Key Indian party still has doubts over nuclear deal

By Krittivas Mukherjee

NEW DELHI (Reuters) - A regional party that could hold the balance of power in India said on Thursday it had to clear up doubts before supporting a nuclear deal with the United States, but hinted it may give crucial backing to the embattled government.

The ruling coalition is wooing the Samajwadi Party (SP) amid signs the communist parties that back the government in parliament will withdraw their support over the civilian nuclear deal. Many Indian politicians worry the deal will compromise India's sovereignty. The left says it makes India a U.S. pawn.

"We need to clear all doubts on the nuclear deal," Amar Singh, Samajwadi Party general secretary, told reporters.

If Prime Minister Manmohan Singh fails to secure Samajwadi support and the left ends its support, his government will likely face a snap election this year.

The ruling coalition already faces other challenges, including an indefinite strike by truckers to protest against rising fuel prices. The strike threatens to push record inflation higher and choke off supplies of some basic goods in the sputtering trillion-dollar economy.

The pact, which would give India access to U.S. nuclear fuel and technology, is potentially worth billions of dollars to U.S. and European nuclear supplier companies and would give India more energy alternatives to drive its development.

It is also seen as a landmark accord moving India's trade and diplomatic relations closer to the West.

Hours after the SP's Singh's statement, party leaders met former President A.P.J. Abdul Kalam, seen as the father of India's missile program and a highly respected proponent of the deal. SP leaders hinted Kalam's support could sway them.

"We have met Mr Kalam and he has advised us, and according to him, the deal is in the interest of the nation," Mulayam Singh Yadav said. "He has said it is beneficial and now it is up to us to decide."

The statement came after a meeting of a coalition of smaller parties, including SP, to decide whether to support the deal.

Party officials from this coalition, known as the United National Progressive Alliance, said no decision on the nuclear deal would be made before Sunday.

YEARS OF FRUSTRATION

Frustrated after four years of stymied reforms due to leftist opposition, Prime Minister Singh wants to move ahead with the nuclear agreement and secure his legacy before the scheduled end of his term in May 2009.

The political uncertainty has hit markets this week. Stocks fell more than 4.5 percent by late trading Thursday, pushed down not only by worries over the government's future but also record oil prices and inflation.

Despite a delay, many political analysts say some sort of government accord was likely with the SP, which has a history of pragmatic alliances with major parties.