Mamata Banerjee vs Government: Compromise evasive, no talk of rollback

Sources in the Petroleum Ministry say that so far, the government has not agreed to a partial rollback of diesel prices, or an increase in the amount of subsidised cooking gas for households. These concessions could have helped propitiate Ms Banerjee, who announced her exit from the UPA last night over the PM's decisions to reduce fuel subsidies and open the retail sector to foreign companies.

However, Congress-ruled states will give three extra subsidised cooking gas cylinders, the party announced today. Spokesperson Janardhan Dwivedi said that party president Sonia Gandhi has instructed state governments on this issue. This announcement puts the party at odds with the government's reforms agenda, that is being led from the front by Prime Minister Manmohan Singh. (Congress-ruled states to relax LPG subsidy cap from 6 to 9 cylinders)

Leaders from Ms Banerjee's party are emphatic that she will not reconsider her exit unless the government suspends its decision to allow Foreign Direct Investment or FDI in retail, which will allow foreign mega-chains like Wal-Mart and Tesco to sell directly to Indian customers. (Poll: Should the government give in to Mamata Banerjee?)

The Prime Minister has made it clear that's not possible. Sources say he phoned Ms Banerjee four days ago, but his call was not returned.  Commerce Minister Anand Sharma urged Ms Banerjee today to reconsider her decision on exiting the government.  The PM has told his ministers that they must "stay the course" to introduce new economic reforms. In Delhi, Sonia Gandhi met with the PM and senior ministers this morning to evaluate the political crisis. After the meeting, Mrs Gandhi smiled at reporters and gave them a thumbs-up.

Ms Banerjee's six ministers are scheduled to resign on Friday at 3 pm. They deny this offers a 72-hour window for a compromise with the Congress. Two of them arrived in Delhi today from Kolkata. They say they want to wrap up work before handing in their resignations to the PM. The Congress will reach out to them to explain the new economic reforms. (Who is Mamata Banerjee?)

Mulayam Singh Yadav has refused to commit to his party's support for the UPA. Mr Yadav's Samajwadi Party has 22 Lok Sabha MPs, three more than Ms Banerjee. He does not participate in the UPA, but provides external support. His party has said his support should not be taken for granted, that it will not participate in the government. The Parliamentary Board of the Samajwadi Party will meet tomorrow to decide its course. Mr Yadav is also taking part, along with the Left and the BJP, in a nationwide bandh or strike tomorrow against the centre's new policies. Another large member of the UPA, the DMK, is participating in the bandh. But its leaders say they are not keen on embarrassing the UPA and are unlikely to pull out of the government, especially if there is some change in diesel prices and the cooking gas policy. (Won't pull out of UPA, say DMK sources, but will take part in bandh)

Mayawati, whose BSP has 21 MPs, is key to the UPA's survival. Like Mulayam, she offers external support to the government, and is opposed to FDI in retail. But because her party performed abysmally in the recent elections in Uttar Pradesh, she has the most to lose if mid-term polls are held - voter sentiment against her party remains strong.

The PM and senior ministers were aware of the political risks of introducing FDI in retail. However, sources in the Congress say that the party felt Ms Banerjee would provide external support to the UPA, and not withdraw completely from the ruling coalition.

Both Ms Banerjee and Mr Yadav have accused the Congress of running the UPA without consulting allies. "The Congress acts as if it has a majority," said Ram Gopal Yadav of the Samajwadi Party. Ms Banerjee said last night that her party had been shown "minimal respect" by the Congress.

The government has 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 Banerjee'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.