Author: Explains

Context

The Supreme Court upheld the validity of India’s ambitious biometric identity project, ‘Aadhaar’, saying it benefited the marginalized and poor, but sharply reined in a government push to make it mandatory for various services.

What is Aadhaar?

Aadhaar is a 12 digit unique-identity number issued to all Indian residents based on their biometric and demographic data. The data is collected by the Unique Identification Authority of India (UIDAI), a statutory authority established by the Government of India, under the Ministry of Electronics and Information Technology, under the provisions of the Aadhaar (Targeted Delivery of Financial and other Subsidies, benefits and services) Act, 2016.

What are the benefits of Aadhar?

1. JAM trinity –  Jan DhanYojana, Aadhaar and Mobile numbers – This will make the government support to poor more targeted and less distortive.
2. Identification of the beneficiaries of the government’s welfare schemes – Aadhar will help to remove fake and duplicates identities. It can be used to filter the list of beneficiaries and stop the leakage of public money.
3. To tackle the black money issue – Use of Aadhar in financial transactions can reduce the menace of black money in the country.
4. In Income tax return – Use of Aadhar in income tax filing will reduce the number of documents needed. It can make the process more efficient and cost-effective way.
5. In Opening a bank account – There is no need to collect multiple identity proofs or run around for documentation. Your humble Aadhaar Card is ample proof of your identity and address.
6. In getting subsidies directly to the bank account – By linking Aadhar with bank accounts, subsidies like LPG will get credited to bank account directly.
7. To get pension money on time – By just registering with the Aadhaar number, pension-related documentation process will be eased and a timely payout of pension money can be ensured.
8. The issue of digital Life certificate – Aadhar number can be used to get a digital life certificate. It will help pensioners without the hassle of physically going to the bank and submitting the life certificate.
9. Easy Provident Fund disbursement – The Aadhaar will ensure that the Provident Fund money is not diverted and is disbursed directly to the pensioner’s account.
10. Accepted as a proof of address by Securities and Exchange Board of India (SEBI) for investing in stock market.
11. Mapping development parameters – In critical sectors of the country like healthcare and education, Aadhar can be used to map the development process.
12. It can help to map skilled manpower, based on the vocational training acquired by the individual, to suitable job vacancies/ skill requirements of the State.

Issues with Aadhar and Aadhar Act

1. Questionable Legal Backing: The current legal backing of Aadhar is via a money bill. The Aadhaar (Targeted Delivery of Financial and other Subsidies, benefits and services) Act, 2016 came into force in 2016, but this is now challenged in Supreme Court.
2. Issues with sharing information collected under Aadhaar – The provisions in the Aadhaar (Targeted Delivery of Financial and other Subsidies, benefits and services) Act, 2016 Act with regard to the protection of identity information and authentication records may be affected by recent verdict by Supreme Court that Right to Privacy is a Fundamental Right.
3. Violation of rights – It was argued that the UIDAI might share the biometric information of people with other government agencies and thus would violate people’s right to privacy.
4. Has potential to profile individuals – The Act does not specifically prohibit law enforcement and intelligence agencies from using the Aadhaar number as a link (key) across various datasets (such as telephone records, air travel records, etc.) in order to recognise patterns of behaviour. Eg The Facebook–Cambridge Analytica data scandal.
5. Discretionary powers of UIDAI – The Act empowers the UID authority to specify demographic information that may be collected. The only restriction imposed on the authority is that it shall not record information pertaining to race, religion, caste, language, etc of the individual.
6. Furthermore, UID has exclusive power to make complaints and the courts cannot take cognizance of any offence punishable under the Aadhaar Act unless a complaint is made by the UID authority.
7. The time period for maintaining authentication records – The bill does not specify the maximum duration for which authentication records may be stored by the UID authority.
8. There are high possibilities of data theft, data leak or breach. Eg. Aadhaar numbers and bank details of over 134,000 beneficiaries on Andhra Pradesh Housing Corporation’s website have been leaked.

