UPDATE 3-India police go after ex-minister in telecoms row

Wed Dec 8, 2010 7:55am EST

* Investigators search ex-minister's homes, offices

* Top court orders probe into bank loans to telcos

* Parliament deadlocked since Nov. 9 over telecoms scam

* Concerns over delay of economic reforms

(Updates raid details, court order)

By Krittivas Mukherjee and C.J. Kuncheria

NEW DELHI, Dec 8 (Reuters) - India's federal agents found what they said were "incriminating documents" in raids on homes and offices of a former telecoms minister on Wednesday in connection with the country's biggest corruption scandal.

The opposition has shut down parliament since early November, demanding a joint inquiry into a government auditor's report that India potentially lost $39 billion in revenue when ineligible firms were given lucrative telecoms licences cheaply in 2008.

The move against former minister Andimuthu Raja may help the beleaguered coalition government placate the opposition and break the logjam that has stalled the passage of key economic reforms.

Although there is little threat to the Congress party-led government, a series of scandals has eroded its political capital since an impressive election victory last year and have become a test of how Prime Minister Manmohan Singh tackles widespread corruption.

Raja, a member of a party from south India which is a key member of the coalition, denies any wrongdoing and has said he was only following policy.

Central Bureau of Investigation (CBI) agents searched 14 locations across Delhi and Tamil Nadu state and the raids were continuing, agency spokeswoman Vinita Thakur told reporters.

She did not explain what was meant by "incriminating documents".

It was the first direct action against Raja, who was sacked last month after the auditor's report was made public.

A senior CBI officer told Reuters Raja would be questioned.

"The natural course of action will include interrogating the former minister and anyone else involved in the case," said the official, who declined to be identified because of the sensitivity of the matter.

"We are investigating five people including A. Raja and former telecom secretary Siddhartha Behura."

SUPREME COURT PRESSURE ON GOVERNMENT

India's Supreme Court has criticised the CBI for not questioning Raja in its year-long investigation despite him being at the centre of the inquiry.

The country's top court has also dragged the prime minister into the scandal by forcing him to answer questions on why he was slow to act against Raja.

On Wednesday, the Supreme Court ordered the CBI to probe bank loans given to the companies that got licences, said Prashant Bhushan, a lawyer who has asked the court to monitor the federal agency's investigation in the case.

The court has deferred orders on Bhushan's plea for appointing its own monitors in the case.

The Congress party-led coalition has been struggling to contain the damage from numerous corruption scandals in recent weeks.

A separate bribes-for-loans scandal, which implicates state and private lenders and financial services firms, as well as several sizeable companies, is also being probed, in addition to other scams, including one linked to the Commonwealth Games.

The deadlock in parliament is more of a concern for foreign investors than corruption, as it means longer-term financial reforms will be stalled, potentially hurting India's rapid economic growth.

Investor-friendly goods and services tax legislation, which is intended to unify a fragmented tax system across India's 28 states, is at risk of missing a 2011 deadline because of the backlog created by the parliament deadlock.

(kuncheria.jacob@thomsonreuters.com; +91 11 4178 1007; Reuters Messaging: kuncheria.jacob.reuters.com@reuters.net))

(Created by Andrew Marshall)

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