Political parties to meet over fate of nuclear deal

A coalition of smaller parties in India will hold a crucial meeting on Thursday to decide whether to support a civilian nuclear deal with the United States, a move that could help decide the fate of the embattled government.

The United National Progressive Alliance (UNPA) includes the Samajwadi Party, which the ruling coalition wants to woo amid signs communist parties that currently back the government in parliament will withdraw their support to protest the deal.

National security adviser MK Narayanan met leaders of the Samajwadi Party late on Wednesday to try to persuade them to back the deal, seen as a landmark accord moving India's trade and diplomatic relations closer to the West.

"Yes, we will discuss the nuclear deal and its implications today," SP general secretary Amar Singh told Reuters hours before the meeting was due to start.

The stakes are huge.

If the government fails to secure Samajwadi support and the Left withdraws from supporting the coalition, the government will almost certainly face early elections this year just as inflation rises to record levels and the economy shows signs of slowdown.

The ruling coalition already faces other challenges, including an indefinite strike by truckers across the country to protest rising fuel prices which threatens to worsen inflation and choke off some supplies of basic goods.

The pact, which gives India access to US nuclear fuel and technology, is potentially worth billions of dollars to US and European nuclear supplier companies and would give India more energy alternatives to drive its development.

The Left says it could withdraw support if Prime Minister Manmohan Singh heads to a G8 summit in Japan on July 7, where he will likely meet President George W Bush -- the man who shook hands with Singh over the accord at the White House in 2005.

The Communist Party of India (CPI), an ally of the ruling coalition and India's second largest left party, will also hold a meeting on Thursday over the deal.

Fearful the fall of the government could give more power to the main opposition -- the Bharatiya Janata Party (BJP) -- the Samajwadi Party has hinted it is willing to negotiate with the centre-left Congress.

But the party may want its pound of flesh.

The Samajwadi, a socialist party in Uttar Pradesh with strong Muslim backing, was reported by a leading daily to be seeking the removal of the finance minister, its central bank governor and its petroleum minister in return for SP support.
The Samajwadi has 39 seats in parliament, compared with 59 for the communist parties. The Congress-led ruling coalition needs the support of 44 lawmakers to reach a majority.

The political uncertainty has helped hit markets this week. Stocks fell for two consecutive days before jumping 5.4 per cent on Wednesday on bargain hunting and rises in the European market.