Sugar row underscores India's political fragility

The routine reopening of the Parliament has suddenly emerged as an awkward test for the Congress-led government's ability to push reforms such as price deregulation in the face of opposition from its rural base.

Tens of thousands of farmers from Uttar Pradesh protesting against low sugarcane prices forced the postponement of the winter session of Parliament on Thursday in a major political headache for the government, re-elected this May.

A once-divided opposition, seemingly unable to recover from election loss, have vowed to disrupt Parliament until the government reverses a policy aimed at bringing in more market forces to the sugar industry, one of India's biggest cash crops.

On Friday, the opposition forced an adjournment for the second day, with lawmakers running into the House shouting slogans.

"Such a display of opposition unity...has rarely been seen outside Parliament," a newspaper commented on Friday. "The United Progressive Alliance (UPA) government has only itself to blame for giving an issue to the opposition on a platter."

The ruling UPA coalition has given states greater autonomy in fixing sugarcane prices to help lift restrictions on the heavily regulated sugar sector.

But a backlash has played into hands of the opposition.

Global politics on the backburner

Only a week ago, domestic politics appeared to be playing second fiddle to international issues, such as global climate change negotiations and prime minister Manmohan's Singh's visit to Washington DC next week.

That mood has changed. Buoyant from the closure, protesters say the ball is now in the government's court. The government may hold an all-party meeting on Monday over the issue.

"We have now adopted the policy of wait-and-watch for next two to three days," Anil Singh, national secretary of the National Alliance of Farmers Associations.

"The response to Thursday's rally was satisfying. Now the government has come to its knees."

Singh has promised economic reforms such as the deregulation of State-run sectors, introducing more foreign investment into areas like insurance, and boosting expenditure on infrastructure to allow India to compete with the likes of China.

But some reforms face endangering the Congress party's pro-poor "inclusive growth" manifesto and dashing hopes of a major revival in Uttar Pradesh, where Gandhi scion Rahul Gandhi has reached out to the poor in high-profile campaigns.

One reform, bringing in foreign investment in retail, has already floundered because of opposition in rural areas.

Indeed, Gandhi was reported to have phoned Singh over worries that the sugarcane issue could derail Congress inroads into some of India's most populous and politically important states.

The protest does not mean all of the Congress party's reforms will be in trouble. It still has a clear majority in Parliament.

For example, most analysts expect the government to raise limits of foreign investment in the insurance sector, a policy aimed at allowing approximately 40% of the country's savings rate to be recycled into investment and sustain higher growth rates.

"Disinvestment, etc, will go on, even though there will be protests as usual," political analyst Amulya Ganguli said.

"The opposition is delighted to have got an issue."