NEW DELHI (Reuters) - After riding high since launching economic reforms in September, Prime Minister Manmohan Singh's minority UPA coalition has been brought to a new low, with key ministers entangled in corruption investigations and Singh facing calls to quit.
In the space of just a week, Singh's government has seen its economic reform legislative agenda disintegrate in parliament as opposition members have repeatedly disrupted proceedings to demand the resignation of the two-term technocrat and his law and railway ministers.
The new corruption allegations and the fallout in parliament are embarrassing for a government which has been aggressively courting foreign investors in major world capitals with promises of more measures to liberalise the economy.
"How will the finance minister face investors abroad after the exposure of new corruption scandals and the parliament session ending without passing any important bills?" asked a Finance Ministry official, speaking on condition of anonymity because of the sensitivity of the issue.
Parliament is due to go into a 2-1/2 month recess on Friday after one of the least productive sessions on record, a notable low given that India's parliament has regularly been paralysed by filibustering opposition parties.
Singh's government has been on the back foot for the past week, fending off suggestions that the law minister interfered with a CBI investigation into irregularities in the award of coalfield concessions to private and state companies.
The latest scandal came on Friday with the arrest of the nephew of Railway Minister Pawan Kumar Bansal in connection with allegations that he accepted a bribe of $160,000 to arrange the promotion of a railways official.
There has been no suggestion that Bansal was in anyway involved but the case reinforces popular perception that the government is "corrupt beyond redemption", The Hindu newspaper said in an editorial on Monday.
The scandals have dented Singh's Teflon image. The prime minister, who has a gold-plated reputation for probity, has been untouched by the raft of corruption scandals that have battered his government during its nine years in power. But the latest allegations have raised questions about how so many graft scandals have occurred on his watch.
The main opposition Bharatiya Janata Party, which will face off against the ruling Congress party in elections due by May 2014, has demanded that Singh quit. The latest edition of India's most widely read news magazine, India Today, said Singh was a "political liability" for his party and should go.
Congress party leaders meeting on Sunday backed Singh and the ministers under fire. One party insider said the leadership feared a domino effect.
"Sacking the railway minister would mean sacking the law minister as well, which would bring the prime minister in the direct line of fire," a Congress party leader with knowledge of the meeting told Reuters on condition of anonymity.
COALGATE FLARES UP AGAIN
The so-called Coalgate scandal emerged last August with the release of a report by the CAG that questioned the lack of transparency and undervaluing in the award of potentially valuable concessions.
But it was quickly eclipsed by Singh's launch of investor-friendly economic reforms on September 14 that shifted the narrative of a government in crisis to a government in overdrive to win back foreign investors.
A new furore over Coalgate erupted last week when the director of the Central Bureau of Investigation told the Supreme Court that government officials, including a top official in the prime minister's office, had amended a report on the investigation meant for the court.
His statement caused a media frenzy and was interpreted by critics to mean the government had interfered in the inquiry. The Supreme Court demanded an explanation and on Monday the director clarified in an affidavit that only minor technical changes had been made to the report.
But his clarification did little to quieten the uproar in parliament. The government now appears unlikely to succeed in getting reforms to increase foreign investment in the pension and insurance sectors through parliament before Friday.
(Additional reporting by Frank Jack Daniel, Annie Banerji, Manoj Kumar and Nigam Prusty; Editing by Robert Birsel)
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