VAT The Deuce!

The UPA government stuck to its schedule. As Chidambaram said earlier, with 21 states ready to impose VAT from April 1, the government would go ahead—with or without the BJP states. Adds Jairam Ramesh, a member of the Congress' economic think tank: "Even if some states didn't join in, there was no going back on the deadline." With a half-baked VAT in place, there may be more confusion with larger states like UP, MP, Rajasthan and Tamil Nadu staying out of VAT.

On the Patents Bill, too, Congress leaders express sarcasm at the BJP's opposition. They find it particularly ironic because the bill was formulated and introduced by the erstwhile BJP-led NDA regime in Parliament in December 2003. The BJP admits that this is true, but says it does not agree with the old draft anymore. The reason: the UPA has missed out on the NDA's achievements in the Doha round of WTO negotiations. Says Shettigar: "The bill was drafted under WTO compulsions and before the Doha round that discussed agricultural subsidy and pharmaceutical concessions. By presenting the old bill, the Doha concessions have not been accommodated. This is a loss for the country."

Even the Left and the RJD had their reservations on the bill. To accommodate their concerns, the Congress made 15 amendments. Only after that did the Left leaders say that their demands had been met and, hence, they had no more problem in supporting it. One amendment related to a provision where the government can intervene if prices of life-saving drugs rise. Experts have warned that prices are likely to go up in the new patents regime.

But the issue is not dead yet. As the Left leaders read the fine print, they concluded that more changes were required in the bill. Admits CPI general secretary A.B. Bardhan: "More coordination was needed between the Left and the government (on the Patents Bill)." He says that while some suggestions were accepted, there was still a danger that the bill could lead to an increase in drug prices. Other Left leaders say they got a raw deal and are pushing for a review. Says Bardhan: "We helped the Congress pass the bill, but the last word hasn't been said on it. We will have more amendments."

The Left's opposition is more severe in case of two other financial reforms—the banking sector reforms, details of which are to be announced by the rbi soon, and the Pensions Bill which has been referred to a standing committee. Under the banking reforms, weak banks may be merged with stronger ones, leading to closure of unprofitable branches and redundancy of employees. This, say Left leaders, will work against the interest of employees, who form a core interest group for the Left. The proposal to hike fdi limits in the banking sector, of course, is something the Left has little option but to attack.

On the Pensions Fund Regulatory Development Authority (PFRDA) Bill, there was virulent criticism by the Left and none from the BJP. Although the government had the BJP's unexpected support on it, it decided against touching the raw nerve of its largest ally and didn't table the bill. The numbers may have been on Congress' side, but it read the warnings. Listen to a senior Left party leader: "We told the Congress leaders that if you want to push the bill with BJP support, then you do so at your own peril. The government can fall." Obviously, the Left feels that the Pension Bill was not in the workers' interest.

Today, the bill's fate is uncertain as the PFRDA Ordinance will lapse on April 8, 2005, and the standing committee report on it is not expected before then. But the Congress is confident of getting the Left to see its point of view. Says Jairam: "They were adamant about the Patents Bill too, but we convinced them." However, the BJP is now against the move to allow pension funds savings to be invested in equities. This will, the government feels, help improve returns and lead to higher interest payments to the pensioners. But the BJP thinks that individuals should be given a choice whether they wish their monies to be invested in the stockmarkets or not. BJP leader V.K. Malhotra has publicly said the government cannot unilaterally decide to invest the hard-earned money of retired people in risky investment schemes.

It's only logical for the opposition to raise a hue and cry on all policy matters. The Congress is actually worried about the dissent inside the UPA. Especially since the decibel levels in the latter segments seem to be reaching a crescendo. Here's an example: Barely a week after the showdown on the patents and pension bills, Bardhan announced at a CPI meet that the Left never said support to the government was guaranteed. He added that they would support them only as long as the UPA's CMP was followed in letter and spirit. "If you go away from it, then we may have to say goodbye to them," he said. That was as open a threat as any politician could have given; implicit in it was the fact that the Left will have no qualms bringing down the government. The ball is now in the Congress court.