While the merits of the business strategy can be debated endlessly, there is not evidence (beyond paranoid conspiracies) to say that anyone other than franchisees were involved in the decision.
PUI, lets assume that it was purely franchises and their decision not to pick any Pakistani player on Jan. 19. I am sure they all knew prior to the Jan. 19th that they are not going to pick them. You think Modi didn't know that franchises are not going to pick any player?
Assuming Modi knew about it and if it was entirely the decision of frnachises than why didn't Modi made any attempts to give franchises any assurance that Pakistani players will participate. Modi is powerful enough to move IPL 2 from India to South Africa in a month and assure players that they all will get South African visas. But on the other hand he cant give assurance to franchises about Pakistani players?
Lets assume that Modi couldn't give that guarantee to the franchises then why didn't he and BCCI tell PCB or the Pakistani players about this situation before the Jan. 19 auction.? Things could have been done to avoid this controversy.