Just three weeks ahead of Budget 2002-03, the Cabinet Tuesday cleared a slew of reform proposals including shedding government flab through a voluntary retirement scheme, full decontrol of sugar from April 1, removal of a dozen items from the purview of Essential Commodities Act and incentivising the pharma sector by approving the new pharmaceutical policy.
The Cabinet also discussed the dismantling of the administered pricing mechanism in the petroleum sector. It, however, left it to the Prime Minister and the finance minister to finalise the roadmap and the modalities which would be part of the Budget.
The VRS will see the government slash its 34-lakh workforce by offering the surplus employees an attractive package. It will also pave the way for implementation of the Expenditure Reforms Commission roadmap for staff reduction to the tune of almost 50,000 employees. The Centre is likely to overcome resistance encountered by certain ministries like the information and broadcasting to the ERC recommendations.
The surplus pool employees will be eligible for an ex-gratia amount over and above their pension and gratuity. The exgratia will be equal to the basic play plus dearness allowance for every 35 days of completed year in service and 25 days for each year of the balance years of service left. The Centre has also decided to give income tax rebates on a portion of ex-gratia payment which sources said will be upto Rs 5 lakh.
The sugar decontrol is, however, conditional on commencement of futures trading in the commodity. Futures trading and decontrol of sugar are intertwined as full decontrol ensures greater volumes for futures trading and better chances of price discovery.
At present, sugar is a controlled commodity with 15 per cent of the release in the market is channelled through the public distribution system. The decontrol will allow millers to unload the entire quantity in the open market and market-determined prices.
There is a three monthly release mechanism under which each factory is allotted a quantum it can unload in the market and the aggregate nationwide quota is also fixed. This will, however, stay even after full decontrol.
Of the 29 items at present governed by the ECA, the dozen items to be removed from its purview include cement, textile machinery, textiles made from silk, yarn made from wool, cable and wares and general lighting appliances.
In a significant move, the government also decided to do away with the requirement of licensing of dealers and restrictions on storage and movement of wheat, paddy/ rice, sugar, edible oilseeds and edible oils. This is likely to enable farmers get a good price for their produce, enhance food credit to them and achieve price stability. Farmers would also be able to raise money by pledging foodgrains rather than going for distress sale.
The Pharmaceutical Policy 2002 aims at relaxing the rigours of price control, ensuring availability of good quality essential drugs and create an incentive framework for the sector.
The reduction in span of drug control is likely to result in the pruning of the essential drugs list from 252 to 100 in the forthcoming Budget.
The policy, which has been pending for almost two years now, also aims at strengthening the indigenous capability for cost effective quality production and exports of pharmaceuticals by reducing barriers to trade in the sector and encourage research and development with particular focus on endemic diseases.