What of the Aadhaar Act has the court struck down?

• Section 33(1) which allows disclosure of information, including identity and authentication records, if ordered by a court not inferior to that of a District Judge. Individuals should be given the opportunity of a hearing.
• Section 33(2) which allowed identity and authentication data to be disclosed in the interest of national security on direction of an officer not below the rank of Joint Secretary to the Government of India. A Judicial Officer (preferably a sitting High Court Judge) should be associated with it and that the government should bring in legislation to this effect.
• Section 47 which referred to cognizance of offences. Under this Section, no individual was allowed to file a complaint if he/she felt their data was leaked or misused. The law only allowed the court to take cognizance of a complaint filed by UIDAI or anyone authorised by it. Any individual will now be allowed to file a complaint if he/she feels their data has been compromised.
• Section 57 refers to the use of Aadhaar data by any “body corporate or person” to establish the identity of an individual. Justice Sikri, in his judgment, found this section to be unconstitutional. It was under this provision that private companies like Paytm and Airtel Payments Bank sought Aadhaar details from customers.

The implications of the Aadhaar verdict:

1. Aadhaar is mandatory for filing of income tax returns (ITR) and allotment of Permanent Account Number (PAN).

2. Most commercial banks, payments bank and e-wallet companies like Paytm, they cannot seek Aadhaar data i.e. Aadhaar authentication for bank accounts is now a thing of the past.

3. Telecom service provider cannot seek Aadhaar details from you. Justice Chandrachud has favoured deletion of consumers’ Aadhaar data by mobile service providers.

4. Students of CBSE, NEET, UGC also do not require Aadhaar number to appear in exams. Even schools cannot seek Aadhaar card for admissions.

5. Aadhaar card is however must for availing facilities of welfare schemes and government subsidies as it empowers the poor and marginalised.

6. The Supreme Court has made exception for children saying that no child can be denied benefits of any scheme if he or she doesn’t have Aadhaar card.

7. The apex court has struck down Section 57 of the Aadhaar Act as “unconstitutional”. This means that no company or private entity can seek Aadhaar identification from you.

8. The constitution bench has also struck down the national security exception under the Aadhaar Act. This will indirectly ensure greater privacy of individual’s Aadhaar data while restricting the government accessibility to it.

9. The Supreme Court judgement, said it would not lead to a surveillance state because the data was kept in silos. The program’s invasion of privacy was minimal and served a much larger public interest by providing identities to India’s poor and marginalized citizens.

10. The court said that under present Aadhaar scheme and structure, it is difficult to profile a person on the basis of minimal biometric information collected.

The dissent in the Court’s verdict

• In his dissent, Justice Chandrachud argued that the passage of the Aadhaar Act as a ‘money bill’, has superseded the Rajya Sabha’s authority and this “constitutes a fraud on the Constitution”. As a result of this “debasement of a democratic institution”, he held the Aadhaar Act unconstitutional.
• He also expressed his displeasure at the government passing a series of orders making Aadhaar compulsory for various reasons, in defiance of interim orders from the Supreme Court.
• He highlighted the biometric authentication failures that have led to denial of rights and legal entitlements. Further he ruled that denial of benefits arising out of any social security rights is “violative of human dignity and impermissible under our constitutional scheme”.

Aadhar Card and Right To Privacy – Can They Co-Exist?

Previous Supreme Court Rulings:

1. In Kharak Singh case (1962), a six-judge judgment — held that the Right to Privacy was not a fundamental right.
2. In Govind vs. State of Madhya Pradesh (1975), the Supreme Court held that “many of the fundamental rights of citizens can be described as contributing to the Right to Privacy”. After this, the approach to interpretation of fundamental rights had undergone a fundamental change. The scope of article 21 of Constitution was broadened through subsequent judgments.
3. In Maneka Gandhi (1978), the SC held that any law and procedure authorizing interference with personal liberty and Right of Privacy must also be right, just, and fair, and not arbitrary, fanciful, or oppressive.”
4. In R Rajagopal vs State of Tamil Nadu (1994), Supreme Court held that the Right to Privacy is implicit in the right to life and liberty guarantee by Article 21. A citizen has a right to safeguard the privacy of his own, his family, marriage, procreation, motherhood, child-bearing and education among other matters.

