A panel headed by UIDAI chairman Nandan Nilekani on Wednesday suggested two-phase strategy to use IT to improve the PDS network and provide direct subsidy to poor, besides checking pilferage in the process.

The first phase of PDS revamp will deal with supply chain improvement, while the second will focus on direct transfer of subsidy, Nilekani said after submitting the report to Finance Minister Pranab Mukherjee.

The Task Force on direct transfer of subsidies on kerosene, LPG and fertiliser was set up in February.

The Task Force has recommended a dedicated institutional mechanism to implement end to end computerisation of PDS across the country, Nilekani said after submitting the report.

It has suggested creation of a National Information Utility or Public Distribution System Network (PSDN) by April 2012 and initiation of pilot projects by December 2012.

There are about 4.62 lakh fair price shops (FPS) which distribute commodities, like wheat, rice, sugar and kerosene, worth over Rs 30,000 crore every year to 18 crore families.

"The Task Force believes that a strong, robust IT infrastructure backbone is critical for reforming the functioning of the PDS", the report said.

It pointed out that true PDS beneficiaries suffer due to "wholesale problems such as large-scale pilferage and diversion...duplicates and ghost beneficiaries, wrongful exclusion and inclusion."

Nilekani said, "the large focus of the report is to make system more efficient (and) to make sure people have choice."

The government has in principle accepted the report of the Task Force, he said, adding, "it will now process the report and take appropriate action".