India News Online » News Analysis » Indian Politics » 

PM forced to roll-back disinvestment : Setback for UPA Government

	July 10, 2006

Inept coalition management and inability to build political consensus on crucial issues cost the Manmohan Singh Government its face when it was forced to roll back the decision to disinvest 10 per cent Government stake in Neyveli Lignite Corporation and National Aluminium Company after DMK chief and Tamil Nadu Chief Minister M. Karunanidhi threatened to pull out the party’s Ministers from the Central Cabinet. A week of high political drama starting with the DMK’s threat, the Prime Minister’s abject surrender evident in his decision announced on Thursday, July 6, to put on hold all disinvestment decisions, pending further review, was climaxed by rumours on Friday, July 7, that Dr. Manmohan Singh had decided to step down, resulting in the Sensex tanking by over 250 points. The rumours were later denied by sources in the Prime Minister’s Office, but the damage had been done, severely denting the UPA’s image as a functioning coalition.



The Congress, the prime moving force in the Manmohan Singh Government later launched a fire-fighting campaign and went on an overdrive to rally behind the Prime Minister’s decision and what it called his “magnificent performance” in leading the coalition government and delivering the goods in the interest of aam admi (common man). The party also sought to shift the spotlight on the previous BJP-led NDA Government’s rollback track record over the disinvestment issue to highlight the difficulties in running and stabilizing coalition governments. The Congress in its blistering counter-attack criticised the BJP for its “vicious personal insinuations” targeting a “weak and ineffective” Dr. Manmohan Singh. The BJP had said that it was time for the Prime Minister to quit as he had ceased to be the centre of power.



The Congress outburst came after rumours about the PM’s resignation offer following his backtracking under pressure. The AICC denied the rumours. The Congress also denied rumours relating to Finance Minister P. Chidambaram resignation offer.



In Congress circles, the rumours over Dr. Singh’s resignation offer were fanned by speculation that the PM had called on Sonia Gandhi at her residence and proposed to put in his papers during a long meeting. Both the AICC and the PMO, however made it clear that there was no such interaction between the two leaders.



Congress leaders and government functionaries including the PM and Sonia Gandhi, however, gathered at the PM’s official residence for their regular core group meeting. The meeting is believed to have taken stock of the episode and draw up a strategy. A meeting of the UPA-Left coordination committee could be convened soon to work out a consensus.



Senior AICC leaders conceded that with the heat turned on by the UPA allies, Dr. Singh did not really have any option other than making a tactical retreat on the disinvestment issue.



The Congress leaders also said, “You have to survive to fight another day, holding that the party will keep pushing economic reforms process as much as possible within a coalition framework. “There will always be attempts and compromises,” said a leader.



The party officially maintained that the party’s stand on disinvestment and economic reforms remains unchanged and that its reform agenda would not be derailed.



In Kolkata, veteran CPI(M) leader Jyoti Basu ruled out any threat to the UPA Government. “We want this government to continue. We do not want to bring it down. We do not want to create a situation where the BJP would return to power”, said Basu, adding that the Left and UPA will hold talks in New Delhi soon.





PM’s emphasis on consensus



After burning his fingers on the disinvestment issue, Prime Minister Manmohan Singh has decided to hold consultations with allies and supporting parties to arrive at a consensus on how to fund social sector projects. A meeting of the UPA Coordination Committee is likely to be scheduled before the start of the Monsoon session of Parliament on July 24 to sort out differences on disinvestment and other issues. Sources say that Dr. Manmohan Singh is likely to do some plain speaking with the alliance partners on the need to generate resources for pro-people projects including job-guarantee, primary education, public health and agriculture. The objective of the discussion will be to ensure that the ruling coalition is able to put up a united front to deflect the BJP-led NDA’s attack on the rollback during the Parliament session.



The Congress core committee meeting on July 7 at the Prime Minister’s residence was attended by party president Sonia Gandhi and senior leaders Pranab Mukherjee, Arjun Singh, Shivraj Patil, Ahmed Patel and A.K. Antony, among others. Defence Minister Pranab Mukherjee later described the meting as routine, but sources say that the party is worried on two counts. One, the NLC controversy raising questions on the coalition’s ability to stick to the reforms path, and two, the damage to the Government’s image following the hike in petrol, diesel and foodgrain prices.



In fact, the regime’s spin-doctors went into overdrive to signal that there would be no slackening of economic reforms. They emphasised that Sonia Gandhi’s pet projects can be implemented only in an atmosphere of faster economic growth and greater resource mobilisation - issues that are likely to figure in talks with allies.



The meting also discussed the AIIMS controversy which involves another UPA ally, PMK’s Anbumani Ramadoss. Even if the issue lies in the court’s domain, the leadership is keen for a resolution to the crisis.



Mukherjee briefed on the agenda for the Monsoon session. This included the unamended office of profit Bill. The quota bill will be looked into only after the Oversight Committee headed by Veerrappa Moily submits its report.





—————————Box———————-



Sonia Gandhi keeps off controversy



While the Prime Minister’s Office and the Finance Ministry were taken aback by the DMK’s pressure tactics on the disinvestment issue, Congress president Sonia Gandhi, upon being told of the Tamil Nadu party’s unhappiness, refrained from getting personally embroiled in the policy dispute. She preferred to direct it to the Government instead.



The financial implications apart, the retreat also represents a major embarrassment for the government - particularly the PMO, which had brandished Cabinet’s decisions on NALCO and Neyveli as its new-found resolve to revive the sell off programme.



