Singh Weakened as Largest Ally Quits India Ruling Coalition

The largest ally in Indian Prime Minister Manmohan Singh’s coalition withdrew support over the government’s approach to alleged war crimes in Sri Lanka, while signaling that a patch-up was possible if its demands were met.

The permanent exit of the Dravida Munnetra Kazhagam, one of nine parliamentary partners in the ruling alliance, would undermine the government before a general election scheduled for next year, leaving it even more reliant on the support of fickle regional parties to pass legislation.

The ally’s threat comes as Singh battles to refocus the government ahead of the 2014 poll, end two years of criticism over alleged corruption and repair a slowing economy. The benchmark S&P BSE Sensex share index fell 1 percent at 1:55 p.m. in Mumbai, the most in three weeks. The rupee weakened as much as 0.4 percent against the dollar before paring losses.

“This is a serious threat but there are talks going on behind the scenes and the government may be able to take care of their concerns,” said Satish Misra, an analyst at the Observer Research Foundation, a policy group based in New Delhi. “If the DMK pulls out, then the government is going to be severely weakened.”

The standoff in India comes as the United Nations Human Rights Council prepares to vote in Geneva on a U.S.-sponsored resolution calling on Sri Lanka to fully investigate alleged war crimes by its troops during the bloody final few weeks of the conflict with Liberation Tigers of Tamil Eelam guerrillas. The southern state of Tamil Nadu, where the DMK is based, shares cultural and religious links with Sri Lankan Tamils.

Top Envoys

DMK party leader Muthuvel Karunanidhi is demanding that the government pass a parliamentary resolution condemning Sri Lanka. Congress leader Sonia Gandhi dispatched her top three ministers, including Finance Minister Palaniappan Chidambaram and Defense Minister A.K. Antony, to hold talks with Karunanidhi in Chennai yesterday evening.

Sri Lanka’s military and Tamil Tiger fighters probably committed serious violations of international law in the final stages of their conflict, resulting in as many as 40,000 civilian deaths, a UN report released in April 2011 said.

A documentary shown at a meeting of the UN council this month included images of the bullet-riddled body of a child its makers identified as the 12-year-old son of slain Tamil Tiger guerrilla leader Velupillai Prabhakaran. The film shows pictures it says were taken with the same camera of the boy eating a biscuit in the custody of Sri Lankan soldiers and later shot dead.

Minority Government

Sri Lanka’s government denies the alleged atrocities in 2009 and has branded calls for an inquiry as meddling by the international community. While India supported a similar resolution at last year’s UN council meeting, it is yet to make its intentions clear ahead of this week’s expected vote.

The DMK has 18 lawmakers in the 545-member lower house of parliament in New Delhi. Without its support, Singh’s ruling alliance would be 44 seats short of a majority. It already needs the backing of groups like the Samajwadi Party and the Mayawati’s Bahujan Samaj Party, which compete for power in the country’s most populous state, Uttar Pradesh.

Karunanidhi has threatened to pull out of the government before as he fought with Singh’s Congress party over how to contest a state election. He also pressured the prime minister ahead of last year’s UN vote.

Relations between the Congress and its southern ally have been strained since former telecommunications minister Andimuthu Raja, a member of the DMK, was arrested in 2011 in a federal probe into the 2008 sale of mobile-phone licenses.

‘Big Risk’

Karunanidhi’s daughter and parliamentary lawmaker Kanimozhi is also among those on trial for colluding to sell spectrum to unqualified companies for personal benefit.

“There’s going to be a lot of political uncertainty because of this now,” said Sonal Varma, an economist with Nomura Holdings Inc. in Mumbai. “It highlights how politics is still a big risk in India, particularly given this is a pre-election year.”

Speaking to reporters today after the DMK announcement, Chidambaram said the government had last night received the latest draft of the U.S. resolution and was studying it to see if it needed to be toughened.

Karunanidhi’s “statement deserves all respect and we have taken note of it,” Chidambaram told reporters in New Delhi today. “The stability of the government and the continuance of the government are not an issue.”

Regarding the DMK’s call for a parliamentary resolution condemning Sri Lanka, the government had begun consultations with all parties, Chidambaram said. The finance minister noted that Karunanidhi had said he could reverse his decision.

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