Sonia Gandhi gets tough in India's "coal-gate" crisis

* BJP has paralysed parliamentary business

* Singh's government on defensive over coal deals

* Gandhi intervenes with eye on elections

By Satarupa Bhattacharjya

NEW DELHI, Aug 28 (Reuters) - Ruling Congress Party leader Sonia Gandhi accused the main opposition party on Tuesday of holding India to ransom in a stand-off over coal deals that has paralysed parliament.

Gandhi's rare public utterance marked a deepening of tensions between Congress and the Bharatiya Janata Party (BJP), which has disrupted parliamentary work for more than a week with demands for Prime Minister Manmohan Singh to quit over the dispute.

Singh's government has been on the defensive since Aug. 17, when the state auditor queried coal mining concessions awarded to power and steel companies without competitive bidding, potentially losing the treasury billions of dollars in revenue.

Singh has denied his government did anything wrong.

Weighing in directly, Gandhi told Congress lawmakers that parliament was being "held to ransom by blackmail, which has become the political bread and butter of the BJP".

The BJP was acting with "wanton irresponsibility", said Gandhi, often described as India's most powerful politician.

Chanting BJP lawmakers again prevented any parliamentary business from being done. "Full-blown coal war", said a headline on the CNN-IBN cable news channel. "The great political crisis," said another on the Times Now channel.

Investors had hoped that the monsoon session of parliament, which ends on Sept. 7, would produce much-needed reforms to help get India's economy back on track. Measures to overhaul the banking, pension and insurance sectors are among 31 pending bills. At this point, action on any of them seems unlikely.

Singh has offered to debate the so-called "coal-gate" affair in parliament. BJP lawmakers shouted him down when he attempted to rebut the accusations in the assembly on Monday.

So far the BJP has shown little interest in any debate as it seeks to focus attention on an issue that could damage a government already tainted by corruption scandals. Congress and the BJP will contest state elections this year and next, as well as national elections in 2014.

Gandhi's attack on the BJP seemed aimed at rallying her party before the elections. Congress has struggled to find a way to counter the BJP's dramatic efforts to paralyse parliament.

"Let us stand up and fight, fight with a sense of purpose and fight aggressively," she told lawmakers. The 65-year-old Italian-born Gandhi was recently called the world's sixth-most powerful woman by Forbes magazine.

Gandhi, who wields enormous influence over government decision-making, makes few public appearances unless elections are in the offing. She is rumoured to have recovered from an undisclosed illness that has fuelled much media speculation. (Editing by Ross Colvin and Alistair Lyon)