US embassy cable - 05NEWDELHI4861

C O N F I D E N T I A L SECTION 01 OF 03 NEW DELHI 004861 
 
SIPDIS 
 
E.O. 12958: DECL: 06/27/2015 
TAGS: PGOV, ELAB, ECON, IN, Indian Domestic Politics 
SUBJECT: LEFT FRONT SUSPENDS COORDINATION WITH UPA 
 
REF: NEW DELHI 4308 
 
Classified By: Charge Bob Blake for Reasons 1.4 (B, D) 
 
1.  (C) Summary: On June 26, the four parties of the Left 
Front (LF) suspended regularly scheduled coordination 
meetings with the UPA government, which were meant to 
implement the Common Minimum Program (CMP), but said they 
would continue to support the government from the outside. 
The Communists accused Congress of not taking its concerns 
into consideration when making economic policy.  The LF move 
does not put the UPA government at risk, but it is another 
downturn in the worsening UPA-Left relationship.  The LF 
insists that Congress must take its concerns more seriously. 
Congress leaders claim that this dispute will be amicably 
resolved, but are reluctant to make substantive commitments 
until party President Sonia Gandhi returns from holiday in 
early July.  The LF views Congress efforts to push ahead with 
economic liberalization, particularly disinvestment, as a 
betrayal of their prior agreement on the CMP and continued 
confrontation on this issue is inevitable.  End Summary. 
 
The Left Suspends Coordination... 
--------------------------------- 
 
2.  (U) Meeting for the second time this month on 26 June, 
the four parties of the LF, decided to suspend their 
participation in regularly scheduled CMP coordination 
meetings with the UPA government, and sent a letter 
expressing their concerns to Sonia Gandhi and PM Singh.  The 
letter stated that "In the meeting of the coordination 
committee...the Left parties raised a number of issues 
connected with the CMP and other policy decisions being taken 
by the UPA government which affected the interests of the 
common people and the country as a whole.  Our experience has 
been that on many issues where the Left had disagreements, 
the government nevertheless went ahead with its decisions." 
3.  (U) The LF expressed particular concern over the GOI 
decision to sell 10 percent of Bharat Heavy Electrical 
Limited (BHEL), a public sector undertaking (PSU) (Reftel) 
without prior consultation, describing the action as a 
repudiation of the agreement establishing the CMP 
Coordination Committee.  Deriding GOI pledges to retain 51 
percent of BHEL and other viable public sector companies, the 
LF accused the UPA government of duplicity by claiming to 
divest only 10 percent of the company now, while reserving 
the right to sell up to 49 percent later. 
 
4.  (U) Communist leaders accused the GOI of maintaining a 
"hidden agenda" of "creeping privatization" and described the 
BHEL disinvestment announcement as "the first serious 
violation of the CMP."  Their letter concludes, "in light of 
this, we find no useful purpose will be served in attending 
meetings of the coordination committee.  Therefore, we have 
decided to regretfully suspend our participation." 
 
...But Does Not Withdraw Support from UPA 
----------------------------------------- 
 
5.  (U) With 61 seats in the Lok Sabha, LF support is vital 
for the survival of the UPA government.  Should the LF 
withdraw its support, the government would fall, making new 
elections likely.  CPI(M) General Secretary Prakash Karat 
clarified to the press, however, that the Left is not 
withdrawing support, but that the UPA must determine whether 
and how long its government can continue. 
 
Congress, BJP Respond 
--------------------- 
 
6.  (U) The immediate Congress response was "damage control." 
 Congress General Secretary Ambika Soni stated that the 
situation can and will be resolved.  PM Singh reportedly 
contacted CPI-M leader Harkishen Singh Surjeet to gain 
further understanding of the decision and to learn about the 
Left's plans for strikes on June 28.  Other Congress leaders 
commented that the Left was trying to separate itself from 
Congress to woo voters in next year's state elections.  Most 
Congress leaders are reluctant to respond until party 
President Sonia Gandhi returns from vacation in the next few 
days.  The party made no commitments regarding the BHEL 
disinvestment or other contentious economic policy issues. 
7.  (U) BJP general secretary Arun Jaitley used the Left's 
decision to continue BJP criticism of the UPA-Left alliance. 
He described the Left's actions as "fraudulent" and called 
upon the Communists either to support the BJP-led NDA in its 
opposition to the petrol price increase or commit to the UPA 
and accept the price increase. 
 
Differing Interpretations of the CMP 
------------------------------------ 
 
8.  (U) The Left is increasingly dissatisfied with the UPA's 
economic liberalization agenda.  The Communists insist that 
the CMP does not allow divestment of state holdings of BHEL 
and as many as 20 other profit making PSUs.  According to the 
LF interpretation, the CMP pledges the GOI to retain 
profitable PSUs "while they raise resources from the market." 
 Congress prefers to draw a distinction between divestment 
and privatization, asserting that the government is honoring 
the CMP as long as it continues to retain 51 percent of the 
profit making PSUs.  The Left disagrees, stating that 
divestment will inevitably lead to privatization, and that 
this is the GOI's real intention.  Their letter to Mrs. 
Gandhi claims that, according to the CMP, the PSUs "can go to 
the market for raising capital for their own needs.  It is 
not for the government to sell their shares and appropriate 
those proceeds." 
 
9.  (U) The Left also opposes the recent decision by the 
Cabinet Committee on Economic Affairs, which went into effect 
on 20 June, to raise gasoline and diesel prices by 2.5 rupees 
and 2.0 rupees per liter respectively, and has called for 
nationwide strikes on June 28 to protest.  The Left also 
claims that GOI proposals to liberalize labor laws, would be 
detrimental to workers (septel), and is concerned that 
opening India's retail sector to FDI will harm Indian workers 
and shop owners.  When asked which of these issues was most 
important to the Left and which they would oppose most 
forcefully, Forward Bloc Secretary General Devarajan told 
Poloff that the issues could not be separated and that the 
Left's frustration and dissatisfaction was with the UPA's 
economic program as a whole. 
 
 
Comment: Left Pressuring (Not Threatening) Congress 
--------------------------------------------- ------ 
 
10.  (U) The LF withdrawal from CMP coordination meetings 
marks a turning point in relations between the Left and 
Congress.  Previously, the Communist parties did not present 
a fully united front in their opposition to UPA economic 
decision-making, while consistently reiterating that they did 
not want to bring down the government and risk the return of 
a Hindu nationalist BJP-led government.  Now, however, all 
four Left parties agree that the UPA is taking their support 
for granted, ignoring their concerns, and questioning the 
sincerity of their repeated demands that the UPA reverse some 
of its decisions regarding economic liberalization.  Karat 
explained that although formal coordination was being 
suspended, dialogue between the Left and UPA would continue. 
 
11.  (U) Most commentators agree that this move by the Left 
is designed to put pressure on Congress and will not lead to 
a withdrawal of LF support to the UPA.  Nevertheless, the 
pundits are recommending that Congress take the Left more 
seriously before the LF/Congress relationship grows even more 
contentious, arguing that increasing dissension would only 
raise the BJP's sagging spirits and encourage it to unite 
against the UPA.  Some are saying that the Communists move 
may also be calculated to energize its working class 
constituencies in West Bengal and Kerala ahead of 2006 
Assembly elections, in states where Congress is the main 
rival of the Left parties, and it must clearly demonstrate 
that it presents an alternative to economic liberalization. 
The "Indian Express" quoted some Left leaders as saying that 
they had no other option but to remain with the UPA as "a 
pressure group." 
12.  (C) Although the Left has criticized the BHEL decision 
since it was announced a month ago, it had made no 
significant move to show its resolve.  Its decision to 
suspend participation in the CMP Coordination Committee is an 
attempt to show Congress that it is serious.  However, as 
long as the LF rules out a withdrawal of its support to the 
government, its threats ring hollow.  Most observers assume 
that a withdrawal is too risky for the Communists, as it 
would open the door for a possible BJP return to power, and 
Left leaders have never clarified under what circumstances 
they would be willing to pull out and bring down the 
government.  While it remains highly unlikely that the Left 
would withdraw over the BHEL issue, Congress recognizes that 
it must manage its contentious relationship with the LF to 
assure political stability and deny an advantage to the BJP 
and its allies.  With Mrs. Gandhi in Shimla, the dynastic 
Congress party is incapable of making concrete moves to 
assuage the LF and will likely remain in statis until she 
returns.  Post will follow the strikes called for June 28 and 
report on any new developments. 
BLAKE