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India police name first companies in corruption probe

Source: Thomson Reuters Foundation - Thu, 3 Feb 2011 12:09 GMT
Author: (c) Copyright Thomson Reuters 2011. Click For Restrictions. http://about.reuters.com/fulllegal.asp
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(c) Copyright Thomson Reuters 2011. Click For Restrictions. http://about.reuters.com/fulllegal.asp
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* Police says wrongdoing in awarding Swan, Unitech licences

* Telenor, Etisalat have large stakes in companies

* Government agency says state lost up to ${esc.dollar}39 billion

* PM Singh government tainted by corruption

(Adds details, background)

By C.J. Kuncheria and Paul de Bendern

NEW DELHI, Feb 3 (Reuters) - Federal police accused for the first time on Thursday two Indian companies, now partly owned by Norway&${esc.hash}39;s Telenor and the UAE&${esc.hash}39;s Etisalat , of buying mobile licences at unfairly cheap prices in a graft scandal that has tainted the government and spooked investors.

The telecoms scandal is estimated to have cost the government almost ${esc.dollar}40 billion in lost revenue and tarnished the reputation of Prime Minister Manmohan Singh, who was forced by the Supreme Court to explain why he took more than a year to look into allegations of wrongdoing in awarding of licences in 2007-2008.

A police lawyer said the companies, Swan and Unitech , had received favourable treatment during the awarding of lucrative licences in 2008 in the world&${esc.hash}39;s fastest growing mobile phone market.

"Undue favours were granted in the allocation ... The companies were favoured and spectrum and licences were awarded at a low rate," special public prosecutor Akhilesh, who uses only one name, told a court in New Delhi.

Telenor, which is 54-percent owned by the Norwegian state, has a majority stake in Unitech Wireless. Etisalat owns about 45 percent of Swan, which has since been renamed as Etisalat DB.

Both companies were not immediately available for comment but have in the past denied any wrongdoing.

It was not immediately clear whether any action would be taken against the companies at this time.

India&${esc.hash}39;s Central Bureau of Investigation (CBI) on Wednesday arrested former telecoms minister Andimuthu Raja on Wednesday over irregularities in awarding dozens of licences and radio spectrum at below market prices.

The new telecoms minister, Kapil Sibal, said he was reviewing the licensing process, warning that some contracts could be cancelled.

PARLIAMENTARY DEADLOCK

The opposition stalled parliament late last year, demanding the coalition government agree to a full parliamentary probe into what is considered the biggest corruption scandal in decades.

Opposition parties have called on Singh to resign, saying he avoided pursuing a case against Raja, who belongs to a party that is key to maintaining the coalition&${esc.hash}39;s majority. The CBI went after Raja after the Supreme Court ordered it to do so.

"With the latest development in the case, the opposition&${esc.hash}39;s demand for a joint parliamentary committee to look into wider aspects of the scam -- including the Prime Minister&${esc.hash}39;s accountability for the actions of a Cabinet colleague that he knew about and did little to stop -- has gathered force," The Hindu newspaper said in an editorial.

A government auditor said the sale of licences and spectrum at below market prices caused the exchequer to lose up to ${esc.dollar}39 billion.

The opposition has threatened to block parliament again when the next session, which will discuss the budget, starts later this month. The government is not at risk of collapsing because it holds a slim majority in parliament.

Raja, who was sacked in November, is accused of misuse of his ministerial office to give favourable treatment to certain companies in the licence process, criminal misconduct and having unaccounted assets.

Ramesh Gupta, a lawyer for Raja, said the former minister had followed existing rules and had not done anything wrong.

Raja, a member of the regional DMK party from the southern state of Tamil Nadu, was remanded in custody for five days.

Both Telenor and Etisalat bought their stakes at a considerable premium after the Indian firms were given the licenses. (Additional reporting by Devidutta Tripathy; Writing by Paul de Bendern; editing by Alistair Scrutton and Miral Fahmy)

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