Welcome give and take

Going by recent news reports, there appears to have been a significant change in the relationship between the government and the Left parties in recent days. On a number of issues, positions have softened to a point where some forward movement appears possible. First, on the issue of disinvestment, the earlier position of the Left, that the Common Minimum Programme explicitly forbade it in profitable public enterprises, has moderated to allow a small dilution of the government's holding in select companies. However insignificant its initial impact on performance might be, this is a small leap forward for the UPA government as far as its reformist credentials are concerned. This step allows funds to flow into the National Investment Fund, set up to finance key social initiatives that the Left would also consider priority. Over time, such programmes can be increasingly financed from the Fund. The benefits flowing from them will contribute to weakening the resistance to more disinvestment.

The Left parties also appear to have taken a more pragmatic position on the vote on Iran in the next IAEA meeting. The government has consistently maintained its need to balance the nurturing of the civilian nuclear arrangement with the US, which will ease India's nuclear fuel supply situation, with access to Iran's gas reserves. Its vote to censure Iran in the last meeting provoked an angry outburst from the Left, which threatened dire consequences if the government persisted with its approach. Fortunately, it now appears to have been persuaded that the government's position could well be contributing to preventing the issue of Iran's alleged violations being referred to the UN Security Council, which would certainly leave Iran worse off than being censured by a lower level forum.

Of course, the flow has not been one-sided. The Left appears to have got its way with the amendments proposed to the Electricity Act. First, the objective of eliminating cross-subsidies by converting them into direct subsidies, financed by budgetary support from the state government, appears to have been thwarted. This is not a good development, because when one group of consumers is forced to pay more for power than it should, the incentive to steal goes up and monitoring and enforcement costs increase. The saving grace is the acceptance of the need to reduce the quantum of cross-subsidies. Second, a move to force the central government to contribute funds for expanding access to electricity raises the old bugbear of moral hazard. Unless states recover the full costs of electricity through a combination of tariffs and their own budgetary support, no investment will ever be economically viable. If the Centre is to provide funds, it should at least be in a position to enforce these requirements, which the amendments do not provide for.

Nevertheless, the give and take that is evident in these instances is a welcome change from the hardline posturing witnessed during the last several months. However, there are inherent dangers in it as well. The government must ensure that the bargains it strikes are conducive to substantial progress on the issue being addressed and not just compromise for the sake of compromise. Properly managed, this bargaining process could even be the hallmark of a new, reasonably functional form of governance by coalition.