Prime Minister Manmohan Singh is expected to speak to West Bengal Chief Minister Mamata Banerjee today - a day before her deadline to withdraw the government's decision to allow Foreign Direct Investment or FDI in multi-brand retail, the hike in diesel prices and restriction on subsbidised gas cylinders runs out.
Sources say a compromise on the cap on subsidised LPG cylinders is likely to be discussed in an attempt by the PM to reach out to the Trinamool Congress, an ally of the government at the Centre. The government, sources say, is willing to raise the cap on subsidised cylinders from six to eight per household each year.
Ms Banerjee is understood to be considering pulling out her ministers from the Congress-led UPA government and give outside support to if her demands are not met by Tuesday, when her party leaders meet in Kolkata. It is not immediately clear what she will politically gain from this, since the government is no danger from the move. Ms Banerjee has 19 Lok Sabha MPs, making her the second-largest member of the ruling UPA coalition after the Congress. (Vote: Will a lack of political consensus kill Manmohan's big reforms push?
The government restricted the supply of subsidised cooking gas to six cylinders per household in a year and raised the price of diesel by Rs. 5 per litre on Thursday, prompting angry responses from Mulayam Singh Yadav and Ms Banerjee, who has demanded a rollback.
Prime Minister Manmohan Singh on Saturday had said that it will take "courage and some risks" to break the policy logjam in the country.
On Friday, the government in a surprise announcement cleared 51% Foreign Direct Investment or FDI in multi-brand retail - a move it first approved last year, but suspended after strident opposition by West Bengal Chief Minister Mamata Banerjee.
This time though, Ms Banerjee's reaction has been taken in stride by the government which has said that while it respects her right to disallow the new retail policy in West Bengal, other states are in favour of FDI in retail and would like to implement it. The government's reforms are based on careful political calculations - Mulayam Singh Yadav's Samajwadi Party has said it does not support the new policy but will not stop the external support it provides to the UPA. Mayawati's BSP has taken a similar stand.
The BJP and the Left and other opposition parties have called a nationwide bandh on Thursday to protest against the new reform guidelines. The BJP has accused the government of using FDI to divert attention from the coal scandal that suggests the government allowed private firms sweetheart deals in coal blocks, many of them assigned to politicians and their relatives.