India fails to break civilian nuclear deal deadlock

NEW DELHI (Reuters) - India's government and its communist allies agreed on Wednesday to meet once again to break a deadlock over a civilian nuclear deal with the United States, effectively delaying any possible threat of snap elections.

The communists prop up the ruling coalition in parliament and say they will bring down the government if it goes ahead with a deal criticized by leftists for making India a pawn of the United States.

But Prime Minister Manmohan Singh, who has invested much of his personal reputation in a deal seen as forging a closer trade and diplomatic ties with Washington, has appeared eager to go ahead with the deal despite opposition from within the coalition.

Wednesday's move to hold yet another meeting after months of fruitless negotiations highlighted how some ruling Congress party leaders and their non-communist allies fear record 13-year inflation could ruin their re-election chances in a snap poll.

A meeting between the two sides ended on Wednesday with an agreement only to meet once again. No date was given for the next encounter.

"The next meeting of the committee ... will finalize its findings," a stern-looking Foreign Minister Pranab Mukherjee told reporters after meeting communist leaders.

Local media says Singh wants to reach a final decision on the deal before the G-8 summit in Japan starting on July 7. He is reportedly reluctant to meet with leaders such as President George W. Bush without a commitment for the deal.

The pact, which gives India access to U.S. nuclear fuel and technology, is potentially worth billions of dollars to U.S. and European nuclear technology companies and would give India more energy alternatives to drive a booming trillion-dollar economy. Sonia Gandhi, the ruling Congress party head and India's most powerful politician, has been meeting non-communist allies of her coalition over the past few days to discuss the government's stance.

Many of these allies would prefer an election in early 2009, hoping the government will be able by then to rein in rising prices that have lost it support among many voters.

"The government and the prime minister had upped the ante. But it seems like he (Singh) has backed down for now and has not been able to prevail either over the communists or his allies," said Praful Bidwai, a strategic affairs analyst.

The Congress has also sought to play down the crisis, saying its allies would not sacrifice the government over the agreement.

The deal still needs clearances from the International Atomic Energy Agency (IAEA) board of governors and the 45-nation Nuclear Suppliers Group. Then the deal would have to go to the U.S. Congress for final approval.

But it might already be getting too late as the United States gears up for presidential elections. U.S. Ambassador to India, David Mulford, was reported to have met top government officials on Tuesday to discuss the deal.

Some analysts say the communists could allow the government to negotiate an India-specific safeguards agreement with the IAEA, and not let the deal go any further. That would buy the government time and avoid early elections but leave the deal in limbo.

But a senior communist leader denied this.

"Our point we have explained that we will not allow the government to go to IAEA for approval," Debabrata Biswas, a senior communist leader, told reporters after Wednesday's meeting.

(Additional reporting by Nigam Prusty and Bappa Majumdar; Writing by Alistair Scrutton; Editing by Jerry Norton)