The state government on Tuesday announced withdrawal of value-added tax (VAT) on foodgrain, trying to provide some relief to the skyrocketing prices of essential commodities and petroleum products a day after the BJP had suffered a crushing defeat at its power citadel Jamshedpur.

At present, a VAT of 4% is imposed on foodgrain and the state exchequer will lose at least a hundred crore every financial year with the people-friendly decision.

The decision to withdraw VAT on foodgrain was taken by the council of ministers as deputy chief minister Hemant Soren had announced this in the assembly's budget session.

Cabinet secretary Aditya Swaroop said: "VAT on foodgrain has been withdrawn. The council of ministers decided to withdraw VAT on foodgrain except branded items." He added that the branded products manufactured in the state would also come VAT-free.

The cabinet also rolled back VAT on towel, bedsheets, napkins and blankets as it directly affects the weaker sections of the society.

The council of ministers also approved the proposal for recruitment of engineers, officers and other employees in the Jharkhand State Electricity Board (JSEB) by outsourcing the work to Faridabad-based National Power Training Institute.

"Keeping in mind the future of thousands of students who failed in the intermediate arts, science and commerce examinations the result of which was declared by the Jharkhand Academic Council last month the cabinet agreed to make amendment in rules for 2011 and provide grace marks. A student, who has failed in one subject, will get up to 10 marks and in case of those who have failed in two, will get six marks in each subject," said Swaroop.

Another important decision taken by the cabinet was providing accidental insurance benefit to workers under the MGNREGA. In case of accidental death or permanent disability, the victim's family will get Rs 75,000.

The long-pending controversy related to payment of consultancy fee to Malaysian company, Meinhardt, for preparation of a detailed project report of sewerage and drainage system of Ranchi was also cleared. The payment was held by the state government after allegations of irregularity in preparation of the project report and a vigilance inquiry was ordered. The cabinet decided to pay the consultancy fee of Meinhardt.

"The company had moved court against the decision of the state government to hold payment. The court has asked the government to pay the consultancy fee," said Swaroop.