India: Key ally withdraws, putting Singh’s government at risk

A key ally of Prime Minister Manmohan Singh's Congress Party withdrew from the United Progressive Alliance government late Tuesday, raising the specter of early polls if Singh and company cannot secure support elsewhere.

West Bengal Chief Minister Mamata Banerjee, leader of the Trinamool Congress, withdrew from the coalition after Singh refused to roll back decisions to hike diesel prices by five rupees and allow foreign direct investment of up to 51 percent from "multi-brand" retail companies like Walmart.

Prior to the move, most analysts, including this one, thought Banerjee was bluffing, as she doesn't seem to have a whole lot to gain from early polls. But as right-leaning columnist Kanchan Gupta points out, the unpredictable regional leader appears not only to be severing ties with the Congress, but also laying the groundwork for an alliance with the opposition Bharatiya Janata Party (or a possible "third front").

"There are three important points made by Mamata Banerjee while announcing her break with the Congress and the UPA," Gupta writes.

First, she has for the first time publicly accused the Congress of corruption. “Is FDI-gate meant to suppress Coalgate? Many people are asking this question. We are also asking,” she said, taunting the Prime Minister and the Congress.

Second, she has demanded an explanation as to why “black money is not being brought back” and “why is there no action against benaami property and wealth”. The jibe is obviously directed at the Congress leadership and the Prime Minister. It also identifies her and the Trinamool Congress for the first time with the loose confederation of anti-corruption movements.

Third, she has openly accused the Congress of “politics of blackmail” – or “blackmailing politics” as she called it at the media briefing. “I know the Congress better than anybody else. If they have a problem with me, they will reach out to Mayawati. If there’s a problem with Mayawati, they will reach out to Mulayam Singh Yadav. If there’s a problem with the DMK, they will go to the ADMK… But that game is now over.”

By bring up Coalgate, Banerjee has for the first time allied with the anti-corruption movement that has been berating the Congress for more than a year. By attacking the issue of "black money," she has embraced an issue that has long been a favorite of BJP leaders such as Ram Jethmalani, who has accused the most visible Congress leaders of having illegal funds stashed abroad. And by introducing the idea that the Congress has long played her regional party against other regional parties so as to avoid meeting any of their demands, she has implicitly suggested that she might be open to banding together with those regional players to form a third front.

Nevertheless, Banerjee has given the Congress until Friday to come up with a solution that will bring her back into the fold, though she's calling for a complete rollback of the FDI measure, a partial rollback of the diesel price hike, and doubling the number of subsidized cooking gas cylinders available to each family (which would undercut a significant part of the diesel price increase). And as Gupta points out, 72 hours is a long time in Indian politics.

On Wednesday, Congress Party strategists met to hash out a plan of attack, reports the Hindustan Times.

Banerjee's exit, if she can't be dissuaded, will reduce the UPA's numbers to 251 seats, or 21 short of the majority mark of 272 in the 545-member parliament. But that doesn't mean the government will fall immediately. Even without a majority, the coalition can continue to rule with the "outside support" of the Samajwadi Party (with 22 seats) or the Bahujan Samaj Party (21 seats).

That means in addition to brainstorming ways of placating Banerjee, the Congress big wigs are considering what they need to do to keep the Samajwadi Party's Mulayam Singh Yadav and/or the Bahujan Samaj Party's Mayawati Kumari happy, as CNN/IBN notes.

According to the Indian Express, the Congress "seemed reconciled on Tuesday to staying the course for the remainder of its term with outside support from the SP and the BSP."  Meanwhile, the paper said Congress sources hinted that there is wiggle room on the diesel price increase and number of subsidized LPG cylinders, but the decision to open up the retail sector to FDI is "non-negotiable."

My best guess: the government will have to shave two or three rupees off the diesel price hike, at a minimum, to ensure the support of the BSP or SP.

This is different from the last time Singh risked his government for a policy he deemed necessary for India's future — the Indo-US civilian nuclear agreement of 2008, which cost him the support of the communists. Although it generated a lot of noise, the nuclear deal wasn't really an election issue, while the price hike (and even, potentially, FDI in retail) could cost the SP or BSP votes if they let it go through. 

Stay tuned from now until Friday to see whether India is headed for early polls.