RPT-RPT-India PM to respond to top court over telecoms scam

Graft scandal widens as PM to answer court criticism

NEW DELHI, Nov 18 (Reuters) - India's Supreme Court will force Prime Minister Manmohan Singh to reply to its criticism over his failure to probe a huge telecoms scandal, the court said on Thursday, putting more pressure on the Congress-led government in one of its biggest graft cases.


Representing Singh and the government, solicitor general Gopal Subramanium will answer questions by Saturday from the court, a highly unusual move that highlights the widening impact of a scandal that may have cost the state up to $31 billion in lost revenues, according to a government audit.

Telecoms Minister Andimuthu Raja was sacked at the weekend over accusations he sold the telecoms licenses too cheaply. The Supreme Court bench criticised on Tuesday Singh's slowness in deciding if Raja could be charged and investigated.

Raja is a member of the DMK, a regional party from Tamil Nadu that helps give the Congress party a majority in parliament. The opposition has said Singh failed to act against Raja because he feared upsetting his coalition partner.

The opposition has stalled parliament this week to protest against what it says is the government's inaction in probing the case.

The court's criticisms have tarnished Singh's image as one of the country's most honest politicians and led to criticism he has failed to act on graft in a country mired by corruption.

While the coalition government is likely to survive the scandal, Congress is mindful that in 1989 it lost a general election partly due to a scandal over gun contracts involving close associates of then Prime Minister Rajiv Gandhi who were accused of taking bribes.


OPPOSITION ON OFFENSIVE

The opposition has stepped up its demand for a parliamentary probe after a report from the government auditor said the state may have lost up to $31 billion in revenues, roughly equivalent to the defence budget, in the granting of licences in 2007-2008.

Raja is accused of selling the licences at deliberately low prices to companies, some of which were ineligible, a charge he denies. The process also violated several rules, the report said.
Swan Telecom, since then bought into by UAE's Etisalat , was given a licence despite a unit of No 2 telecoms firm Reliance Communications holding over 10 percent of equity, a violation of rules, the report said.

Several firms, which now are part of Telenor's India operations, were also given licences despite not having adequate capital, the report said.

Indian telecoms stocks have been badly hit by the report. Shares in mobile operators Reliance Communications and Unitech fell by as much as 10 percent on Thursday, on worries about a potential investigation into the sales.

"There are concerns in the minds of investors that there could be an investigation in how companies like Unitech and Reliance Communications obtained spectrum," said Arun Kejriwal, a strategist with research firm KRIS.

Even by the standards of India, where corruption is pervasive, the scale of the 2G scandal has shocked India and galvanised the Hindu nationalist-led opposition.

India was ranked 87th in Transparency International's 2010 ranking of nations based on the perceived level of corruption. India lies behind rival China, which is in 78th place.

The Hindu-nationalist Bharatiya Janata Party (BJP) has threatened to block reform bills unless the government orders a parliamentary inquiry, though it is not thought likely to try to topple Singh's administration.

"The BJP is so embroiled in its own corruption allegations, such as in Karnataka, that it will not take the risk of attempting to pull down the government" said Amulya Ganguli, political commentator.

Parliament was again suspended on Thursday.

The government planned to push its reform agenda through the current session of parliament, including a bill to ease land acquisition for industry and mines