From these rulings, it can be inferred that though the Constitution does not specify ‘right to privacy’ as a fundamental right, but the subject has evolved considerably in India, and privacy is now seen as an ingredient of personal liberty.

The Need of hour to ensure Data Privacy:- Justice AP Shah Committee

• In its zeal to aggregate data in electronic form and target subsidies better, the government cannot ignore its responsibility to protect citizens from the perils of the cyber era.
• Legislation- it is imperative that the Union Government enact a privacy legislation that clearly defines the rights of citizens and it should be consistent with the provision of the Constitution.
• The government should factor in privacy risks and include procedures and systems to protect citizen information in any system of data collection.
• It should create an institutional mechanism such as the Privacy Commissioner to prevent unauthorised disclosure of or access to such data.
• Our national cyber cell should be made well capable of dealing with any cyber-attack in the shortest time.
• We need to educate people on the risks involved and highlight examples of ID thefts and fraud.
• The government should recognise all dimensions of the right to privacy and address concerns about data safety, protection from unauthorised interception, surveillance, use of personal identifiers and bodily privacy.
• We need to take a level-headed approach and ensure that ample safeguards are put in place for data protection and privacy.

The Way Ahead:

• The court also ruled that the authentication record should not be kept beyond the period of six months and the provision that allowed archive records for five years has been struck down.
• It has excluded storage of meta-data of transactions by individuals. This banning means UIDAI cannot collect data sets and mine it for more data or analysis. It has also struck down data sharing with corporates.
• The Supreme Court also called for Parliament to draft and pass a data protection law immediately. “We have also impressed upon the respondents to bring out a robust data protection regime in the form of an enactment on the basis of Justice BN Srikrishna (Retd.) Committee Report with necessary modifications thereto as may be deemed appropriate.”

Conclusion

• This judgment should reassure all citizens that Aadhaar has been put into place by this government to ensure that curse of corruption and leakages in use of public money is once in for all removed from our system.
• The main concerns of rights of citizens and correcting the imbalance in Aadhaar Act vis-a-vis UIDAI has been corrected by Supreme Court and UIDAI will now evolve into a transparent accountable institution.
• The ban on metadata storage, minimum data and only six months of data storage strengthen the citizens Right to Privacy.
• Along with Section 66 A, Privacy as Fundamental Right and this verdict on Aadhaar– these three cases mark the basic shaping of the future of a Digital India with solid clear legal rights for Indians.

WHY IN NEWS

IL&FS Group, a vast conglomerate that funds infrastructure projects across the world’s fastest-growing major economy, sent shock waves through credit markets when it began missing debt repayments. That’s caused concern not just for its myriad investors, including private individuals, who had regarded IL&FS debt as rock-solid.

KEY TERMS

1. Commercial paper is an unsecured, short-term loan used by a corporation, typically for financing accounts receivable and inventories. It is usually issued at a discount, reflecting current market interest rates. Maturities on commercial paper are usually no longer than nine months, with maturities of between one and two months being the average.
2. NBFC: A Non-Banking Financial Company (NBFC) is a company registered under the Companies Act, 1956 engaged in the business of loans and advances, acquisition of shares/stocks/bonds/debentures/securities issued by Government or local authority or other marketable securities of a like nature, leasing, hire-purchase, insurance business, chit business but does not include any institution whose principal business is that of agriculture activity, industrial activity, purchase or sale of any goods (other than securities) or providing any services and sale/purchase/construction of immovable property.
3. SFIO:-The Serious Fraud Investigation Office (SFIO) is a corporate fraud investigating agency in India. It is under the jurisdiction of the Ministry of Corporate Affairs, Government of India. The SFIO is involved in major fraud probes and is the coordinating agency with the Income Tax Department and the Central Bureau of Investigation.

