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OB van politics, passing laws won't solve corruption, we need to fix the system: Nandan Nilekani


Sagarika Ghose,CNN-IBN
Oct 23, 2012 at 06:03pm IST

The Unique Identification Authority of India (UIDAI) chairman Nandan Nilekani, in an indirect attack at India Against Corruption activist Arvind Kejriwal, has said laws like the Lokpal Bill cannot help in solving the problem of corruption in India. Speaking to CNN-IBN Deputy Editor Sagarika Ghose, Nilekani said, "I think it is not just laws, you need something by which land titling is improved, you need something by which land registration is improved, you need something by which land record reflects actual ownership. You need to have a way of mapping who owns what land."

He also said that the Aadhaar number is a step forward in the direction of solving the problem of corruption. Following is the full transcript of Sagarika Ghose's interview with Nandan Nilekani:

Sagarika Ghose: Hello and welcome to a Face The Nation special. Last weekend the government launched the Aadhaar enable service delivery system. This means integrating the Aadhaar numbers with delivery of government services, integrating the Aadhaar numbers with direct cash transfers to the poor. The government says this will drastically cut corruption, but others say that this is a pre-election gimmick by the UPA. Who better to explain Aadhaar enable service delivery system than Chairman of the Unique Identification Authority of India, Nandan Nilekani. Thanks so much for joining us.

Nandan Nilekani: Thanks Sagarika.

Sagarika Ghose: How will the system actually work - Integrating the Aadhaar number with delivery of government services, integrating the Aadhaar number with direct cash transfers to the poor.

Nandan Nilekani: Well you know the Aadhaar number gives a unique identity and we are doing that so far to 21 crore people and that's an online ID using biometric technology. Now, to that ID you can now attach a bank account. And a government programme like a pension programme or a scholarship can just credit money electronically to the bank account using the Aadhaar number as the address. The person then can go and withdraw the money anywhere from a business correspondent. That's how it will work for cash transfer. The same concept can be done for the PDS, for example, if somebody has a rice account the person can go to the Aadhaar number to authenticate before claiming the rice in the PDS outlet. So both for cash and in kind, Aadhaar enables a better delivery and accurate beneficiary, identification and authentication.

Sagarika Ghose: But Nandan how has the Aadhaar number worked until now? It's been two years since the Aadhaar process started. As you said 20 crore Aadhaar numbers have been given out, 21 crore was the number that was given by the Prime Minister just last weekend. But we find that many government department we not accepting the Aadhaar number. The Reserve Bank of India has gone on record saying that Aadhaar number is not enough to open a bank account. So, is there a problem with government departments accepting the Aadhaar number? And if it's not actually delivering benefits then why should people go for an Aadhaar number?

Nandan Nilekani: I think it is a process, I think we will see more and more proclamations from different departments, over the time it will become the de facto proof of identity and address for many, many schemes, including for bank accounts, mobile connections, other documents. So I think you have to see it as a major transition. First you require enough people to have the number, which we now have reached 21 crore, 210 million, one out five Indians has an Aadhaar number. By next year one out of three will have an Aadhaar number, by yeat after that one out of two will have an Aadhaar number. So that's quite a serious penetration and as It becomes more and more gateway, it's already a gateway. For example, you can get an LPG connection with an Aadhaar number, it's an ID proof of address for SEBI transactions, you can use it for insurance policies, railways it's an ID. So you know over time as we make it more and more…

Sagarika Ghose: But it's an ongoing process, we're not there yet.

Nandan Nilekani: Yeah

Sagarika Ghose: Don't you think you need to spread more awareness in the government departments on the Aadhaar number?

Nandan Nilekani: Which we are doing. I think the fact that we had this major launch last week in the presence of the Prime Minister Manmohan Singh, UPA Chairperson Sonia Gandhi, and Finance Minister P Chidambaram. I think shows the enormous political and government …

Sagarika Ghose: And what about penalties? Will the government departments be penalised if they don't honour the Aadhaar number?

Nandan Nilekani: Penalise the government department?

Sagarika Ghose: Yes, penalise those who don't honour the Aadhaar number.

Nandan Nilekani: Well I think it is a process because we have to work with different departments, we have to get them to bring out regulations that this is sufficient. So, this is a very major change in the way we do things. I think the fact is that we have used it for cash transfers, at this function we showed examples of old age pension system, pensions in Tripura, MNREGA payments in Jharkhand, you know scholarships and pension in Maharashtra, PDS in Andhra, LPG cash transfers in Mysore. It shows the breadth and diversity of its application.

Sagarika Ghose: You know, on the cash transfer question, there are many who oppose the direct cash transfer, they feel the system more suited to India is the PDS, is the Public Distribution System, cash transfer will not work in a country like India where many don't have bank account where you'll get transfers of money and fitter it away into alcoholism, it will not help the families. The real poor need the PDS, they don't need cash transfer.

