UPDATE 1-Indian tycoon Tata faces lawmakers probing telecom scandal

Mon Apr 4, 2011 2:36am EDT

* Tata to answer questions on radio spectrum grants

* Panel questioning Tata lobbyist Niira Radia

* Tata and his firms not charged in telecoms case

* Scandal potentially India's largest graft case (Adds details, lobbyist questioning)

By C.J. Kuncheria

NEW DELHI, April 4 (Reuters) - Iconic Indian tycoon Ratan Tata will appear on Monday before a parliamentary panel probing a multi-billion dollar telecoms graft scandal that has badly dented the government's credibility and alarmed investors in Asia's third largest economy.

The questioning of one of the foremost titans of Indian industry comes two days after police made the first indictments in the case, naming a former minister, a unit of Reliance ADA group and the Indian partners of Etisalat and of Telenor among the accused. [ID:nL4E7F201J]

Neither Tata, ranked No. 61 in the Forbes list of the world's most powerful people as head of autos-to-software conglomerate Tata Group, nor his telecoms firm Tata Teleservices, have been charged in the case.

But an independent lawmaker has said the firm gained from a 2007 policy change in the manner radio spectrum was granted. Tata will answer questions including those related to the allocation of spectrum, his spokesman has said. [ID:nL3E7ES2T3]

Tata has denied his company received any undue benefits.

The graft scandal, potentially India's largest, has tarnished the stature of Prime Minister Manmhohan Singh and fuelled doubts that he will not serve a full term.

It is one of the several corruption scandals that have emerged during Singh's second term, hobbling policymaking and diverting the government's attention from pushing forward crucial economic reforms. [ID:nL3E7F11Z5]

A dispute between the government and opposition over whether a parliamentary panel should investigate the scandal paralysed parliamentary proceedings for weeks late last year, until Singh caved in to the demands of his political opponents.

The scandal has also led to several official decisions being scrutinised or reversed, raising regulatory risk.

Shares in Reliance Communications , DB Realty and Unitech , whose units were charged on Saturday, all fell on Monday morning, lagging a broader market that was in positive territory.

Andimuthu Raja, the telecoms minister during the licence allocations, was forced to resign and has been arrested. He was charged on Saturday with abuse of official position, cheating and criminal conspiracy.

Tata had earlier backed Raja and the policy changes he made, saying they "broke the powerful cartel which had been holding back competition". [ID:nSGE6B900V]

Ahead of Tata's appearance before the panel on Monday afternoon, lawmakers will question powerful lobbyist Niira Radia, who has represented Tata Group companies as well as Tata himself.

BILLIONS OF DOLLARS LOST

India may have lost as much as $39 billion in revenue due to violation of rules when lucrative 2G mobile phone licences were granted in 2008, the state auditor has estimated, a sum equivalent to the country's defence budget.

The Public Accounts Committee (PAC), the panel which will question Tata, scrutinises the accounts of the government and is chaired by Murli Manohar Joshi, an independent-minded lawmaker from the main opposition Bharatiya Janata Party.

Anil Ambani, the billionaire chairman of Reliance ADA group, is due to appear before the panel on Tuesday.

Apart from the PAC, the scandal is also being investigated by a special cross-party parliamentary committee.

The police investigation is being monitored by the Supreme Court, which earlier reprimanded Singh for not moving quickly enough to act against his minister.

Several corruption scandals, which include charges of graft in the run-up to the 2010 Commonwealth Games and allegations officials at state-run banks took bribes for corporate loans, have undermined Singh's image as a clean and effective leader.

They could also affect the performance of his ruling Congress party in five state elections across April and May, in which the party must perform well or risk the coalition unravelling.

The first round of elections began on Monday with the northeastern state of Assam going to polls. (Additional reporting by Nigam Prusty; Editing by Andrew Marshall)

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