New Delhi: The ruling United Progressive Alliance (UPA) seems to have persuaded key constituent Trinamool Congress (TMC) to agree to a suspension of the move to allow majority foreign investment in multi-brand retail rather than scrap the reform initiative altogether. At the same time, the UPA pursued behind-the-scenes negotiations with opposition parties to break a parliamentary logjam over the contentious issue.

Breaking logjam: West Bengal chief minister Mamata Banerjee had demanded earlier a 19,000 crore package for the state. HT photo

On Monday, the UPA told the opposition that it had suspended the initiative to allow overseas retailers to enter the country by owning up to 51% in departmental stores and similar multi-brand shops. The UPA government retreated after TMC leader and West Bengal chief minister Mamata Banerjee, a constituent of the ruling coalition with 18 seats in the Lok Sabha, refused to back the 24 November decision that has paralysed parliamentary proceedings.

A Congress leader also said on Tuesday that the Trinamool Congress had held out an assurance that its members of Parliament will support the government in the event of a vote on the move. This leader also did not want to be named.

The TMC softened its stand on the eve of a Union cabinet meeting that will discuss a financial package for the benefit of backward districts in West Bengal. Under the package, the eastern state will receive 8,750 crore, said the Union minister cited above.

The West Bengal chief minister had demanded a 19,000 crore package for the state. She had written to Prime Minister Manmohan Singh in July 2011—months before the furore over foreign investment in retail erupted—seeking financial support for the development of West Bengal’s backward regions.

Part of the funds will be released in the current fiscal year and the rest in the 12th Plan period (2012-2017).

The government was forced to review its decision after TMC chief Mamata Banerjee, whose 18 members support the UPA government in the Lok Sabha, refused to support the move.

The decision to open up multi-brand retail and simultaneously allow 100% foreign ownership in single-brand retail triggered flak from both opposition parties and UPA allies that it would hurt small family-owned stores and lead to job losses.

“The government is hopeful of finding a solution in the all-party meeting on Wednesday. Finance minister Pranab Mukherjee thereafter will address the House," said the Congress leader cited above. “The government is also hopeful of taking up at least some of the 31 legislation listed for the winter session," he added.

Meanwhile, the main opposition Bharatiya Janata Party (BJP) and the Communist Party of India-Marxist (CPM) stuck to their demand for a full rollback of the policy.

“We are not against foreign investment in other areas like highways, infrastructure, cold storage chains, etc., but this retail segment gives jobs to four-to-five crore families in India and the experience has been that the farmers and other stakeholders do not get benefits out of investment in this sector so we are totally against the opening of this sector," Arun Jaitley, leader of the opposition in the Rajya Sabha, told a gathering of BJP workers in New Delhi on Tuesday.

CPM general secretary Prakash Karat said on Tuesday his party would be satisfied with nothing less than a “complete" rollback of the policy.

“The government has informed the opposition parties that they are putting the decision in abeyance. This is an obvious plot. This abeyance is till the winter session," Karat was quoted as saying by PTI.

“We want a complete cancellation of the policy," he told reporters.

Appu Esthose Suresh and Elizabeth Roche contributed to this story.