Nandan Nilekani: Well I think we have to actually dissect this thing, about 150,000 crores of payments today in India already happen in the form of cash, for example scholarships, pensions, NREGA payments, there is janani suraksha yojna which encourages women to come in for delivery at a PHC and so forth. One part of that is streamlining those electronic benefits and making them much more electronic and deliver directly. So that's a straight thing, it's a cash only but done in a much better way. Then we have direct subsidies on fuel for example LPG and kerosene, as well as fertilisers. There again I think by and large people are fine with cash transfer so that the product goes at market price and people get cash in their account equal to the difference of the price. I think the issue is where there is a debate on food. I think our system allows you to use it for food also. In fact as I was giving the example of what we are doing in Andhra Pradesh, the PDS system using Aadhaar to authenticate the food. So as a platform it is neutral whether it is used for cash or food.

Sagarika Ghose: Aadhaar is neutral whether it is used for cash or food?

Nandan Nilekani: Correct.

Sagarika Ghose: But in terms of cash, obviously the people who will benefit those who have bank accounts. What about people who don't have bank account? How will they benefit?

Nandan Nilekani: Aadhaar first of all allows you to open a bank account, very soon it will be an electronic opening of a bank account. Aadhaar becomes the address by which you put the money into the bank account and using Aadhaar enabled micro-ATMs business correspondents make it easier to withdraw money. All this infrastructure will make banking more accessible. So they go hand in hand.

Sagarika Ghose: So the series of process go hand in hand and they are based on the Aadhar number.

Nandan Nilekani: Yes.

Sagarika Ghose: Let me just read out to you the views of Swaminathan Aiyar who speaks about the integration of the Aadhaar numbers with cash transfers. He says cash transfers are a good idea but we need to hasten slowly. Scoundrels can still sabotage the cash transfer system. The conditions to identify target and monitor cash transfer are not favourable with almost 70 per cent living in rural areas and 30 per cent illiterate in India. Mobile banking using biometric cards needs 3G broadband, which will take time. Corrupt officials will demand bribes to issue smart cast. They will inevitably be they will be fake cards and ghost cards.

Nandan Nilekani: First of all the ID is a unique ID so we eliminate ghosts and duplicate. Secondly, more than the smart card, the ID is online so I can just use my finger or my eye to authenticate myself. Thirdly, a regular mobile network is good enough for the online connectivity. Fourthly, we plan to work with the banking system to have a range of outlets called as business correspondents who are on the mobile ATMs, who can authenticate and disperse money. So a huge amount of thinking has gone into the architecture which allows people to get an ID, bank account, withdraw money easily and get money for the various schemes.

Sagarika Ghose: But the system is not entirely food proof, as he says. In our country everything can be sabotage, so there are no chances of sabotage as well in this?

Nandan Nilekani: Sagarika, how much does it improve from where we are? You know it is very obvious and all the anecdotal evidence on all the early use of Aadhaar has shown significant benefits in reducing ghosts and duplicate and reducing savings to the government. So we are already saying that in all the programmes we have launched it. So you're going from a system which has fair amount of leakage, we have enough numbers on that, to a system which is almost, I would say zero leakage.

Sagarika Ghose: Almost zero leakage.

Nandan Nilekani: Yes, don't look for absolute perfection. If you are at X you are going close to 100 per cent, that is the big leap forward.

Sagarika Ghose: This Aadhaar is the government's weapon to fight corruption, given that there is a huge rising anger against the corruption. Is Aadhaar the government's weapon to fight it?

Nandan Nilekani: But I think it is important to understand that it is not just about the corruption dimension. Number one, it is the world's largest social inclusion project. For the first time millions of people will get ID and will get included in society. So it's the world's largest social inclusion project. It will help in making you physical spending more efficient by reducing diversion and fraud. It helps in empowering the person to go anywhere and withdraw their money, choice is important. The consequences of all this helps in reducing corruption. So it is more than… it's not just the negative thing to reduce corruption, it is also a positive empowering thing which has a bi-product also helps in reducing corruption.

Sagarika Ghose: Right, we'll come to the corruption question in just a bit, but I also want to ask you about you know the information of the database, how will you update for example the information on your list because the fact is people will go on from being poor to rich, how will you update your database? Is there an updation problem?

Nandan Nilekani: See, our database is a pure ID database, who is eligible for what is in that respective application. So the previous application says who is eligible for subsidised rice, or wheat or sugar or kerosene. Some of the health application will say what is his health record. So we only provide the ID infrastructure, so those decisions will be in the respective applications.

Sagarika Ghose: Yes, but when people change their addresses, when they move, when they go from being poor to rich, so how will they...

Nandan Nilekani: See, poor to rich is the eligibility criteria which is the part of the application which gives whatever benefits.

