Will Mamata Banerjee ditch UPA over FDI, diesel hike? 10 Latest Developments

Ms Banerjee has described the recent measures of fiscal consolidation and economic reform as "against the interest of the people".  Ms Banerjee's party said it had not been consulted about the decisions and has demanded a rollback.   She gave a  72-hour deadline to the government to withdraw their decision. That deadline ends today.

Talking tough, Trinamool MP Kunal Ghosh today said, "We have cleared our position. Mamata Banerjee is going to take a strong stand. The Congress is behaving as if the UPA is its private property. Enough is enough if the only solution to a financial crisis is to put the burden on the common man." The government says it's confident that its allies will come around.  

Ms Banerjee's colleagues in the Trinamool Congress say she is evaluating three options - divorcing the government altogether, pulling her six ministers and providing external support, and asking her ministers to boycott work as a sign of protest.

Mamata Banerjee plans will be guided by the fact that her state is in financial distress -she has been urging the centre for a moratorium on 22,000 crores that she owes on loans -a request that will resonate more if she is a part of the union government.  

The Congress admits to back-channel talks. Sources say the party hopes to appease Ms Banerjee by allowing more subsidized cooking gas than decided last week - eight cylinders instead of six per family, for example.  

But on FDI, the government says this time around, it won't back down, and stresses that states are not obliged to allow FDI in retail, but must not stop others who wish to do so.  "It is imperative to keep growing economically...We will convince our allies that what we have done is necessary...there is no threat to the government, it is stable," Finance Minister P Chidambaram said yesterday.

On Thursday, the government raised the price of diesel by 12% or Rs 5, and ruled that households will be entitled to six subsidised cylinders of cooking gas or LPG every year. After that, they will have to pay market rates or Rs 750. A day later, the government decided to open up India's retail sector to foreign investors - a cabinet committee said a proposal to allow 51% Foreign Direct Investment or FDI in multi-brand retail would be implemented. That policy, approved in November, had been blocked single-handedly by Ms Banerjee who threatened to opt out of the UPA if super-chains like Wal-Mart are allowed to sell directly to Indian customers.

Ms Banerjee is aware that if she parachutes out of the government, other regional powerhouses will prop up the coalition, and so little will change in the political landscape at the centre, other than her own absence.  Her party acknowledges that is a reality. Ms Banerjee with her 19 MPs is the second-largest member of the UPA after the Congress party.

But the Prime Minister and senior Congress leaders are in the mood for reforms. Bolstering them is the fact that Mulayam Singh Yadav's Samajwadi Party has not threatened to withdraw support over the issue of FDI in retail. Mr Yadav does not participate in the UPA, but provides external support. He has 22 Lok Sabha MPs against Ms Banerjee's 19.  

Additionally, Mayawati's Bahujan Samaj Party or BSP has 21 MPs and also supports the UPA.