Indian PM set to advance U.S. nuclear deal at G8

India's Prime Minister Manmohan Singh speaks during the diamond jubilee celebrations of the ''Institute of Chartered Accountants of India'' (ICAI) in New Delhi July 1, 2008.

NEW DELHI (Reuters) - Having clinched crucial political support, Indian Prime Minister Manmohan Singh arrived in Japan on Monday for a G8 summit where he may formally press ahead with a civilian nuclear deal with the United States.

Singh appears to have secured a parliamentary majority for his government to replace his communist allies, who say they will withdraw their support if the deal goes ahead. The left criticizes the deal as making India subservient to Washington.

The pact would be one of Singh's most important achievements in four years of office, giving India access to U.S. nuclear fuel and technology and moving the Asian giant's trade and diplomatic relations closer to the West.

Singh was due to hold on Wednesday a bilateral meeting with U.S. President George W. Bush -- the man who shook hands with Singh on the accord at the White House in 2005 -- where he is expected to say the deal goes ahead.

If Singh gives the green light, an International Atomic Energy Agency's 35-nation board of governors could meet as early as July 28 to ratify a recent safeguards accord between India and IAEA inspectors, a step required for the U.S.-India deal to take effect, diplomats accredited to the agency said.

Singh told reporters on the plane to Japan that India would approach the IAEA to have it submit the safeguards text for board approval "very soon", the Press Trust of India reported.

The IAEA diplomats said there was talk of a special July 28 board gathering but any timetable for advancing the deal remained unclear until Singh authorized the IAEA to proceed.

"This meeting would be India-specific, but no date for it has been set yet. It would be premature at this point," said an IAEA official who, like the diplomats, asked for anonymity due to political sensitivities.

But some say it could already be too late for the deal to be passed before the end of Bush's term.

With time running out before the U.S. election in November, India needs to seek approval for the deal from the IAEA, then the 45-nation Nuclear Suppliers Group where there is doubt about the deal since India is outside the Non-Proliferation Treaty, and finally ratification by the U.S. Congress.

DEAL POTENTIALLY WORTH BILLIONS

The nuclear deal is potentially worth billions of dollars to U.S. and European nuclear supply companies and would give India more energy alternatives to drive its booming economy.

To secure both the deal and his government's survival, Singh has realigned his four-year-old coalition by securing the support of the Samajwadi Party, a regional party from northern India with a history of pragmatic alliances with governments.

Their support should ensure that Singh avoids having to hold an early election this year just as the government grapples with 13-year-high inflation and signs of economic slowdown.

"The nuclear deal is safe and so is the central government, thanks to the Samajwadi Party," the Economic Times said in an editorial on Monday.

The four communist parties that give the ruling coalition a majority in parliament had set a Monday deadline for the government to tell say if it was going ahead with the deal.

The Forward Bloc, one of the smaller leftist party said late on Monday that the left would withdraw its support on July 10.

"We have no choice but to withdraw support and we will do it on July 10," Debabrata Biswas, a Forward Bloc leader told reporters. "This is a unanimous decision."

In its reply to its communist allies on Monday, the government did not say if it was proceeding with the nuclear accord, but requested a meeting with the left on Thursday -- an encounter that could see a formal split between the two sides.

"The ball is in the court of the left parties, not the Congress," senior ruling Congress party leader Veerappa Moily told reporters. "If they have any grievances they can express them at the next meeting.

The main Hindu nationalist opposition, the Bharatiya Janata Party, has called for a vote of confidence in the government. It is almost certain that the vote will be called if the left withdraw their support.

The Samajwadi Party has 39 seats in parliament, compared with 59 for the communist parties. The Congress-led ruling coalition needs the support of 44 lawmakers to reach a majority. It would try to win the other five seats from smaller parties.

India's political uncertainty has hit markets. Stocks fell 2.5 percent last week, pushed down not only by worries over the government's future but also by record oil prices and inflation.

On Monday, stocks rose 0.5 percent, partly on news that the government has secured the support of the Samajwadi Party.