Sagarika Ghose: Okay, but what about the change of address?

Nandan Nilekani: That's the big one. So we intent to have a network of update centres where people can go and do the address change. So the address is really the big one from our side. So what we do is provide proof of identity, proof of address.

Sagarika Ghose: Right. And the people who have got the Aadhaar number already in Maharashtra, the first people who got the number when you launched it in 2010, how many benefits have they actually got till now?

Nandan Nilekani: I think it's still getting rolled out, I would not say that everything has happened. But the way to think of this is that first we have a population with large number of people and then we start rolling out applications using those numbers and over time this will become more and more prevalent. And what was launched on Saturday was the next phase where we now use the installed infrastructure of the 210 million, tomorrow 400 million, then 600 million and now building application on top of it which will give them benefits.

Sagarika Ghose: So do you feel, just to come to that corruption question, in order to fight corruption Aadhaar is a more valuable weapon, Aadhaar is a more efficient weapon for the government than simply going after individual cases, going after individual person or individual personality.

Nandan Nilekani: Absolutely, if you want to build a solution at scale you have to do it using this kind incentive aligned technology enabled systems. You can't say every time a PDS guy doesn't get his rice, he calls up somebody and he comes running and sorts it out. That's not the way of doing it. Retail transaction which involves an individual getting the benefits which can be in cash and in kind, reducing hassles for them, empowering them.

Sagarika Ghose: How does the government see it in terms of the architecture of fighting corruption?

Nandan Nilekani: So automatically the corruption is addressed. Let's say today you can only go to one person to get your pension or can go to only one PDS outlet to get rice. Tomorrow if I have this network where I can go to any BC to withdraw my money, or any PDS to get my rice, then automatically the bargaining power shifts to the resident. That's how empowerment happens. You as a costumer can go to this bank, if you don't like it you can go to that bank, you can go to this grocery store, that grocery store. We need to create the same kind of empowerment for the common man. This is what it does, so automatically it will help in reducing corruption.

Sagarika Ghose: Let me give you another quote from R Jagannathan of Firstpost, he says in all areas where UAID has done cash transfers mean every family will get money in the range of Rs 3,000 to Rs 14,000 per annum depending on whether they are identified as BPL or better off. This is nothing but the legalised bribery of the voter. The Congress party is getting ready to harvest votes. Are you rushing through the scheme because elections are around the corner?

Nandan Nilekani: No, I think I can say know that it's been three years since we started this scheme and two years since we launched it. Right from day one we have been saying that this will reach 600 million people or 60 crore by 2014. Right from day one we have said that this will be our platform for transfer of both cash and in kind, and going by that I have received very strong support from day one by the government of India.

Sagarika Ghose: You see the Aadhaar card as reduction in corruption, pilferage and fraud?

Nandan Nilekani: Yes, in the dispersal of the electronic benefits and subsidies. I mean you can't use Aadhaar for solving coal or something but you can use it to solve retail corruption.

Sagarika Ghose: You know given this rage against corruption that exists, what does Aadhaar mean for the fight against corruption?

Nandan Nilekani: I think it means for millions of people, social inclusion, where they become part of the formal society, empowerment for them, and for government also improvement in delivering the system and as a bi-product of this it also mean the resident-state interface gets streamlined and automatically corruption in that interface comes down. That's my point, You don't fix corruption by creating more laws, more inspectors and more punitive measures on bureaucrats. You fix it by changing the underline system so that millions of people get benefits.

Sagarika Ghose: I also want to ask you, when I interviewed you last year, you said that to think that a Lokpal Bill will fight corruption was to drink cool aid, that made a lot of news. Do you still believe that an anti-corruption campaign on Indian Against Corruption that is launching on public naming and shaming individuals, do you still believe that this is not an effective way of fighting corruption?

Nandan Nilekani: Well, let me tell you I am as much for fighting corruption as the next guy. I do believe that we need to fix those things. But I certainly don't believe that by passing a law, putting more punitive penalties on bureaucrats, creating more inspectors is going to solve corruption. That's absolutely the wrong prescription. You may want some of that but we have already done much of that. What you need now is to fundamentally get into the trenches and fix the delivery system. How to make sure that the right people get the right things at the right time with an element of choice, that's re-engineering the delivering system which is far more complex. That is what we do at UIDAI. So I think that's the kind of thing we need to focus on if we need to fight corruption for a large number of people. It's not just Aadhaar but I am saying improving the way you buy things, improving the way you sell things, improving the way you convert money into electronic money reduce unaccounted money, the whole host of thing. But I think it really hard block and tackle thing that is required now.

Sagarika Ghose: It's systemic change, changing the processes, not necessarily targeting the individuals.

Nandan Nilekani: Even if you say that you raise the consciousness of corruption in the system and encourage more honest behaviour, then what? Then you have to fix the system.

