NEW DELHI -- His business rivals never fully understood how Manoj Jayaswal got so rich so fast, except that he often seemed joined at the hip with powerful politicians. He hosted them at lavish parties, entertained them at his daughter's opulent Thai wedding and stood among them at India's presidential palace, where a year ago he was praised as a leader in the India growth story.

But now Jayaswal is embroiled in a $34 billion coal mining scandal that has exposed the ugly underside of Indian politics and economic life: a brazen style of crony capitalism that has enabled politicians and their friends to reap huge profits by gaining control of vast swaths of the country's natural resources, often for nothing.

"Today in India, politicians are so powerful," said Santosh Hegde, a former Supreme Court justice who recently led a sweeping investigation of a different mining scandal in southern India. "All together, they are looting the country."

Growing official graft

Coalgate, as the scandal is now known here, is centered on the opaque government allotment process that enabled well-connected businessmen and politicians to obtain rights to undeveloped coalfields. Investigators are now looking at whether Jayaswal and Vijay Darda, a member of Parliament, conspired to fraudulently obtain five lucrative coal allocations. Naveen Jindal, another lawmaker and one of India's richest industrialists, is also reportedly under investigation.


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Even as the scandal has renewed public anger about rising official graft and the state of the economy, Coalgate has provided fresh ammunition for those who say India's politicians have become so venal and feckless that they are no longer able or willing to address the country's entrenched problems.

The opposition Bharatiya Janata Party, which was already on the defensive because it had been implicated in Hegde's investigation, has been so eager to score political points with the latest scandal that it shut down Parliament for weeks with floor protests. It refused to allow any debate -- even of Coalgate -- or any voting unless the prime minister resigned over the scandal. Almost an entire session was lost.

This sort of political dysfunction is hardly new in India and, in recent years, the economy was booming even as the politicians dithered. But now that the economy is slowing sharply, particularly in the ailing energy sector, analysts say India can no longer afford a government that so flagrantly fails to deliver what it promises.

Millions lack power

Friday, the government approved long-pending proposals allowing foreign retailers, airlines, broadcasters and other companies to enter the Indian market in an effort to shore up the faltering economy.

A decade ago, India's leaders announced an idealistic slogan -- Power for All in 2012 -- and pledged to bring electricity to every corner of the country, partly by expanding coal-fired power plants. India still has more than 300 million people living without electricity, and this summer, it suffered the biggest power blackout in history. The scandal in the coal industry, meanwhile, has made it even harder for the country to generate enough electricity to meet its needs.

"Not being able to produce enough power has absolutely been the single biggest bottleneck for economic growth," said Praveen Chakravarty, chief executive of Mumbai-based Anand Rathi Financial Services.

Unlike other sectors of the economy, natural resources like coal remain tightly controlled by politicians and bureaucrats.

A recent study of contributions to India's political parties offered a telling insight into the nexus between politics and money. The biggest donors were involved in mining, power and other sectors dependent on the government to obtain rights to natural resources.

India is trying to expand cleaner energy sources but still depends on coal for roughly 57 percent of its electricity.

Investigators say that in the past, some who acquired coalfields free, quickly sold them for tens of millions of dollars to steel or power companies. Others simply kept them as an asset and have not yet developed them, even as the country faces blackouts and coal shortages.