Considering that the decisions had to be put on hold even when the Left had appeared reconciled to those, last week’s development indicates the limited manoeuvering space the government has on controversial reforms initiatives.



The DMK - which gloated over its victory by welcoming the pro-worker move - made no bones of the fact that it had used pressure to have its way. Though couched in a “thank you” note to Finance Minister P Chidambaram, Karunanidhi made it plain that a delay in retracing steps would have been politically prohibitive for the government. “I thank you for the timely efforts you have taken in this regard,” said the Tamil Nadu Chief Minister. There was no mistaking the disappointment and bitterness in the government despite ritualistic assertions that the retreat did not represent reversal of the reforms process.



PMO sources admitted that the Prime Minister was disappointed. Finance ministry, with direct stake in disinvestment programme, could not conceal its unhappiness either.



In Congress circles, the sullenness towards the DMK was evident with many pointing out that Karunanidhi’s men were party to not just the decisions on NALCO and Neyveli, but had also supported, during the NDA regime, the strategic sale of PSUs.



The development was also being seen in the light of uneasy equations between the DMK leadership and Chidambaram, with Congress sources acknowledging that the Dravidian partner had been resentful of Finance Ministry’s functioning.



Observers say that while it seems to be curtains for disinvestment over the remaining three years of the government’s tenure, there are indications that this retreat would practically terminate UPA government’s reforms journey, raising serious doubts about banking and labour reforms.



————————Box ends here—————————-





DMK’s change of track on disinvestment



The DMK’s about turn on the disinvestment issue has also dented the party and its chief Karunanidhi’s image. The DMK had been a party to the disinvestment move all along. In the last two years, two of its Union Ministers Dayanidhi Maran and T.R. Baalu - as members of the Cabinet Committee on Economic Affairs (CCEA) had approved selling shares of profitable PSUs.



In July 2004, they okayed the sale of NTPC shares and in December 2004, agreed to issuing more shares of Power Corporation so they could be disinvested. In a subsequent meeting of the CCEA, they approved setting up the National Investment Fund with the money from disinvestment drive - in principle they also agreed to the disinvestment of NLC, a profit-making PSU.



“It is like hunting with the hounds at Delhi and running with hares at Chennai. Once a decision they were party to at Delhi becomes politically uncomfortable in Tamil Nadu, they not only distance themselves from it, but also try to reverse it. While in NDA, Murasoli Maran had okayed the sale of Salem Steel Plant. But when Jayalalithaa and others protested, they dropped the move,” recalled a Congress MP.





More trouble ahead : Left to step up price rise agitation



Encouraged by the DMK’s stand on the disinvestment issue, the Left parties are trying to gather support from UPA constituents for their agitation on the price rise issue. The Left parties have decided to have a week-long stir from July 13 to 19 against the disinvestment policy and the price rise. They have charged the Government with bungling in the food policy and have identified forward trading in foodgrains, weakening of the public distribution system and hoarding as reasons for the price rise.



At a meeting in New Delhi on July 4, leaders of Left parties said that the Government had failed to take effective measures to check the price rise. CPI general secretary A.B. Bardhan said, “We think that the Government has messed up the whole thing.



All four Left parties requested the UPA allies to step up pressure on the Government to end what they call, deviations from the Common Minimum Programme on various issues.



Observers say that the week long countrywide agitation against the price rise may be a precursor to the Left parties snapping their participation in the coordination committee meetings. Smaller Left parties, the RSP and the Forward Bloc, openly said at the July 4 meeting that it would be good for the Left’s credibility if the coordination committee mechanism is done away with. The major Left parties, the CPI(M) and the CPI, however, want to wait for the Government’s response to their demands before taking a final decision on the issue.





Congress Chief Ministers told to regulate commodity trade



Congress president Sonia Gandhi told Chief Ministers of Congress-ruled states on Wednesday, July 5, to get cracking on measures to check the spiraling prices of essential commodities. Asking the Chief Ministers to pull up their socks, Sonia Gandhi stressed the need for credible action against hoarders and black-marketeers of essential commodities. She asked them to streamline the public distribution system so that the common people get essential commodities at reasonable prices. Observers say that the Congress president’s strategy appears to be aimed at reducing the impact of the agitation launched by the BJP and the Left parties on the issue by projecting the Congress party’s pro-active bid to tackle the problem.



Reports say that some of the Chief Ministers urged the Manmohan Singh Government to reconsider the previous NDA Government’s February 2002 order lifting all controls under the Essential Commodities Act. There was a demand for better regulation by the Centre of forward trading in foodgrains to curb what they called excessive speculation. There are reports that the Prime Minister may too call a meeting of Chief Ministers to discuss the price rise.



Observers say the meeting - which highlighted problems of change in cropping patterns, low procurement or delayed government intervention - reflected the Congress’ dilemma in resolving the clash of interests of farmers and consumers.



While the entry of MNCs gave farmers a good price so that they preferred to sell their produce to private players, more farmers were retaining foodgrains for forward trading, causing a national procurement shortfall of 5 million tonnes. Not surprisingly, Andhra Chief Minister Rajashekhara Reddy wanted the minimum support prices to be raised.



The Centre is reported to have made it clear that while market reforms in the farm and food sector cannot be reversed, there will be proper regulation to protect the vulnerable sections. Several measures to balance the interests of producers and consumers are expected to be announced soon.



The Central Government is reporting to be considering quick and large imports of several items to check the rise in prices. After wheat, the first batch of imported pulses will start arriving this month at Mumbai, Chennai and Kolkata.