Cabinet to consider sugar decontrol, hike in DA to 80%

NEW DELHI: Sugar decontrol and a proposed hike of 8% in the dearness allowance of government employees are likely to come up before the Cabinet Committee on Economic Affairs on Tuesday but a decision could be deferred with finance minister P Chidambaram out on a tour to Japan.

A decision on sugar decontrol has been pending since a committee under C Rangarajan, chairman of the PM's Economic Advisory Council, submitted its report recommending that the Rs 80,000 crore business be freed to market forces.

The move to increase DA to 80% from 72% is likely to benefit around 50 lakh employees and 30 lakh pensioners of the central government. The government had raised DA to 72% in September last year, which had come into effect from July 1, 2012. According to the current proposal, the increase would be effective from January 1, 2013 and employees and pensioners would be entitled for arrears.

On the sugar decontrol front, the consumer affairs and food ministry has recommended that the levy on sugar mills be done away with on the stock after October 2012 and the regulated release mechanism be dispensed with entirely.

It has also recommended that the issues of cane area, minimum distance between mills and following the cane price formula be left to the states to adopt and implement.

Once the regulations are dismantled, the government has proposed that states be asked to purchase sugar from the open market for supply under the public distribution system. The states would be reimbursed the subsidy based on the share they have in the levy sugar.

This would entail an additional burden of Rs 3,100 crore for the Centre, taking the total subsidy cost to Rs 5,600 crore.

The government has proposed that the additional cost be covered by increasing the excise duty on sugar production. The exact increase in the excise rate has been left to the finance ministry to recommend.