The Mughal power began to decline after death of Aurangzeb.
Within 30 years of his death, Mughals lost most of their South Indian possesions. New states were established by 3 prime nobles, Sadat Ali Khan, Murshid ul Kuli Khan and Qamar ud Din Khan, even when the throne saw 8 rulers in 12 years. But all pronounced themselves, to be allegiant to the Mughal throne, though, each individually was stronger than the throne in Delhi.
Shahuji's Army under treaty with Sayyid brothers, simply walked into Mughal capital, and deposed Farrukhsiyar, the ruling emperor. But the Treaty was not about sharing spoils. Shahuji, in the treaty, agreed to accept rule of Mughal throne in Deccan, and in return was guaranteed Swaraj, self rule, and rights to revenue, in the same Mughal Deccan.
The Marathas had the effective control of more than 70 % of the Indian subcontinent by 1758. The had sacked Delhi several times. The Mughal empire, was not a stakeholder, in the power dynamics at all.
Then why were they held on throne as puppet rulers? Even after the Third Battle of Panipat, Ahmed Durrani after victory, before leaving back for Afghanistan, installed Shah Alam II as Mughal emperor, and issued firman to all indian chiefs, to recognise him as the ruler.
In 1772, Mahadji escorted the then deposed , and even blind Shah Alam II, from Allahabad to Delhi to crown him as king again. And then, he got royal titles in court, and ruled the state, in Emperor's name.
And many more instances. In 1857, sepoys of the mutiny, stormed into Delhi, and the Emperor was nearly forced to accept being the leader of mutiny, and from there, sepoys again proclaimed him Emperor of India. The question I have, is, why was the Mughal throne, used as a token to rule in India. Why wasn't it simply abolished, and ended. Why did powers not rule in their own name? Why wasn't the Mughal throne, simply abolished long ago and fade into oblivion?