The tail is wagging the dog. And the celebration over the Congress-led UPA government's reformist credentials has been abruptly-and rudely-cut short. The July 10 meeting between UPA chairperson Sonia Gandhi and Left leaders saw the latter exercising their veto over the Manmohan Singh government's economic agenda. The immediate result: no sell-off in BHEL (Bharat Heavy Electricals Limited), a navratna that makes equipment for the power industry. CPI(M) General Secretary Prakash Karat, his CPI counterpart A.B. Bardhan, and leaders of the smaller Left parties, who command 64 mps in the 543-member Lok Sabha, denied the government even a face saver: they struck down a compromise formula whereby the government would have been able to sell 5 per cent-half the original stake-in the PSU. The reason: such a move would be a departure from the National Common Minimum Programme (NCMP), which all the UPA constituents and the Left parties had agreed upon in May last year.

What the NCMP actually says is: "There will be no privatisation of profit-making PSUs, generally." This clause was inserted in order to placate the Left and to win its support. But selling minority stakes in government-owned companies can, by no stretch of imagination, be called "privatisation". Besides, the NCMP explicitly allows PSUs to raise resources from the capital market. So, the sale of a 10 per cent stake in BHEL, which would have brought the government's holding in the company to a little above 57 per cent, was actually in keeping with both the letter and spirit of the NCMP. It is, in fact, the Left that is transgressing its tenets. Barely eight months ago, in October 2004, this very government had sold a 5.25 per cent stake in power major National Thermal Power Corporation. If Comrades Karat and Bardhan allowed that sale to go through, why are they flexing their muscles now?

Besides, the Rs 900 crore that the government was expecting to mobilise from the sale of BHEL shares would flow into the National Investment Fund and be used to finance education, health and employment generation projects. Part of the proceeds would also be used to revive sick PSUs-another bad idea; it's much better to sell them lock, stock and barrel. Also, the employees (a section of whom are opposing the sale) have no reason to complain: 15 per cent of the shares were reserved for them. But the Left, and some Left-leaning employees, would not listen.

It is pertinent to note that selling "family silver"-as the Left dubs even minority stakes in PSUs-is a controversial topic even in the capitalist West. In the 1980s, then British Prime Minister Margaret Thatcher had to ride roughshod over trade unions and other opponents as she set about privatising Britain's overstaffed and inefficient state-run companies. She is now lauded for dragging her country, protesting and kicking, back to the higher rungs of the so-called First World. The Dominique de Villepin government in France is also facing opposition from trade unions to its plans of selling a chunk of Gaz De France, the former gas monopoly, through a public float. In October, the French government plans another sale: of shares in Electricite de France. Strictly speaking, neither of these sales will take the government out of business. But they represent small, positive steps towards greater economic freedom.

Prime Minister Manmohan Singh was getting there when his Cabinet cleared the BHEL proposal. But the UPA's capitulation before its Left allies now places a massive question mark over the government's resolve to push through other more important, but politically sticky, issues like pension and labour reforms.

It should bear remembering that the Left does not have a mandate to foist its economic vision on the country. But in this era of coalitions, it is numbers that count. And so long as the Left holds the key to this government's survival, it will continue to extract its pound of flesh. With elections due in Marxist bastions West Bengal and Kerala next year, things can only get worse.

That's not very encouraging for the economy.