NEW DELHI (Reuters) ? Prime Minister Manmohan Singh began a meeting with Trinamool Congress, the biggest ally in the United Progressive Alliance (UPA), on Tuesday to heal a rift over a fuel price hike last week seen as crucial to shrink a widening budget deficit.
Mamata Banerjee, whose Trinamool Congress governs West Bengal, has threatened to pull out of Singh's UPA last week unless he reversed a rise in petrol prices.
There was no official word from the meeting yet, but most expect the allies to broker a compromise which could carry a hefty price tag for an already burdened exchequer.
Banerjee has demanded a 190 billion rupee package for her heavily indebted state, according to media reports. Party sources told Reuters on Tuesday that the exact details of a package were still being worked out.
"She wants to be populist, without thinking of the consequences," said D.H. Pai Panandiker, the head of the RPG Foundation, a New Delhi-based think tank.
"She wants all the goodies, and she does not want to accept that everything has a price, that nothing comes for free."
The package could include a "credible economic recovery programme" to beef up West Bengal's manufacturing industry and infrastructure, Dipak Dasgupta, the principal economic adviser to the ministry of finance, told Reuters.
Freeing up heavily subsidised fuel prices is viewed as a badly needed measure to help tame India's fiscal deficit, which swelled to nearly 71 percent of its full-year target in the first half of the year.
Rattled by street protests and facing major state elections next year, Congress chief Sonia Gandhi may feel the need to shore up the government's centre-left credentials.
(Additional reporting by Manoj Kumar and Nigam Prusty; Editing by Alistair Scrutton and Ed Lane)
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