By Sanjoy Majumder
BBC News, Delhi
It is the biggest crisis to hit the Indian government since it came to power three years ago.
The communists have recently grown in power
The Congress Party-led government's communist allies are threatening to withdraw their support over the civilian nuclear agreement with the US.
Although the government and the communists have had major differences before, this is the first time that both sides have stood their ground. Many believe it spells the beginning of the end for the government.
There is even talk in Delhi's corridors of power of a possible early election, ahead of 2009 when the government completes its five-year term.
The four communist parties have 60 MPs in the lower house of parliament and provide critical support to the government, without which it would be reduced to a minority.
The stand-off has come as a major boost for the main opposition Bharatiya Janata Party (BJP), which also opposes the nuclear deal.
So why have matters reached a point of brinkmanship?
There are some who believe the Indian Prime Minister, Manmohan Singh, is fed up with the left for questioning his judgement and even his political integrity.
Mr Singh's close relationship with the US is controversial
This, they believe, led to his outburst 10 days ago, when he challenged the communists to withdraw support for his government over the nuclear deal.
But, while the prime minister may have wanted to call their bluff, the fact is that the nuclear deal has opened up a serious point of difference between the left and the centre-left government.
By signing a landmark agreement with Washington - a deal that reverses 30 years of US policy towards India - the communists are worried that India will become a part of America's global strategy.
This is completely unacceptable to them, since their very political existence and ideology is based on countering US supremacy in the economic and political spheres.
In particular, the communists are wary that India's handling of countries such as Iraq and Iran may be conditioned by Washington.
In this, their opposition to the nuclear deal is diametrically different from that of the BJP and the political right.
The BJP is concerned that India may have bartered away its nuclear security, particularly its strategic nuclear weapons programme, by agreeing not to carry out more nuclear tests and also by allowing the International Atomic Energy Agency (IAEA) access to its civilian nuclear sites for inspection.
While the government has categorically stated that India has not given up its right to test, the fact is that under US law the nuclear agreement stands automatically annulled if India does so.
The US also reserves the right to ask India - in the event of a nuclear test - to return all nuclear technology and fuel that it receives as part of the agreement.
It would be a "lame duck" government without the communists
The BJP and the right find these guarantees unacceptable and an infringement of India's sovereignty.
However, since the BJP is in opposition and the deal has already been discussed in parliament, this does not pose a threat to the government. The differences with the communists do.
They are not natural partners of the Congress Party - they are on opposing sides of the fence in many parts of the country, particularly West Bengal, Kerala and the tiny state of Tripura in the north-east.
It is their common opposition to the BJP and its policy of Hindu nationalism that brought the Congress and the communists together at the central level - and this is what may still bind them, although it is a bond that is fraying.
Until now, the cracks that existed between them have been papered over, particularly in economic policy and international relations.
The left, especially hardliners on its policy-making politburo, is opposed to the economic reforms of Congress, in particular privatisation, deregulation and inviting investment from foreign companies.
The communists simply cannot be seen to be endorsing a deal that flies in the face of its ideological basis.
In particular, they are wary of alienating their core constituency, made up mostly of peasants, blue-collar workers and Muslims. While the first two are the immediate casualties of the government's free-market style economic policies, the latter are opposed to US policy in the Arab and Muslim world, particularly Iraq and Iran.
So where do they go from here?
A possibility is that both sides agree to set up a panel of experts to scrutinise the deal to try and resolve their differences.
India would be able to use US technology in its nuclear facilities
The government could put the deal on hold - something that would certainly satisfy the communists.
Or the communists could pull out - either leading to a snap poll, or letting the government exist as a lame-duck minority administration.
But while the first might be the best approach for a face-saver, it can only buy time, since there is little likelihood of both sides finding common ground.
The government is fully committed to a deal it sees as a major achievement of its term, and one that alters the global nuclear order in its favour.
Already it is warning that any sign of India backing down would lead to significant international embarrassment and the surrender of a major diplomatic initiative.
And the government can ill afford to put the deal in cold-storage - it desperately needs to reach key agreements with the IAEA and the Nuclear Suppliers Group, after which the US Congress will vote on the deal.
With the US approaching an election year, time is running out for Delhi.
So it may all boil down to one thing. Are the communists ready to pull the plug and face the electorate? They may need to consider the fact that the 2004 elections handed them their best ever performance, and crucial leverage in an Indian government for the first time.
Are they ready to give that up and risk losing out in a fresh election? That may well hold the key to the fortunes of the Indian government.