Sagarika Ghose: Otherwise you will get more individual who are in the same system and are equally corrupt.

Nandan Nilekani: Lokpal, he'll go around, somebody will call him up and he will solve problem. I mean you can't do it like that. Let's take an example, if you are have an automobile factory and if the cars are of bad quality, then you don't improve the quality by putting more inspectors, you improve quality by looking at manufacturing process and fixing defects. So you have to do it same here. We have to get into the innards of the system and figure out how to make it deliver better.

Sagarika Ghose: It's not only about targeting Robert Vadra for his land deal, it's not only about targeting Nitin Gadkari for his land deals, it's perhaps fixing the land laws. Do you feel it's about changing India's land laws which many feel are absurd?

Nandan Nilekani: No, I think one is not just laws, you need something by which land titling is improved, you need something by which land registration is improved, you need something by which land record reflects actual ownership. You need to have a way of mapping who owns what land. I think that's all nuts and bolts stuff. I mean the notion you know can bring corruption by having bunch of OB vans, I think that's not going to solve the problem.

Sagarika Ghose: Is that how you see Arvind Kejriwal's campaign?

Nandan Nilekani: No, I think there is a lack of appreciation of the long term institutional and systematic changes required to get to where we want.

Sagarika Ghose: Does it worry you that some of the anti-corruption campaign is seen as anti-economic reform? Or liberalisation is seen to bring corruption? Or liberalisation is seen to bring chronic capitalism, corporate are being targeted. Does that worry you that a anti-corruption crusade could take you back to licence raj or inspector raj?

Nandan Nilekani: No, I think we should really understand that if India is going to create employment for millions of young people, it will be done by entrepreneurs. Let's be very clear about it. It's only business, innovation and entrepreneurs who are going to create jobs for everybody. So we need a thriving business and private sector. Having said that, where the private sector interacts with the government in term of natural resources in terms of purchase, buying, in terms of regulation, that interface has to be done in a transparent and a levelled way so that there is no accusation of chronic capitalism. But we certainly need to have a very thriving economy and private sector to create jobs. There's a part of the business which has nothing to do with the government where people compete on market principles, innovate services. And large part of Indian economy has that.

Sagarika Ghose: And there, there is less corruption?

Nandan Nilekani: There it is a market thing, automobile, it's up to Mr Tata or Mr Mahindra to come out of the...

Sagarika Ghose: It's where the private sector deals with the government there is corruption.

Nandan Nilekani: Where government is a buyer, say procurement, where government is a seller say natural resources, mining or etc. or where government is a regulator where say regulation has a huge impact on business performance, so that is what needs to be streamlined. But by and large we absolutely need good, honest entrepreneurs to create jobs. I think we are kidding ourselves if we think jobs for millions of people will be created without entrepreneurs.

Sagarika Ghose: Do you think Arvind Kejriwal is doing the hard work of fighting corruption?

Nandan Nilekani: Absolutely not.

Sagarika Ghose: But you know the fight against corruption has become a dominant discourse, at least among the middle class, there is a huge amount of anger and Arvind Kejriwal and India Against Corruption have tapped into that anger. Now, where do you see this movement going, where do you see Arvind Kejriwal going? Do you see them achieving something productive by this public naming and shaming or do you think it will fitter away because it doesn't have a serious fighting capability against corruption?

Nandan Nilekani: My point is that, the only real challenge is that how do you make it work. How do you fix it, how do you put institutional arrangement in place, how do you have frame of laws and regulations which allows honest business to compete.

Sagarika Ghose: But don't you think this spurs it, this kind of public campaign don't you think it spurs that kind of change?

Nandan Nilekani: But I think it needs a lot more thinking. You know, the solution that say that how do you fix the price of something, we'll ask the people. It's not the solution, what worries me is that people should not be sold something, I don't see the depth of serious thinking of how do you deliver this systems. That's the hard part.

Sagarika Ghose: At the end of the day you feel something like an Aadhaar card is actually going into the nuts and bolts of the system and fixing the relation between the citizen and the state where it really needs to be fixed?

Nandan Nilekani: Absolutely. Aadhaar is just one example, I don't want to talk about Aadhaar, but I think going in and making the hard changes which may involve, technology, regulations, institutional rearrangement, process reengineering, incentive aliened design and in a way that millions of people improve their interaction with the state. That's where the action is.

Sagarika Ghose: Right, so if you want to fight corruption don't just engage in OB van politics, decentralise, hand over power, fix the system, UID, a host of other…

Nandan Nilekani: Build automatic transparency in all things like that.

Sagarika Ghose: Processes at the grass root, processes at all level of the society that really fight the corruption. Nandan Nilekani, thanks so much for joining us.

Nandan Nilekani: Thanks Sagarika.

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