What is IL&FS?

• The IL&FS Ltd is an infrastructure finance company registered with the Reserve Bank of India as a ‘Systemically Important Non-Deposit Accepting Core Investment Company’, with over Rs.1,15,000 crore of assets and Rs. 91,000 crore of debt.
• The IL&FS was the brainchild of the late M.J. Pherwani and was founded in 1987 with equity from Central Bank of India, Unit Trust of India, and Housing Development Finance Co to fund infrastructure projects at a time when peers IDBI and ICICI were more focused on funding corporate projects.

What is the crisis?

• To put it simply, IL&FS defaulted on a few payments and failed to service its commercial papers (CP) on the due date—which means the company has run out of cash or it is facing a liquidity crunch.
• The company piled up too much debt to be paid back in the short-term while revenues from its assets are skewed towards the longer term.
• IL&FS first shocked markets when it postponed a $350 million bonds issuance in March due to demand for a higher yield from investors.
• The recent slowdown in infrastructure projects and disputes over contracts locking about Rs 90 billion of payments due from the government have further worsened the condition.
• IL&FS Financial Services disclosed on September 6 that the commercial papers (CP), which were due on August 28, could not be paid on due date and were settled in full on August 31.
• IL&FS Financial Services has about $500 million in repayments which are due in the second half of this financial year while it has only about $27 million available.
• According to a Reuters report, by the middle of September, IL&FS and IL&FS Financial Services had a combined Rs 270 billion of debt rated as junk by CARE Ratings and a further six group companies had suffered downgrades with a negative outlook on another Rs 120 billion of borrowings.

What are the effects?

• The company’s default spells trouble for its investors, which include banks, insurance companies, and mutual funds. Investors and traders have been worried over the cascading effects of IL&FS’s defaults.
• IL&FS sits atop a web of 169 subsidiaries, associates, and joint-venture companies, which makes the default even more worrisome.
• IL&FS has revealed a series of delays and defaults on its debt obligations and inter-corporate deposits.
• IL&FS said it was unable to service its obligation towards a letter of credit to IDBI Bank Ltd.
• This has raised concerns about the possibility of a contagion or spillover, with further defaults hitting mutual funds with exposure to IL&FS and its group companies.

Why are individual investors affected?

• Some of the missed payments, which started in late August, were on commercial paper, or short-term unsecured debt.
• Money managers have marked down holdings of IL&FS debt and one financial company temporarily halted inflows into some affected funds.
• Banks, mutual and pension fund managers, insurers and individuals are bracing for further losses.
• Among the concerns for investors is that IL&FS has made loans to its own units. The company is also in default on short-term borrowings known as inter-corporate deposits.

LATEST DEVELOPMENT

• The government announced that Kotak Mahindra Bank’s managing director Uday Kotak will serve as chairman of the new IL&FS board. Additionally, the government nominated technocrats with substantial experience in their fields.
• The Parliamentary panel on finance decided to investigate the IL&FS matter and its members will meet the new board.
• Separately, India’s Serious Fraud Investigation Office (SFIO) has launched an inquiry into alleged financial irregularities at IL&FS, questioning its top management and searching its offices.
• Life Insurance Corporation(LIC) has been slated to bail out Infrastructure Leasing & Financial Services Limited (IL&FS) soon.

