New Delhi, September 21 With political uncertainty over Trinamool Congress chief Mamata Banerjee out of the way, next on the UPA government’s radar is to get Cabinet clearance for the controversial Land Acquisition Bill, possibly before October-end.
However, the immediate next on the Cabinet Committee on Economic Affairs’ agenda next week is to raise the foreign direct investment (FDI) limit in the insurance sector to 49% from 26% and increase the price of retail price of sugar sold through ration shops - suggestions that have the potential to snowball into another political controversy, especially that pertaining to the latter, considering its direct effect on the Below Poverty Line segment in the country.
Although the Food Ministry has not recommended any specific figure and has left the sensitive decision to the CCEA, sources say officials have recommended increasing the price of sugar sold through ration shops from the existing Rs 13.50 per kg to around Rs 23 per kg to decrease the subsidy burden on the exchequer. “If the proposal is accepted, the quantum of increase will be decided on the basis of all governing factors,” they say.
Coming ahead of the festival season, it is a move that is not expected to go down well with the Opposition parties, which are already on a warpath on various other economy-related issues.
It is also the decision that the government will find the trickiest to implement, considering that it affects the bottom rung of the economic ladder in the country.
But with Mamata out of the way, some of the in-house problems will be reduced.
Officials contend that as far as this particular issue is concerned, the UPA has limited choices.
Sugar price was last fixed more than 10 years back in March 2002 and since then, the market dynamics have undergone a major change.
The open market price of sugar is hovering around Rs 40-50 a kg depending on the quality.
There are allegations that apart from the huge subsidy burden that the government incurs every year by procuring levy sugar at Rs 19.05 a kg from mills and selling it with the subsidy component of Rs 5.55 per kg, a large chunk of this highly subsidised 27 lakh tonne sugar ends up in the open market. The subsidy burden for the government was Rs 1.39 a kg in 2002 when ex-mill price for levy sugar in 2002 was Rs 12.11 a kg.
Even though the move is largely expected to benefit the government, sugar stocks are back on buyers’ radar. Experts say their optimism is based on the hope that the next in line of economic reforms may be an increase in ex-mill price of levy sugar to make it more economically sound for the industry. Mills supply levy sugar at 60 per cent of the cost of production, resulting in an annual industry loss of about Rs 2,500-3,000 crore. Mills are obliged to sell a tenth of their annual output to the government for this sale through ration shops.
Meanwhile, the Group of Ministers (GoM) headed by Agriculture Minister Sharad Pawar to fast-track the Right to Fair Compensation, Resettlement, Rehabilitation and Transparency in Land Acquisition Bill will give its recommendations.
Even though it has the blessings of Congress General Secretary Rahul Gandhi and president Sonia Gandhi, who, as the head of the National Advisory Council, has been pushing for the law after framing its broad contours, the legislation has been hanging fire for long.
The legislation has not gone down too well with the industry and has seen vehement resistance from UPA ministers handling economic and infrastructure portfolios. Their contention that stringent norms of acquisition envisaged in the legislation will discourage industrialisation and urbanisation will be examined by the panel on September 27 after which it will hit the Cabinet.
Officials say some “tweaking” in the new Bill may be undertaken to dispel misgivings of states and industry but basic spirit of the Bill has always embodied faster urbanisation and industrialisation. Rural development Minister Jairam Ramesh has also insisted that no dilution would be made in provisions relating to resettlement and rehabilitation (R&R), compensation and consent of landowners.
On fast-track
Officials have recommended increasing the price of sugar sold through ration shops from the existing Rs 13.50 per kg to around Rs 23 per kg to decrease the subsidy burden on the exchequer
The next on the Cabinet Committee on Economic Affairs’ agenda is to raise the foreign direct investment (FDI) limit in the insurance sector to 49% from 26% and increase the price of retail price of sugar sold through ration shops