What was supposed to be a peaceful demonstration heated up when anti-corruption protesters began marching towards Prime Minister Manmohan Singh and Congress leader Sonia Gandhi’s residences.
Police sprayed the demonstrators with tear gas and fired water cannons to disperse the crowd.
The ongoing protest follows a recent report by the state auditor, which said private firms had made “windfall gains” from the allocation of coal mining rights since 2004 in a process that “lacked transparency”
Mis-selling of the coal assets has reportedly cost India $US33 billion.
Although the main opposition Bharatiya Janata Party said the prime minister should quit because he was managing the coal ministry at the time of the sale, protesters believe both sides of politics are to blame.
“Our protest today was to tell the country how the congress and the BJP are hand-in-glove in looting the country,” protest leader Arvind Kejriwal, of the India Against Corruption group, told demonstrators.
The opposition’s call for Singh’s resignation has left the parliament deadlocked for days, as congress insisted there was no wrongdoing.
It also stipulated efforts to introduce open-bidding for coals resources were held up by protests from several state governments, notably those led by the BJP.
All parties are expected to meet shortly to discuss the matter.
Indian Finance Minister P Chidambaram told the BBC the government was ready and willing to debate the issue.
The next general election in India is due by mid-2014.