India coalition partner mulls pull-out over reforms

A key party within India's ruling coalition is due to decide on Tuesday whether to pull out over contentious reforms announced by the government to try to revive the flagging economy.

Trinamool Congress (TMC), a regional party based in West Bengal state and led by firebrand politician Mamata Banerjee, has been a thorn in the side of Prime Minister Manmohan Singh's administration since elections in 2009.

Banerjee has already described the reform package as "anti-people", saying a hike in diesel prices will spur inflation and that the opening of the retail sector to foreign multi-nationals will hurt millions of small traders.

"We may withdraw from the coalition… and we are ready to relinquish our ministerial portfolios as well," Sultan Ahmed, a TMC lawmaker and junior tourism minister, told AFP on Tuesday.

"We will support whatever decision our leader takes. Mamata Banerjee will not compromise as it would send the wrong signals to her voters," he said as party leaders began gathering at the Town Hall for the make-or-break meeting.

TMC sources said Trinamool leaders were waiting for a last-minute assurance on a rollback of the reforms, but the government has repeatedly stressed it will stick by them.

"We are keeping all our options open," commented TMC MP Subrata Bakshi.

Last December, Banerjee's refusal to accept retail reforms forced the government into a humiliating U-turn but the policy was re-launched last week.

The TMC, which has six ministers in the government and 19 MPs in the 543-seat parliament, met in a Kolkata town hall on Tuesday and was set to make an announcement later in the day.

Premier Singh insists the diesel price rise and economic reforms are needed to reverse a slowdown in economic growth and to boost public finances.

On Friday his cabinet cleared new rules inviting foreign supermarkets such as Walmart into the retail sector and allowing foreign airlines to take stakes in domestic carriers.

The measures came soon after diesel rates were raised by a steep 12 percent, sparking protests across the country.

Trade unions, backed by the main opposition Bharatiya Janata Party (BJP), have called for a nationwide strike on Thursday.

The country's biggest union of truckers announced Tuesday it would join the day of defiance with a one-day stoppage.

Banerjee has said she does not wish to topple Singh's government, while Finance Minister P. Chidamabram on Monday expressed confidence that the reforms would be pushed through.

"I do not think that the government is facing any threat," Chidamabram said on Monday. "There are allies both in the government and outside. I am confident that they will continue to support us."

Analysts such as Sanjay Kumar from the New Delhi-based think-tank the Centre for the Study of Developing Societies, said even a complete pullout by the TMC would not bring down the government.

"If that happens Samajwadi party and the Bahujan Samaj Party (other regional parties) will support the government from the outside, so nothing dramatic is expected to happen in the next two months," Kumar told AFP.

Together the two parties have 43 MPs in parliament.