By IPS Correspondents
NEW DELHI, Jun 9 2006 (IPS)

A nine percent hike in India’s already high fuel prices, effected this week, has brought out serious rifts within the ruling, Congress party-led United Progressive Alliance (UPA) establishment.

With the communist parties – that provide crucial outside support for the minority UPA government – threatening to launch a series of nationwide agitations, expectations are now high of a partial rollback in the newly announced prices.

While prices of petrol were hiked by nine percent to Rs 47.49 (1.03 US dollars) a litre in the capital, the cost of diesel went up by 6.5 percent to Rs 32.45 (0.70 dollars), on the consideration that it was used largely by farmers to run tractors and irrigation pumps.

In deference to its powerful communist allies, the government left intact the prices of subsidised fuels used for cooking, kerosene and liquefied petroleum gas. But the communists, who hold 61 seats in parliament, refuse to be impressed and are planning a series of strikes and demonstrations to pressure the government into a rollback. The first of these is set for Jun. 13.

Petroleum minister Murli Deora has justified the price hike by pointing out how international prices of crude oil had doubled over the last two years during which the coalition government has been in power in New Delhi. Since the end of 2004, petroleum prices have gone up by 50 percent to 71 dollars a barrel, hurting India, which imports three-fourths of its crude oil requirements.

Deora said if prices were not increased, the finances of India’s publicly-owned oil refining and marketing companies would go deep into the red. The hikes are expected to raise Rs 36 billion (820 million dollars) in revenues that would help foot import bills.

The communists are demanding that the government cut the high taxes on fuel. In India, petrol and diesel prices are relatively high because roughly half of what consumers pay for is for various taxes and levies – customs duties, excise duties (manufacturing) and sales tax (retail). In neighbouring Pakistan, petrol sells at around one-third of the price it does here.

Although a section of the Congress agrees with the communists, this group has no option but to be collectively responsible and support the government’s unpopular move. This section worries that the communists are appropriating the space of the political opposition.

India’s leading opposition party, the right-wing, business-friendly, Bharatiya Janata Party (BJP) is yet to recover from a shock defeat in 2004 elections and is right now in the throes of an internal power struggle, exacerbated by the murder of one of its important political leaders, Pramod Mahajan, by his younger brother.

While the BJP has joined in the chorus for a rollback in prices and disrupted traffic in many parts of the capital and some provincial urban centres in protest on Wednesday, it cannot match the popular attention the communists draw. “We will only settle for a complete rollback of the price hike,” BJP spokesman Mukhtar Abbas Naqvi said somewhat unconvincingly.

In contrast, the ability of the communist parties to influence the government’s economic policies has been improving steadily, especially after its convincing win in the April-May provincial elections held in West Bengal in eastern India, and in southern Kerala where it unseated a Congress-led coalition government.

The Left makes a point of saying that it supports the UPA government from the “outside”, on the basis of a common minimum programme (CMP) that was thrashed out in May 2004. Whereas the communists support many of the government’s economic policies, they accuse the government of not being sincere about implementing particular programmes outlined in the CMP.

The communists claim there is little to distinguish between the economic policies of the UPA regime and those followed by the previous National Democratic Alliance government that was led by the BJP. They contend that both the two largest political parties in India believe in the virtues of market-friendly policies of economic liberalisation, privatisation and globalisation.

Many of these policies are bitterly opposed by the Left. The communists say these policies have not alleviated the economic conditions of the underprivileged, but sharpened inequalities and worsened regional imbalances. The Left extends support to the UPA government only because it considers the pro-Hindu BJP to be ‘communal’ and against the secular principles enshrined in the constitution.

Many in the Congress believe that India, like China, should be attracting more foreign investment than it has in the past. The communists, while critical of foreign investment, have been busy rolling out the red carpet for trans-national corporations in its bastion of West Bengal.

“Certainly, there are differences between the UPA and the Left on a number of economic policy issues – some of these differences are more sharply defined than others,” says Abhijit Sen, member of India’s Planning Commission. He told IPS that “the government’s economic policies, as they continue to evolve, have by and large been able to take into account the concerns of the Left”.

One important area of agreement between the Congress and the Left relates to the implementation of the ambitious National Rural Employment Guarantee Programme that has been described as the world’s largest social security programme. The scheme legally guarantees employment to one able-bodied member of a poor family living in a rural area at the official minimum wage for 100 days in a year.

On the other hand, the communists have stonewalled a government proposal to offload a minority stake in Bharat Heavy Electricals Limited (BHEL), a profit making government-owned company and one of India’s better performing public sector corporations.

“We have sent a message to the Congress that we (the UPA-Left Coordination Committee) should meet and talk seriously about our differences,” veteran communist leader and former chief minister of West Bengal Jyoti Basu told reporters recently. “They (the Congress-led UPA) wanted to sell the shares of BHEL to foreigners. I think they have stopped that now. But they are becoming more and more pro-American and depending on the IMF (International Monetary Fund) and the World Bank. We don’t like that,” Basu added.

Because of pressure from the Left, the government has had to postpone plans for divesting government-held shares in more than a dozen leading industrial public sector companies. Moreover, proposals to sell equity shares in publicly-owned banks have also had to be suspended.

In the run up to the provincial assembly elections, the Communist Party of India (Marxist) or CPI-M, the largest communist formation, used strong language to hit out at the government. Party general secretary Prakash Karat told an election rally in Kerala: “The UPA government is anti-people. The central government is not following the common minimum programme. The government does not care for farmers across the country. The Left would strongly oppose the move to privatise public sector banks in the country. The government is opening India’s retail sector to Western multinationals. We will not allow it.”

Other points of difference between the Congress and the communists relate to imports of commodities backed by domestic and export subsidies in developed countries and increase in duties to protect agriculture, protect biodiversity and seed rights. The CPI-M has called for a review of amendments to the Indian Patents Act which, it is argued, favours multinational pharmaceutical companies.

On farm policy, the CPI-M insists on strict implementation of land holding regulations, while the Congress merely suggests that it would redouble its efforts to distribute surplus land. The CPI-M wants prohibition on sale of agricultural land to foreign companies for agri-business operations. The Congress, in turn, accuses the Left of double standards since the West Bengal state government has welcomed multinationals like Pepsi in food processing and contract farming.

The CPI-M has itself changed its attitude towards foreign investment over the years and has opened the doors in areas such as information technology and agro-processing, provided new jobs are created and the country’s knowledge base is enhanced. Though it opposes sale of profit-making public sector enterprises, the CPI-M sees the need to for more efficiency. “You have to streamline or restructure the public sector. You may make it leaner; you could shed some of the enterprises,” Karat said in an interview with IPS.

“I think the Left is not as responsible for slowing down the pace of economic reforms as the socialist group within the Congress is,” economist Omkar Goswami told IPS. He says it is easy for the Congress to claim that the Left parties are holding back the implementation of economic policies.

“In reality, the Congress can deal with the Left if it wants to. What is far more difficult is for the Congress high command to deal with the old socialists in its midst,” adds Goswami, former chief economist, Confederation of Indian Industry and currently chairman, CERG Advisory, a New Delhi-based consulting firm.

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