Challenges for the new board under Uday Kotak as chairman

• Infrastructure Leasing and Financial Services (IL&FS) is a season of corporate misgovernance, scams and lack of any CEO-level and board-level accountability.
• It is shocking that credit rating agencies such as ICRA and CARE should have given a ‘AAA’ rating to IL&FS when information regarding the IL&FS board’s complete neglect of risk management was in the public domain.
• It would take time to revive the company and the new board need to ensure a fair value for the assets of IL&FS.
• The company, with Rs 91,000 crore debt, has defaulted on a series of payments due to asset-liability mismatch and its inability to raise funds from the market.
• The immediate task for the board would be to come up with a roadmap to arrange for the funds and to also re-examine the IL&FS business model of being both a financier and a developer of infrastructure projects.
• The new board will have to figure a way to unravel the numerous subsidiaries and associate companies, which have over the years burgeoned under the parent IL&FS’s blessings.

THE WAY AHEAD

• There may be a freeze on actions like payout of management salaries and payout of dividends that were declared at IL&FS’s annual general meeting.
• The new board is reportedly considering monetisation of IL&FS’s assets to pay back investors and lenders. It also plans to sell as much as 24 projects to raise around Rs30,000 crore.
• Besides raising funds, the board may also have to order an audit to identify what went wrong and take action against those found responsible.

CONCLUSION

The IL&FS fallout has already roiled stock markets and the government has scrambled to contain the further damage that could undermine confidence in the financial sector.  The need is to restore investors confidence who are worried about leverage at other shadow banks, prompting a surge in volatility among financial stocks.

What is the meaning of IoT?

1. The Internet of Things (IoT) is a system of interrelated computing devices, mechanical and digital machines, objects, animals or people that are provided with unique identifiers and the ability to transfer data over a network without requiring human-to-human or human-to-computer interaction.
2. A thing, in the Internet of Things, can be a person with a heart monitor implant, a farm animal with a biochip transponder, an automobile that has built-in sensors to alert the driver when tire pressure is low — or any other natural or man-made object that can be assigned an IP address and provided with the ability to transfer data over a network.
3. IoT has evolved from the convergence of wireless technologies, micro-electromechanical systems (MEMS), microservices and the internet. The convergence has helped tear down the silo walls between operational technologies (OT) and information technology (IT), allowing unstructured machine-generated data to be analyzed for insights that will drive improvements.

Impact of IoT on the day to day life:

1. Car-Calendar Connection: Say for example you are on your way to a meeting; your car could have access to your calendar and already know the best route to take. If the traffic is heavy your car might send a text to the other party notifying them that you will be late.
2. Alarm Clock-Coffee Maker Connection: What if your alarm clock wakes up you at 6 a.m. and then notifies your coffee maker to start brewing coffee for you?
3. IoT and Google’s Driverless Car: The car has multiple devices which track the movement of objects, captures the images surrounding it and processes the information. It has devices on board that can change the speed and direction of movement depending on the feedback it gets from the external environment. The data is then backed-up on a cloud from which it can receive instructions and behave accordingly, right from throttle accelerator to applying brakes.

Impact of IoT on Governance:

1. On a broader scale, the IoT can be applied to things like transportation networks: “smart cities” which can help us reduce waste and improve efficiency for things such as energy use; this helping us understand and improve how we work and live.

Challenges thrown up by the advent of IoT

• Data Management

Connected devices are going to produce massive amount of data. Companies need to figure out a way to store, track, analyze and make sense of the vast amounts of data that will be generated.

• Privacy & Security

With billions of devices being connected together, what can people do to make sure that their information stays secure? Will someone be able to hack into your toaster and thereby get access to your entire network? The IoT also opens up companies all over the world to more security threats. Then we have the issue of privacy and data sharing.

IoT in India

Government of India’s IoT Announcement, has come out with a draft IOT Policy document which focuses on following objectives:

1. To create an IoT industry in India of USD 15 billion by 2020. It has been assumed that India would have a share of 5-6% of global IoT industry.
2. To undertake capacity development (Human & Technology) for IoT specific skill-sets for domestic and international markets.
3. To undertake Research & development for all the assisting technologies.
4. To develop IoT products specific to Indian needs in all possible domains.

