* Govt speeds review of coalfields, sets Sept. 15 deadline
* Chidambaram rejects call for independent inquiry
* Morgan Stanley shocks with bearish growth forecast
By Malini Menon and Ross Colvin
NEW DELHI, Sept 3 (Reuters) - The Indian government tried on
Monday to defuse a political crisis over sweetheart coal deals
that has deepened a perception of dysfunction in the world's
biggest democracy and derailed Prime Minister Manmohan Singh's
efforts to win back investors.
In a shock forecast, Morgan Stanley warned there was a "very
high risk" that growth in Asia's third-largest economy could
slow to just 4.3 percent in the 2013 fiscal year unless the
government took urgent steps to cut the fiscal deficit and
encourage private investment.
Singh's government has struggled to defend itself against
allegations that it awarded coalfields potentially worth
billions of dollars to private and state power, cement and steel
companies in a process that was corrupt at worst and lacked
transparency or any element of competition at best.
Under pressure from the prime minister's office, a
government committee met on Monday to speed up the review of 58
coalfields whose owners have already been issued notices for
missing deadlines to get them operational. The coal ministry has
until Sept. 15 to decide whether to cancel the licences.
Among those that face possible cancellation of coal mining
licences are billionaire Lakshmi Mittal's ArcelorMittal
, GVK Power and Infrastructure, India's top
aluminium producer Hindalco Industries Ltd - part of
the Aditya Birla Group - and Tata Power.
The furore, dubbed "coalgate" by India's media, has drowned
out Singh's efforts to show that his weak coalition government
is serious about implementing reforms. For months it has been
under fire for dithering while the economy suffers from the
impact of the eurozone debt crisis and sluggish U.S. growth.
Morgan Stanley cut its growth forecast for India to 5.1
percent on Monday for the 2012/13 fiscal year. It had previously
projected the economy would grow at 5.8 percent in the year
ending next March. But in its "bear case" scenario, growth could
tumble to 4.3 percent if policy inaction persisted, it said.
The main opposition Bharatiya Janata Party (BJP), which will
challenge Singh's ruling Congress party in elections due by
2014, has seized on a state auditor's report that questioned
licenses granted for 142 coalfields between 2004 and 2009.
The concessions were awarded by a government committee
without competitive bidding. The auditor said it was not clear
from the minutes of the committee's meetings how it arrived at
decisions on coalfields that could be worth billions of dollars.
The BJP has all but paralysed parliament for two weeks,
using the report to blacken the government, which has been
buffeted by corruption scandals, most notably a $39 billion
telecoms licences scam that saw a former minister arrested.
BJP WANTS TO KEEP CORRUPTION CENTRE-STAGE
Crowding around the speaker's seat in parliament, BJP
members chanted "prime minister submit your resignation". Amid
the din, the Congress party and its allies managed to pass three
The BJP, which has struggled to capitalise on infighting
within the Congress-led coalition, wants to keep alive an issue
it believes resonates strongly with voters, political
commentator Vinod Mehta said.
"They feel it is striking a chord. They are trying to keep
the corruption issue at the centre of political discourse."
Singh has denied any wrongdoing and pointed out that it was
his government that proposed competitive bidding, but the softly
spoken prime minister's rebuttal has been overshadowed by daily
images of parliamentary chaos on cable television news channels.
It has been left to Congress leader Sonia Gandhi, who
normally keeps a low profile, to take the fight to the
opposition. She has surprised observers with her unusually
aggressive response to the BJP's corruption charges.
With the monsoon session of parliament due to end on Friday,
there was no sign of an end to the deadlock.
The BJP has signalled that it might be willing to drop its
demand for Singh to quit if the government cancels coal licenses
and agrees to an independent inquiry. But the government has
dismissed the demand, saying a Central Bureau of Investigation
probe was already under way.
(Editing by John Chalmers and Robert Birsel)