Indian Prime Minister Manmohan Singh on Sunday night pulled off surprises in allocating high-profile portfolios, but a key ally refused to take over ministries it was allocated, demanding more powerful posts.

Manmohan Singh gave finance ministry charge to reform-friendly Palaniappan Chidambaram, defence portfolio to senior leader Pranab Mukherjee and water resources portfolio to Priyaranjan Dasmunsi.

Seasoned diplomat K Natwar Singh became the new external affairs minister, a portfolio he had earlier held as a junior minister under PV Narasimha Rao.

Natwar Singh yesterday sought to deepen a growing friendship with Pakistan, saying he would use his experience as ambassador to Islamabad to steer complex ties between the nuclear-armed neighbours.

"I myself served as ambassador to Pakistan and have some personal knowledge of the complexities and subtleties of India-Pakistan relations," he said.

Investors cheered Harvard-educated 58-year-old Chidambaram as he was made the finance minister after weeks of chaos and volatility in financial markets.

But differences came up on the first day Manmohan Singh's communist-backed coalition government opened for business. The rift is not seen as a major threat, but underlines the difficulties in bringing cohesion to the alliance.

The seven ministers of the Dravida Munnetra Kazhagam (DMK) party refused to report for their jobs yesterday, a day after portfolios for the 67-member council of ministers were announced.

Our correspondent Pallab Bhattacharya reports from New Delhi: Shivraj Patil, party colleague of Pranab Mukherjee now in charge of defence ministry, became the new home minister.

Mukherjee, a 57-year-old writer and journalist who had been billed as a potential prime minister, signed India's treaty to enter the World Trade Organisation in 1984.

On the face of it, the water resources ministry for Dasmunsi, the second ministerial representative in Manmohan Singh cabinet, might look minor but he would have a key role in view of the proposed controversial river-inter-linking project which the previous BJP-led government had so zealously championed.

Former Prime Minister Atal Behari Vajpayee had used the inter-linking project as a poll issue but Congress has so far remained cool to it. The draft common programme of Manmohan Singh government has merely said the techno-economic feasibility of the project has to be examined.

Veteran Congress leader PM Sayeed has been rewarded with the plum portfolio of power while his party colleague Kamal Nath, a former private-sector industrialist, was given the charge of commerce and industry ministry.

Among the Congress allies, the most important portfolios have gone to Rashtriya Janata Dal chief Laloo Prasad Yadav (railways) and Nationalist Congress Party Presi-dent Sharad Pawar (food and agriculture) and DMK's first-time MP Dayanidhi Maran (telecoms and information technology).

The sulking ally of Congress is Ram Vilas Paswan who was given charge of chemicals and fertiliser who had expected the railways portfolio to which he was outpaced by Bihar strongman Laloo Prasad Yadav.

A clearly upset Paswan had initially refused to join the government and reached the venue of swearing in ceremony barely 20 minutes after former prime minister VP Singh persuaded him to do so. He was finally mollified with the additional charge of steel ministry.

(Material of Reuters and AFP has been used)