Mamata Banerjee met her party leaders in Kolkata to decide whether to quit the ruling UPA coalition in protest against the government's decision to raise diesel prices, place a cap on subsidised gas cylinders and allow Foreign Direct Investment or FDI in multi-brand retail.An announcement is expected soon.
Sources say the Prime Minister phoned her three days ago and left a message for her, but she has not returned his call. Senior ministers in Delhi have made it clear that Ms Banerjee's objections will not provoke a rethink or reversal. Her 72-hour deadline for a rollback expired today without any compromise, or phone call from either Sonia Gandhi or the Prime Minister.
Ms Banerjee is reportedly weighing three options - whether to quit the UPA altogether, pull her six ministers out of government to provide external support, or ask her ministers to boycott work.
Should Ms Banerjee opt out of the UPA altogether, regional powerhouses like Mulayam Singh Yadav and Mayawati will ensure the government does not fall. Ms Banerjee has 19 Lok Sabha MPs; Mr Yadav has 22 ; Mayawati can offer the support of another 21.
So by exiting the UPA completely, Ms Banerjee will not change the political landscape. As a part of the UPA, her request for help from the Centre with her mangled finances is likely to carry more weight than as an outsider. Ms Banerjee has been asking the Centre for a moratorium on 21,000 crores that West Bengal owes as interest on loans from the Centre.
The government has rejected her 72-hour deadline that asked for a rollback of the new policies. Finance Minister P Chidambaram said that there is no question of any reversal, and that the government is confident it can bring its allies around.
The government has also stressed that states have the freedom to decide whether to allow FDI in retail. Ministers have said that while Ms Banerjee may oppose the reform in her state, others would like to implement it. Ms Banberjee's party says that once super-chains like Wal-Mart enter some parts of the country, they will lobby and pressure the government to open other regions to them.
The Congress has admitted to back-channel talks with Ms Banerjee's party. A possible compromise may involve modifying the quota introduced for cooking gas cylinders.
Last November, the cabinet cleared the proposal to allow foreign companies to buy majority stake in Indian firms to sell directly to customers but the policy went into cold storage after Ms Banerjee threatened to exit the government.
The Prime Minister is focusing now on big-ticket reforms to revive a sputtering economy and to rescue the government from its image as a lame-duck administration fettered by the conflicting interests of its allies.