8 DEC, 2011, 07.27AM IST, ROHINI SINGH & SOMA BANERJEE,ET BUREAU
FDI in retail: UPA’s multiple dysfunctions created the perfect FDI storm
NEW DELHI: The government’s decision to suspend opening up of India’s retail sector to foreign investors, 12 days after it was announced with much fanfare, marks a new nadir in the fortunes of the second UPA government. Optimists, and there a few, think retail FDI could play out like the nuclear deal, where it was initially put on hold after the Left objected, and later revived.
But the second avatar of the UPA appears to be difficult from the previous one, a number of ministers in the current government said, with key players often working at cross purposes. The ministers, as well as several politicians, both belonging to the Congress and the government’s allies, largely spoke on condition of anonymity.
The fiasco has highlighted what was till recently only whispered about – infighting in the cabinet and a rapid diminution in the authority of the Prime Minister, Manmohan Singh. Barely 24 hours after the cabinet meeting, for instance, senior ministers from the ruling and allied parties were expressing their reservation about the move, some openly. It soon became well known, for instance, that defence minister AK Antony and rural development minister Jairam Ramesh were opposed, though neither have spoken in public.
PROBLEMS AT THE TOP
But the discord, according to the ministers and a number of political leaders, is not restricted to the cabinet. According to a number of people familiar with the matter, equations between Sonia Gandhi, the Congress President, and the man she appointed as Prime Minister more than seven years ago, is no longer what it used to be.
“The Congress is like a three-legged animal, with each being pulled in different directions. So, if there is one section that is toeing Mrs Gandhi’s line, there is another that appears to have Rahul Gandhi’s mandate. And a handful of people supporting the PM,” a cabinet minister said.
Sonia Gandhi’s illness has been a complicating factor.
“Who is in charge here? Sonia Gandhi is distracted with her illness and she is no longer as hands on as she was during UPA 1. Rahul Gandhi is a landlord in absentia – his interventions are few and far between and he keeps himself away from the government mostly. That leaves the Prime Minister whom his own party members don’t take too seriously. His authority is constantly challenged ironically not as much by the allies but by Congress cabinet ministers. And it doesn’t help when the PMO is perceived to be playing games with various ministers,” another senior UPA minister says.
“This term of the UPA has killed the spirit of doing business in India,” a top industrialist told ET. “It’s not just an activist judiciary, an out-of-control law enforcement agencies but also other issues such as inflation. Who can do business with interest rates at 16%? This government has some outstanding, bright individuals but nobody is willing to do anything,” the industrialist says.
The division in the cabinet has not helped.
“The FDI in retail is a classic example of how the PM was let down by his own cabinet. Which of the powerful ministers came out in strong support? Not because in principal they didn’t support it but because they are upset and disillusioned by the PM,” says a minister belonging to a party allied with the Congress.
According to this person, Chidambaram feels let down by the PM as he feels the Prime Minister’s Office has not been particularly helpful at a time when he is under relentless attack from Subramaniam Swamy, the maverick politician who has petitioned the courts seeking resignation of home minister, who was finance minister in 2008 when a set of controversial telecom licences were issued by A Raja, the former telecom minister.
A controversial note from the finance ministry, which appeared to partly blame Chidambaram for failing to prevent the scam, has not helped matters.
“It later emerged, of course, that the finance ministry was forced to write this by the PMO and Pranab was quite upset by how he was made to look in all of this for no fault of his,” the minister says.
One cabinet minister also points out that Kapil Sibal, the telecom and HRD minister, who till a few months ago did a fair amount of fire fighting for the government, kept mostly silent during the FDI debate as he feels he went out on a limb opposing the popular anti-corruption campaigner Anna Hazare, with little backing from the party.
Government officials say an attempt was made by the Congress high command to bring in order by appointing Pulok Chatterji as the PM’s principal secretary. Chatterji comes with the formidable reputation of being a professional, low profile and no- nonsense bureaucrat. He has an onerous task at hand, say people in the know, with the relationships between some of the most powerful cabinet ministers at an all-time low.
