Left launches campaign against UPA

NEW DELHI, July 14 (Agencies): Launching a nationwide campaign against the United Progressive Alliance (UPA) government clubbing the nuclear deal and price rise, the Left parties on Monday accused the ruling combine of "failing" to address the problems of the 'aam aadmi' due to its "obsession" with the agreement.

The Left parties said they could not agree to the country becoming a "junior partner" to the US and withdrew support to the government as it moved ahead with the deal when the country was faced with price rise and inflation.

Attacking the government for moving ahead with the deal when in "minority", CPI(M) general secretary Prakash Karat took a potshot at the ruling party, saying 'Congress ka Haath, America ke Saath'.

Karat said the Left will work to defeat the government on the trust vote and expects that more parties will join them in the struggle against the deal.

"The popularity of President George W Bush in US is 20-25 per cent.

He is the President of a minority.

We have a Prime Minister who is heading a minority government.

A minority President and minority Prime Minister are trying to hook this country to US hegemony," the senior CPI(M) leader said.

Claiming that the government and Congress want to fulfill their promise to Bush, he said, "it is their primary aim and not tackling inflation or price rise...The deal and price rise were the issues on which we withdrew support." "We were tolerating them (UPA) because we did not want BJP and other communal forces to come to power," he said.

In an apparent reference to Congress tie-up with Samajwadi Party, Karat said there is a party which is now supporting the government, but shared the dais with the Left sometime ago in opposing the deal.

The campaign has been launched to explain to the people the reasons for withdrawing support besides "explaining the UPA's pro-American and anti-people policies which are resulting in price rise and other problems".

In the course of the campaign, the Left will also place before the people alternatives to meet energy requirements for development and for putting an end to economic policies which are "harmful to farmers, rural poor, workers and other sections".

Plans are afoot to field top leaders, who will criss-cross the country, to attend public meetings and rallies organised in major towns in all states.

Meetings will be organised at all major centres, as well as in towns and villages.

Pamphlets and handbills will be published.

The campaign plank will be anti-imperialism and defense of the country's sovereignty, anti-communalism, secular domestic polity and protection and improvement of common people's livelihood against attacks of big business, a senior Left leader said.

Ambani meets PM, decries demands for windfall tax NEW DELHI, July 14 (Agencies): With United Progressive Alliance (UPA) government's new found ally Samajwadi Party gunning for Reliance Industries, the company head Mukesh Ambani on Monday met Prime Minister Manmohan Singh and a host of other senior government functionaries to explain how demands for levy of windfall tax was bad economics.

Ambani first met Singh and there were unsubstantiated reports that he followed this with a meeting with Congress President and UPA Chairperson Sonia Gandhi.

Flying in from Mumbai on July 14, Mukesh started a series of meeting with top bureaucrats, including a call to Cabinet Secretary K M Chandrasekhar.

Ambani's visit assumes importance in the wake of Amar Singh raising a number of issues, including a demand for withdrawal of EOU status for RIL's Jamnagar refinery along with a suggestion that Prime Minister should intervene to bring peace between Mukesh and younger brother Anil.

Sources said Ambani pleaded that the demand for levy of so-called windfall profit tax on private firms was no more than a populist slogan based on the misleading logic that with rising prices of oil across the globe, these companies are making profits far in excess of what they legitimately deserve.

While government shares production from oil and gas fields and is a beneficiary of high oil prices, the refinery business is highly cyclical and with new capacities coming on stream world over margins will decline precipitously.

Ambani is believed to have told policy makers that fiscal revenue gain from a WPT would be short-term in nature, but the economic costs of introducing an unstable fiscal regime could be long lasting.

Ambani is believed to have told policy makers that during boom periods of business cycles diverse sectors enjoy high returns like the IT boom in the late 1990s, but a WPT was not even contemplated for them.

Presently, many domestic natural resource-extracting entities in non-oil sectors have also benefited financially from the unprecedented global commodity boom.

Will it be justified to impose WPT on them, he asked.

The US imposed a WPT in 1980 but repealed it in 1988 as it led to increased dependence on imported oil and gross revenue gains were significantly less than anticipated.

Ambani is believed to have stated that the current high crude oil price has led to an unprecedented increase in supply and service costs raising both exploration and development of oil and gas by a factor of 3 times over the last 3-4 years.

In economic terms, taxes such as WPT increase marginal production costs, and profit maximising firms respond to it by reducing output and raising prices.

Imposing WPT could have several adverse economic affects.

If imposed as an excise tax, the WPT would increase marginal production costs, reduce domestic oil production and increase the level of oil imports.

Windfall profit tax is a tax on actual profit or profit margins.

If levied on actual profit then it would need to take into account the capital invested, asset base and similar parameters while if levied on profit margins it was necessary to look at margins of other businesses especially during boom periods.

Refining business, Ambani is believed to have argued, is cyclical in nature.

Product deficits catalyses expansion plans.

But as new capacities come on stream, refining margins decline precipitously.

Also, refining needs large and continuous investments just to meet stringent clean fuel specifications and stay in business.