New Delhi: Amid the government's plans to transfer cash through unique identity number Aadhar to reduce corruption in subsidy, its success would depend on how states and banks use it, said Nandan Nilekani, chairman of the Unique Identification Authority of India said on Friday.

"Our feedback is that there is saving in subsidy through Aadhar though it would vary from state to state. Aadhar will certainly help in optimising subsidy and reducing corruption," Nilekani said.

"I hope the diversion in subsidy would go away," he said.

Prime Minister Manmohan Singh has announced setting up an architecture to implement cash transfers to plug loopholes in the subsidy regime and ensure it reaches only the genuine beneficiaries.

Nilekani said Aadhar can help authenticate the identity of a beneficiary.

In 2010-11, the country's subsidy burden was Rs.1,64,153 crore -- or 2.08 percent of the GDP -- and is expected to increase to Rs.2,23,000 crore in the current financial year, which is 2.5 percent of the GDP.

Stating that it was for the government to decide, Nilekani said the Aadhar platform could also be used to rationalise the subsidy in cooking gas cylinders.

It can even be used to provide subsidised diesel to the farmers, he said.

The government recently hiked the price of diesel by Rs.5 per litre and capped the number of subsidised cooking gas cylinders at six per household per year as a measure to reduce the subsidy bill.

The Unique Identification Authority of India is running various pilots of Aadhaar Enabled Service Delivery like public distribution system in Kakinada, in East Godavari district of Andhra Pradesh; social security payment in Aurangabad, Maharashtra; LPG cylinder delivery in Mysore, Karnataka; payments under the Mahatma Gandhi National Rural Employment Guarantee Scheme in Ramgarh, Jharkhand; and Old Age Pension payments in West Tripura.

(Agencies)

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