The Telegraph
Since 1st March, 1999
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Glare & wink make PM blink

New Delhi, July 6: Prime Minister Manmohan Singh has put all divestment proposals on hold after a threat from southern ally DMK and a nudge from Sonia Gandhi.

Karunanidhi issued a warning that he would pull out the DMK’s ministers from the Centre unless it rescinded the decision to divest 10 per cent stake in Neyveli Lignite Corporation, a Tamil Nadu-based public sector undertaking.

Sonia was firm that unless the government went back on an identical decision on another public sector unit, Nalco, the Congress would lay itself bare to the charge of being “anti-labour and anti-poor”.

On June 22, the cabinet had cleared the offloading of equity in both units. The DMK’s ministers, including Dayanidhi Maran, T.R. Baalu and H. Raja, were present at the meeting.

Initially, sources close to the Prime Minister said there was “no way” the decision would be reviewed, let alone revoked. “The DMK was as much party to the decision as anyone else. The minutes of the (cabinet) meeting establish this fact,” a source said.

An hour later, following a phone call to Singh from Sonia, the Prime Minister’s Office issued a statement, saying: “The Prime Minister has decided to keep all disinvestment decisions and proposals on hold, pending further review,” keeping the “concerns” of the allies in mind.

The Centre was initially confident of riding out the storm because few disputed the assessment that the DMK was raising the pitch against divestment to pre-empt the Jayalalithaa-led state Opposition from gaining political mileage.

But Jayalalithaa played her cards well and kept up the momentum, prompting DMK ministers Maran and Raja to call on Singh this morning and emphasise that matters were slipping out of the party’s hands in Tamil Nadu.

But Sonia’s call was the clincher. She reportedly said the Nalco divestment would “work against” the Congress’s interests.

“We welcome the Prime Minister’s announcement,” said V. Narayanaswamy, the AICC general secretary in charge of Orissa, where Nalco is based.

On Sonia’s “advice”, he had circulated a background paper on Nalco in the Congress Working Committee meeting last Thursday. Congress sources claimed Sonia killed two birds with one stone: mollify the DMK and protect her party’s turf.

The immediate “casualties” were divestments in NLC and Nalco. But the government had also decided on stake sales in the Power Finance Corporation, the National Mineral Development Corporation and Tungabhadra Steel Products.

Had the divestment process gone ahead, it would have fetched the government Rs 5,000-6,000 crore. The money would have been parked in the National Investment Fund, meant to finance welfare programmes.

Several banks, including SBI, Indian Airlines and Air-India were also among corporations where the government planned to dilute its stake.

It is believed that although the Prime Minister was “unhappy” about undermining his reform credentials, the Congress president explained to him the political imperatives. Singh was told that if he continued to “aggressively” pursue the reform agenda, the Congress would go the NDA way in the next election.

Sources said it was conveyed to Singh that the government seemed to “flounder” for want of a political direction. This “message” was beamed subtly to Singh and finance minister P. Chidambaram when Sonia took over the price rise fight.

The sources said the Prime Minister appeared “extra cautious” at today’s cabinet meeting. He referred three matters to a group of ministers: irrigation schemes, freight corridors between Delhi and Mumbai and Delhi and Calcutta and a bill on foreign universities.

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