Prime Minister Manmohan Singh's core group on food and Public Distribution System (PDS) is looking at the option of providing foodgrain subsidies through cash transfers using Aadhar Unique Identification cards to eliminate leakages.

"There is a massive leakage in PDS. We are considering the proposition to move towards smart card using Aadhar number, which Nandan Nilekani is working on," planning commission deputy chairman Montek Singh Ahluwalia, who heads the PDS core group, told reporters on the sidelines of a book release function.

He said computerisation of PDS alone cannot eliminate leakage of foodgrains. "If there is a strong incentive for leakage, that is not going to be covered by computerisation," he said.

The core group includes chief ministers of Delhi, Bihar, Chhattisgarh, Assam and chairman of Prime Minister's Economic Advisory Council (PMEAC) C Rangarajan as members.

Ahluwalia, who is finalising the report with suggestions to improve the distribution of foodgrains through ration shops, said, "Through smart card, cash subsidy goes to PDS in uniform manner at market prices".

He also said that there is a divided opinion on transfer subsidy. "Delhi and Bihar Chief Ministers are favouring cash transfer system and the rest two are not."

Prime Minister Manmohan Singh had set up the group in April 2010 to ensure effective nationwide distribution of foodgrains through ration shops.

At present, the government supplies every month 35 kg of foodgrains at subsidies rates to 6.52 crore BPL families and 15-35 kg of foodgrains to 11.5 crore families above poverty line (APL).

Presenting the Budget 2011-12 last month, Finance Minister Pranab Mukherjee had proposed direct cash transfer of subsidies for kerosene and fertilisers.