WALKING INTO DISASTER
Landmark legislation and reforms initiated by the UPA have had one characteristic. With the important exception of the nuclear deal legislation such as NREGA – which provides 100 days of guaranteed employment – and the proposed Food Security Bill have been personally been driven by Sonia Gandhi. The government’s role has been to implement the party’s wishes.
In case of multi-brand retail it was different, with the Prime Minister driving the initiative. The government had to sell this idea to the party once the core committee took a view.
“In other cases, the decision or a policy is moved by the Congress or Mrs Gandhi like the food bill. In this case, it was led by the PM along with industry minister Anand Sharma initially. Finance minister Pranab Mukherjee lent his weight to it, only after the core committee gave its nod.” The Congress core committee consists of Mrs Gandhi, the PM, and some of the top cabinet ministers.
But the core committee’s support proved to be not much help as the opposition remained relentless and in-house dissenters, including a number of MPs from poll-bound UP, failed to fall in line.
Many blame industry minister Anand Sharma for the fiasco.
At the cabinet meeting, Sharma is said to have given the impression that Mamata Banerjee, the West Bengal Chief Minister, was on board. “I have spoken to her,” he informed ministers when faced with opposition from those belonging to her party. “But speaking to her and getting her on board are two different things. The impression that was given was that she was on board,” another senior cabinet minister says.
Says Dinesh Trivedi, the railway minister and TMC’s sole cabinet member: “The cabinet is like King Arthur’s table where everyone is equal with the PM presiding over it.”
The TMC had made it clear that it would not support the move and the government could have avoided embarrassment if the voices of dissent were taken more seriously, he said.
When asked if the TMC had not changed track mid way since commerce minister Anand Sharma claimed to have had consultations with Mamta Banerjee, another TMC leader said that “it is one thing to apprise a party on a decision and another to have it ob board”. He may have gone and spoken to the TMC leader but there was no consent to the move, he said.
Law minister Salman Khurshid told ET that the government was “disappointed that such an outstanding measure was being seen with cynicism”. On being asked whether he concedes that the handling of the situation left a lot to be desired, Khurshid said, rather diplomatically, that “in hindsight it would have been more comfortable for us if our allies had come on board earlier”.
A Congress party member says Sharma was the wrong choice to hard sell the proposal. “First, he didn’t even bother to sell the idea to his party men, forget about allies. The result being that a lot of Congress members were doubtful about the move given that elections in key states are next year. Uttar Pradesh was a big factor – how we could explain the benefits of this policy to the farmer in such a short span of time. Our opposition in the state had already made it into an anti-farmer issue and we weren’t sure how it would have gone down there,” the person says.
“This government is being run by Rajya Sabha people some who haven’t even been municipal commissioners,” says a Congress leader sarcastically. The criticism would apply to the Prime Minister, who is a Rajya Shabha member.
Several Congress ministers say it was a classic case of bad presentation. “The policy should have been pitched as a special power that states were going to be given to avail foreign investment in infrastructure and retail if it so desired.
Instead, we pitched it like some central law,” says a senior cabinet minister. “And what was the point in announcing it late at night to the media without bothering to inform political parties during Parliament session? Mamata should have been taken on board and the opposition should have been spoken to. Instead the government was in such a hurry to show that it was not in a state of paralysis that it ignored ground realities,” the minister says.
FM THE LONE POLITICAL MIND
Political leaders across party lines are surprised and non-pulsed about how the finance minister became a part of this mess. The FM is amongst the few political leaders in the cabinet who is perceived to be in command of the political situation. “It is an embarrassment when he is forced to suspend a decision; He is the only person who could get all the political parties to agree on giving up the adjournment motion saving the government from further setbacks,” a cabinet minister said on conditions of anonymity.
Finance ministry officials say that the ministry has always supported FDI as it would bring in much needed capital and technology that would create jobs. The timing depends on the parent ministry, the ministry says.