Recent Initiatives

1. Government is coming up with a regulatory framework for Internet-of-Things (IoT) along with policies to promote the sector.
2. Department of Telecom has come out with a machine-to-machine (M2M) roadmap, with an aim to put regulators, industry agencies that develop standards, users and manufacturers on the same page.
3. The Department of Electronics & Information Technology (DeitY), in its draft policy, targets to create an IoT industry in India of $15 billion by 2020.
4. Currently, work is going on in the area of numbering schemes for IoT and KYC norms for SIM-embedded M2M devices.
5. Telecom Standards Society of India too is working on India-relevant standards with respect to the sector.

Consumer IoT adoption would be slow in India

Due to various challenges, consumer IoT adoption would be slow in India. Some of these IoT adoptions challenges (data security, lack of standardization, data ownership issues, ROI, etc.) are really not unique to India. Apart from these challenges, IoT in India, especially in the consumer space, would need to reckon with a few other hurdles. These are:

• Internet availability / bandwidth / reliability

Even today Internet connectivity is a major challenge in India. For consumer IoT adoption – this would remain a major challenge.

• Cost of IoT enabled systems and devices

Even products such as wearable fitness bands are yet to take off in India, and price is a key reason. Indian consumers are very selective in terms of where they would invest when it comes to technology.

• Lack of vendor activity

Global vendors, often mistakenly, assume that Indian consumers are “not ready” for advanced products. This is very much evident in the IoT space, with hardly any kind of vendor activity today. This, in turn, has led to low awareness levels of IoT devices and systems among consumers.

• Overall infrastructure challenges

Apart from the internet the supporting infrastructure such as smart grids, traffic systems, etc., are far from being ready for IoT.

Commercial IoT has much better prospects in India

The challenges listed for consumer IoT adoption becomes less of an issue when it comes to commercial space. It is not that these challenges (especially internet connectivity and cost of IoT) are not there in the commercial space; they can just be more easily addressable by commercial organizations. Even globally, IoT adoption and usage is much higher in the commercial space.

Some of the areas where commercial IoT adoption can grow in India are:

• Logistics, fleet telematics

1. Logistics as a sector is expected to grow rapidly in the coming years in India. Regulatory changes such as GST implementation would drive consolidation and growth. The booming e-commerce sector is another key driver for the logistics industry.
2. With growth and consolidation, logistics companies would be looking to better leverage technology to drive efficiency in operations and this where IoT could play a key role.
3. Tata Motors as begun putting sensors into its trucks, so that fleet owners can get information on how the vehicles are used, and even predict potential breakdowns.
4. Vendor community also sees to be interested in the IoT opportunities in the logistics space.
5. Cisco and L&T Technologies announced a tie-up in September 2014, to explore IoT opportunities in transportation and other infrastructure sectors.

• Smart cities and utility services

1. With the new government coming out with an IoT policy, and the stated plans of developing smart cities, there is significant scope for growth of IoT in multiple government and utility services.
2. There are signs of some vendor activity also. Tech Mahindra has announced a tie-up with Bosch Software Innovations, to develop an ecosystem to enable innovative solutions for the connected world and connected enterprises.

• Industrial automation / supply chain / inventory management

1. Indian manufacturing sector has seen a significant growth in IT adoption.
2. IoT applications for the manufacturing sector whether it is automation or supply chain management would be a key growth area in India.
3. Other areas of possible growth include insurance sector, where some of the insurance companies in India have started experimenting with IoT, primarily in the automobile insurance space; and the healthcare sector which is growing very rapidly and modernizing fast.

Way forward

1. IoT will continue to evolve in the coming months and one can expect significant growth in the long run.
2. However, reliable internet connectivity and overall supporting infrastructure will be a key prerequisite for this growth. If things fall into place, IoT has the potential to provide substantial benefits.