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9 March 2016 Editorial

 

9 MARCH 2016 

Don’t compromise on privacy 

The Aadhaar Bill, which the government introduced in the Lok Sabha last week, has not come a day too soon. More than six years have passed since the first attempt was made to give legal validity to Aadhaar, an ambitious project that seeks to provide unique identification numbers to each individual in a country of over a billion people, collecting demographic and biometric information in the process. And through these years, amid many legal and political challenges and a change in government, over 98 crore numbers have been issued. The stated idea of the Aadhaar (Targeted Delivery of Financial and Other Subsidies, Benefits and Services) Bill, 2016, is to provide for “efficient, transparent, and targeted delivery of subsidies, benefits and services”. This, along with a clause that says the unique numbers will not be considered as proof of citizenship, is welcome. And yet, the process of legislating for Aadhaar has not been wholly reassuring. The Bill has attracted immediate criticism for being introduced as a money bill, by virtue of which it does not require approval of the Rajya Sabha, where the BJP-led government does not have the numbers to ensure its passage. Bypassing the Upper House’s vote does give the Bill an easy route to becoming law. The question is, given that Aadhaar was a signature project of the Congress-led UPA, could not the government have made the effort to reach out to lawmakers across the board on such a crucial, bipartisan issue?

 Wider political consensus and scrutiny are vital. Section 7 of the Bill, for instance, makes proof of Aadhaar necessary for “receipt of certain subsidies, benefits and services”. This must be read in the backdrop of a Supreme Court ruling that said Aadhaar cannot be made mandatory. A key concern over the collection of personal information on this scale is data protection. There are provisions in this Bill that seem to address the concern, including one that prohibits any official from revealing information in the data repository to anyone. But the exceptions cause unease. Two provisions are particularly troubling. The first is Section 29(4), by which no Aadhaar number or biometric information will be made public “except for the purposes as may be specified by regulations”. The second, which experts have already flagged, is Section (33), under which the inbuilt confidentiality clauses will not stand when it concerns national security. The only reassurance could be that in such cases the direction has to come from an official who is not below the rank of a Joint Secretary to the government. Nonetheless, without robust laws to protect their data, citizens would be rendered vulnerable. It is not about just snooping. It is also being said that in order to be useful and effective, Aadhaar data might have to be used alongside other databases. That could trigger further privacy questions. There is little doubt that India needs to streamline the way it delivers benefits, and to empower citizens with a basic identification document. But this cannot be done without ensuring the strictest protection of privacy.

 

Government cuts its losses on EPF 

Facing mounting criticism, the Narendra Modi government at the Centre has decided to drop its Budget proposal to tax a portion of the EPF (Employees’ Provident Fund) corpus upon withdrawal. An ill-conceived move both context- and content-wise, it has deservedly been given a burial. “In view of the representations received, the government would like to do a comprehensive review of this proposal, and, therefore, withdraw the proposal in paragraph 138 and 139 of my Budget speech,’’ Finance Minister Arun Jaitley said in a statement in the Lok Sabha. The government has also withdrawn the proposal to limit tax-free contributions by the employer to the provident fund account of an employee to Rs.1.5 lakh a year. This did not gel with the Budget speech rationale for taxing EPF savings — to bring parity in tax treatment between the EPF and the National Pension System (or NPS, where employers can pay up to 10 per cent of salary as contribution without any such cap). By putting the EPF back into an EEE tax regime (where contributions, income as well as the accumulated corpus are all exempt from tax), the government’s volte-face would help retain the EPF’s popularity among the salaried class, most of whom are part of it not out of choice but by statutory default. The Finance Minister had himself called them hostages to the EPF in his last Budget, but instead of setting them free, he thought it better to tax them citing fair taxation principles. It is still not clear whether the government had initially thought it could pull the taxation proposal past its middle-class constituency. In the event, the tax on EPF withdrawal gave additional ammunition to an aggressive Opposition, including the Congress party. Differences within the National Democratic Alliance and the Cabinet finally ensured the climbdown by the Finance Ministry. 

While announcing a return to status quo on the EPF, the Finance Minister has rightly retained the Budget provision allowing NPS subscribers to withdraw 40 per cent of the corpus without any tax liability. The remainder 60 per cent will attract a combination of withdrawal tax and deferred tax on the annuity products one buys. In a way, partial tax relief for the NPS will narrow the existing tax-induced gap between the EPF and the NPS. The strident opposition to EPF tax must be read in the context of the virtual absence of a social security net of any worth in India. There are no two views on the need to move towards a ‘pensioned society’. However, this cannot happen abruptly or in a coercive manner — people need to be nudged over time to gear up for such transitions. Whatever the intention, it was the ‘out-of-the-blue’ approach of the government that triggered an uproar. A sheepish rollback is a smart move, ahead of a round of Assembly elections. It is to be hoped that this U-turn will trigger a larger debate on ushering in a holistic social security ecosystem in the country.

 

 

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