The Communists look frustrated on most fronts but they won't 'bite', for now.
Let us consider three issues on which Left-Congress relations have been tense: oil prices, FDI and the interest rate on employees’ provident fund (EPF) deposits. The first is the least problematic. Finance minister P. Chidambaram has agreed to bring down taxes on several petro-products by reducing the effective rate of protection given to domestic refiners, so the Left’s grouse has by and large been addressed.
No sane person would blame the government for what has happened: global oil prices are ruling at record levels; India imports close to three-fourth of its requirements of crude oil—most of it from the Gulf; and the NDA government arm-twisted "autonomous" oil companies by preventing them from hiking prices for six months because of the polls. Thus it became impossible to completely insulate the domestic consumer from the oil price shock except to cushion the impact slightly by cutting taxes.
A bigger dispute between the Left and the UPA concerns the government’s decision to reduce the annual interest rate on EPF deposits from 9.5 per cent to 8.5 per cent in the teeth of opposition from all trade unions (barring the Congress-affiliated INTUC). The finance ministry argues that the high interest rate on EPF deposits is not compatible with an overall "soft" interest rate regime (in nominal terms, most interest rates in India are at their lowest levels in 30 years) and would result in the EPF Organisation incurring huge losses.
The trade unions argue that the interest rate on deposits should be treated like a "social security" benefit for the 30 million industrial workers. CPI MP Gurudas Dasgupta complained in Parliament that the UPA government was more interested in ceding to the demands of stockbrokers, not the workers. What cannot be denied is that lower rates benefit the government and industrialists the most, not workers or senior citizens. While labour minister Sis Ram Ola has said the interest rate would be increased if the EPFO shows a surplus, the Left unions are extremely dissatisfied.
The most contentious issue between the Left and the Congress relates to the FM’s proposal to hike FDI limits in three sectors: telecom, aviation and insurance. Chidambaram has argued that by allowing the FDI limit in telecom to go up to 74 per cent, he would merely be making transparent what is currently held in an opaque manner. He adds that if 49 per cent foreign holding is allowed in airports, the same norm should apply to aviation companies. Finally, he has argued that there’s little to distinguish between 26 per cent and 49 per cent foreign holding in insurance companies since the relevant limits are 25 per cent and 50 per cent. (See Chidambaram’s interview in Outlook, July 26, ’04)
The Left generally opposes the entry of foreign capital unless it is accompanied by technology that the country does not possess, if domestic resources are inadequate and if national security is not affected. If the FDI cap on insurance has to be upped, the law will have to be amended—curiously, opposition to this step is not merely from the Left but from the BJP as well, articulated by none else but Atal Behari Vajpayee himself in a classic case of hypocrisy, an instance of "opposition for the sake of opposition".
The Communists don’t believe foreign investors in insurance will bring in anything new in terms of technology that the lic or the gic doesn’t already have. Private insurance firms target their products at those who need it least, affluent people with high life expectancies.
In telecom, the Marxists argue (and rightly so) that private firms have not expanded their services to rural areas like the much-maligned bsnl has. In any case, there are already too many telecom players and mergers are inevitable—the world over, telecom firms are not exactly going great guns and formally hiking the FDI cap won’t alter the situation. As far as aviation is concerned, the Left points out that fares are collapsing not because airlines love their customer—India is soon going to become the only country in the world where air fares would be cheaper than the cost of travel by road or rail—but to ensure occupancy.
When the CPI(M) decided to stay out of the UPA government, only a few party bigwigs argued that this would imply the Left wanted "power without responsibility". The overwhelming majority argued that there was little to distinguish between the economic policies of the Congress and the BJP, saying it would be able to do little to influence the "upper class-oriented" economic policies. It is also a fact that wherever the Left is an electoral force to reckon with (West Bengal, Kerala, Tripura and to a lesser extent, Bihar), its principal political adversary is the Congress (and the RJD).
Therein lies the dilemma for the Left. Having decided on who is the "lesser evil", to what degree can the Communists compromise on economic issues? The answer to this is not clear. This explains the frustration of the Left. And also sets a limit to the extent to which the Congress can take them for granted. Watch out for more action. The assembly polls in West Bengal and Kerala are scheduled for June ’06.
(The author is director, School of Convergence. He can be contacted at paranjoy@yahoo.com)