maybe we can trust the poor. But before trusting, do we know who are the poor. Will a person identify himself as a farmer? Yoginder Alagh seems to be raising an alert for potential cases of fraud. The Interim report on Direct Cash Transfers tries to deal with fraud but in a convoluted manner. The word fraud appears exactly once in the Interim report on Subsidy transfer, when it is suggested that the Core Subsidy Management System (CSMS) ‘will be able to use analytics to detect fraud and diversion’ 19

Government of India Pvt. Ltd

The Core Subsidy Management System (CSMS) is a type of solution architecture for direct subsidies. According to the Interim report on subsidies ‘[t]he actual implementation of subsidies may be done in-house, or through a National Information Utility’ 20. A National Information Utility (NIU) is a company with public and private ownership set up for the purpose of development, maintenance, and execution of complex IT projects in the Government.

The idea of the National Information Utility (NIU) appears vaguely in Nandan Nilekani’s book, but it is clearly spelt out in the TAGUP report. TAGUP is an acronym for Technology Advisory Group for Unique Projects. Unique projects may refer to Goods and Services Tax (GST), Tax Information Network (TIN), Expenditure Information Network (EIN), National Treasury Management Agency (NTMA) and New Pension System (NPS). Nandan Nilekani was chairman of TAGUP. TAGUP submitted its report to the finance minister on the last day of January. The report proposes that ‘NIU may be put in place to handle all aspects of IT systems of unique projects’. A National Information Utility (NIU) ‘would be private companies with a public purpose: profit-making, but not profit maximizing.’ 21

The report suggests an ideal NIU could have the following set up:

‘1. Total private ownership within NIU’s should be at least 51%. As a paying customer the Government would be free to take its business to another NIU, if necessary. At the same time, the Government could moderate the functioning of the NIU, by virtue of being the owner, through its position on the Board.

2. The ownership share of the Government in an NIU should be at least 26%.

3. No single private entity should own more than 25% of the shares in an NIU. Institutions that have a direct conflict of interest (eg. IT companies) should not be permitted to be shareholders.’ 22

Further more, for staffing purposes TAGUP report recommends that ‘an NIU . . . can hire professionals from the market at market salaries.’.

At least theoretically one of the primary characteristics of any state is its ability to collect and manage a certain type of information and use it with wisdom and justice. The Indian state is seen to be unable to do that. In Nandan Nilekani we already have a private person holding a cabinet level office, which is a political position, without even caring to fight an election. I wonder, are we witnessing a slow transformation of Government of India to Government of India Private Limited?

Four years ago Nandan Nilekani met P. Chidambaram for a causal chat. P. Chidambaram was the finance minister of India back then. They started talking about an aspect of the Indian market: Rural India.

Chidambaram said ‘we spent ten trillion rupees on subsidies alone’. Nilekani thought ‘that’s Rs 10,000,000,000,000 funding some very bad ideas’.

Plato says a good ruler must first and foremost take utmost care of his own soul before prescribing any cure to others. So like a good Platonic ruler, with his soul apparently at the right place, Nilekani has come up with a simple solution to the problem of leakages in funding bad ideas.

Register the poor. Transfer subsidies directly to the poor. Set up a Core Subsidy Management System (CSMS) to carry out the transfer of subsidy. Set up a National Information Utility (NIU) to run CSMS. Make sure that Total private ownership within NIUs is at least 51%.


1. Nilekani, N. 2009, Imagining India: The Idea of a Renewed Nation, p-290, Penguin Press HC

2. Nilekani, N. 2009, Imagining India: The Idea of a Renewed Nation, p-290, Penguin Press HC

3. Nilekani, N. 2009, Imagining India: The Idea of a Renewed Nation, p-291, Penguin Press HC

4. Nilekani, N. 2009, Imagining India: The Idea of a Renewed Nation, p-361, Penguin Press HC

5. Nilekani, N. 2009, Imagining India: The Idea of a Renewed Nation, p-350, Penguin Press HC

6. Szreter, S, The Right of Registration: Development, Identity Registration and Social Security, History & Policy, url-

7. Szreter, S, 2007, ’The right of registration: development, identity registration and social security - an historical perspective ’ World Development, Volume 35, Issue 1, pp.67-86

8. Allen, K, 2007, Reed Elsevier pulls out of organising arms fairs, The Guardian, url:

9. Budget 2011-2012, Speech of Pranab Mukherjee Minister of Finance February 28, 2011 Full Text of Union Budget, The Hindu, Resources url:

10. PTI, Mumbai, February 28, 2011, Stock markets cheer the Budget, Sensex up 122pts url:

11. Interim Report of the Task Force on Direct Transfer on Subsidies on Kerosene, LPG and Fertiliser, June 2007, Need For Reform- p-59, url:

12. Dreze,J, May 11 2011, The Cash Mantra, Indian Express, url:

13. PTI, Jun 6, 2011, Cost-benefit analysis of UID necessary: IIM-A professor, The Economic Times, url:

14. Bizot, C.P, Jun 27 2011, Trusting the poor with choices, Indian Express, url:

15. Iqbal,F 2006, Sustaining gains in poverty reduction and human development in the Middle East and North Africa, World Bank Publications, Main Cash Transfer Programs in the Middle East and North Africa, pp-67-70

16. -ibid-

17. -ibid-

18. Alagh, Y.K, Mar 31, 2011,What cash transfers can’t solve, The Financial Express url:

19. Interim Report of the Task Force on Direct Transfer on Subsidies on Kerosene, LPG and Fertiliser, June 2007, Need For Reform- p-1, url:

20. Interim Report of the Task Force on Direct Transfer on Subsidies on Kerosene, LPG and Fertiliser, June 2007, Need For Reform- p-14, url:

21. Report of the Technology Advisory Group for Unique Projects, January 31st 2011, Ch-16 Recommendations for public policy challenges, 16.1. The appropriate placement of tasks, p-80, url:

22. Report of the Technology Advisory Group for Unique Projects, January 31st 2011, Ch-1 The appropriate placement of tasks, 1.4. Ownership, p-13, url: