Divestment on hold, blow to reforms

Airports sell-off scrapped, Neyveli strike called off, but power PSU IPOs on course.

The economic reforms programme of the UPA government was dealt a huge blow today when the Dravida Munnetra Kazhagam (DMK) succeeded in pressuring Prime Minister Manmohan Singh to put off all disinvestment for the foreseeable future, threatening to pull out of the government if any stake in the Tamil Nadu-based Neyveli Lignite Corporation (NLC) was divested.

Top government sources said reforms in the civil aviation sector were off, but divestment in power PSUs would continue as before.

On the prospects of further economic restructuring, a source pointed to a more serious dissonance. "Where was the Congress Party when the PM needed it? Why didn't it defend him?" he wondered.

The policy reversal came after the Cabinet had agreed by consensus barely three weeks ago on sale of a 10 per cent stake in Nalco and NLC through a book-building process.

Minority stake sales in the National Thermal Power Corporation, the Power Finance Corporation, and the National Mineral Development Corporation had also been cleared by the Cabinet Committee on Economic Affairs (CCEA).

The DMK claimed its ministers were not present at the meeting and, therefore, not party to the decision. It also said Finance Minister P Chidambaram should have shared political responsibility for divestment.

"Why should only we be made to look bad for a decision that will cost jobs?" Communications Minister Dayanidhi Maran reportedly asked the PM when he met him.

Three hours later, the Prime Minister's Office, in a terse statement, said there had been representations from some constituents and allies over disinvestment in some public sector enterprises.

"Taking into account their concerns, the prime minister has decided to keep all disinvestment decisions and proposals on hold, pending further review," the statement said.

Alarm bells had started ringing last night itself when DMK Chief M Karunanidhi told Congress President Sonia Gandhi that the disinvestment process for NLC would have to be reversed.

Meanwhile, Dayanidhi Maran got in touch with CPI (M) leader Sitaram Yechury, who also got a call from top leaders in the Congress Party, flagging their concern about the DMK's stand.

Inside the Congress too, there had been some disquiet over disinvestment that was expressed at a number of fora, without check from Congress President Sonia Gandhi.

V Narayanswamy, general secretary in charge of Orissa Congress, had led a delegation of Congress leaders from Orissa on June 28 to get the Nalco divestment decision reversed. Gandhi had assured the delegation that she would speak to the PM on the issue.

The signals were there for all to see when, on Gandhi's suggestion, Narayanswamy was given a chance to speak at a meeting of the Congress Working Committee (CWC) last week.

He criticised the government's decision at the CWC, but Prime Minister Manmohan Singh interrupted him mid-speech, saying there must be a guillotine on discussion of the issue because the Cabinet had already taken a decision on it.

Sources said this was not the only instance of a gap in communication between the government and the party. From the time a junior minister criticised the government's policy on Special Economic Zones (SEZs), there has been clear dissonance between the policies of the government and the party's priorities.

Not only was former Chhattisgarh Chief Minister Ajit Jogi let off with a slap on the wrist for writing a letter suggesting that Sonia Gandhi take over as PM, a CWC meeting was also organised on the price rise.

Worse, a conclave of 16 Congress chief ministers was called at 24 hours' notice in the middle of the assembly session on the same issue, emphasising the urgency of the situation and underlining the government's failure on this front, sources said.

"This is the same prime minister who was so firm on the issue of a petroleum price hike. This time, he told DMK leaders that by reversing a CCEA decision the government's credibility would be eroded. But three hours later, he took that very decision "" because he is no longer sure the party will back him," the sources said.

Congress ministers are now wondering whether there is a timetable "" either on part of the Congress president or the prime minister "" of which they are unaware.

The PM continued with his scheduled programme of meetings today, including one with the finance minister and the deputy chairman of the Planning Commission on the Khadi Board and the environment's assessment.

However, the key political test of the extent of rift between the Congress Party and the prime minister is whether a core committee meeting of the government and the party, of which some select ministers and the Congress president are members, takes place tomorrow.