Key reform decisions taken at Cong core group meet on Sep 11

Few senior ministers, barring the ones directly associated with the decision to open up multi-brand retail and civil aviation sectors to foreign direct investment (FDI), knew announcements of such deep political importance were on the way.

At least three Cabinet ministers Business Standard spoke to said they had no idea, prior to the announcements, that such major decisions were going to be taken. Working backwards, they speculated that iritated and stung by the charge that the party and the government were not on the same page on reforms, the decision to raise fuel prices as well as FDI in multi-brand retail were taken at the Congress core group meeting held on September 11.

The core group is a consultative mechanism of the party and the government that has party President Sonia Gandhi and Prime Minister Manmohan Singh sitting around a table and discussing politically sensitive policy issues.

That putting the economy right was the top most priority of the party was conceded by top party managers a few days after former finance minister Pranab Mukherjee was elected as the President and P Chidambaram, who was previously holding the home portfolio, was appointed in Mukherjee’s place.

Even before he was formally appointed as the finance minister, Chidambaram spoke to the prime minister and explained to him he would be unable to turn the economy around unless the government committed itself to taking some tough decisions. Among these was the fuel price hike.

But both the prime minister and Sonia Gandhi were hamstrung. Having promised to do nothing until political consensus had been reached, they could neither push through FDI in multi-brand retail nor a fuel price hike.

But at the September 11 meet, it was decided that no more time could be lost on consensus building, especially as naysayers like Mamata Banerjee were not going to come around any way.

Therefore, it was the core committee which decided the bullet had to be bitten. Once a decision was taken, it was not communicated to too many people, including most ministers. Both decisions were last minute inclusions in the respective day’s agenda.

The diesel hike followed on September 13 and the FDI-related decision the next day.

Unlike previous occasions, when the Congress party always publicly condemned any fuel price hike citing the travails of the ‘aam aadmi’, this time no differing opinion emanated from the party and it has solidly backed the government in taking these decisions.

According to sources, the political fallout had been factored in by the high command and it was felt that this was obviously the time to strike; if the economy could be revived through bold reform measures than the benefits of it would enable the Congress party to cash in on it politically. “Just before 2014 election, with the additional resources at our disposal we could unveil social welfare schemes, the Food bill, etc.” said a minister.

This argument was made both at the Cabinet Committee on Political Affairs (CCPA) meeting on September 13 as well as the Cabinet meeting on September 14.

Chidambaram had made a compelling case for diesel price hike at the CCPA, where he highlighted the perilous condition of the economy and the need to take “unpleasant decisions.” Ultimately, it was a text message with an imaginary dialogue between the prime minister and Mamata Banerjee, around the Thums Up advertisement doing the rounds in Delhi that summed up the new-found resolve of the government.

Mamata Banerjee asks the prime minister: “Why didn’t you consult me on FDI in retail and the diesel price hike”. The reply is: “Socha, aaj kuchh toofani karte hain” (I thought, let’s do something daring today).