UPDATE 3-India police to charge ex-minister in telecoms graft case

* Government and company officials to be charged

* Two more executives arrested

* Etisalat accused of violating Indian rules

(Adds accusations against Etisalat, company comment, stock
market)

By C.J. Kuncheria and Devidutta Tripathy

NEW DELHI, March 29 (Reuters) – Indian police will file
charges against a former telecoms minister and other government
and corporate officials this week, a government lawyer said on
Tuesday, in a multi-billion dollar telecoms corruption case that
has shaken government and business.

Alleged corruption in a 2007-08 telecoms licence and
spectrum allocation has damaged confidence in the ruling
Congress government, has led to calls for the resignation of
Prime Minister Manmohan Singh and has worried investors in
Asia’s third-largest economy.

The announcement of the first formal charges in the
investigation into a scandal that a government auditor estimates
cost the exchequer up to $39 billion came hours after two more
arrests of company executives.

The charges may put further pressure on the embattled prime
minister, criticised by the Supreme Court for failing to act
quickly enough against his minister. While his government will
likely survive, the scandals have almost paralysed policymaking.

Police will file charges against former telecoms minister A.
Raja, government officials and two companies, on April 2,
government lawyer K.K. Venugopal told the Supreme Court on
Tuesday.

Investigations will be completed by end-May, and more
charges are expected to be filed, Venugopal said.

Venugopal also said Etisalat , the Gulf’s largest
telecoms firm, violated foreign investment and forex rules when
it entered India. He accused Etisalat of using front companies
to control more shares of its Indian operations than the 45
percent as publicly revealed and approved by authorities.

Earlier, in court, police lawyers accused Raja of
having taken bribes from firms which are now the Indian arms of
Telenor and Etisalat to grant them lucrative mobile
phone licences.

A federal report into the allocation highlighted
irregularities and said kickbacks had been paid when licences
were granted in 2007-08 at rock bottom prices. The report forced
the resignation and arrest of Raja.

Executives Asif Balwa and Rajiv Agarwal were
arrested on Tuesday in connection with the telecoms probe, a
spokeswoman for India’s federal investigative agency said.

The two arrested on Tuesday are executives with real estate
firm DB Realty , according to the company’s latest
annual report as well two people with direct knowledge of the
matter.

Balwa is the brother of former DB Realty Managing Director
Shahid Balwa, who was arrested in February in connection with
the telecoms investigation. DB Realty’s parent DB Group is
Etisalat’s India mobile joint venture partner.

All of the accused have denied any wrongdoing. Etisalat and
Telenor have in the past said they bought into the Indian firms
long after licences were granted and therefore are not involved.

Etisalat was not immediately available to comment on the
latest allegations. DB Realty said the officials arrested on
Tuesday were innocent and the company fully backed them.

ECONOMIC REFORMS STALLED

The opposition has called for Singh’s resignation and halted
parliament, effectively blocking economic reforms such as
freeing up diesel prices and allowing foreign investors into the
supermarket sector.

The scandal has touched the very top of Indian society,
including some of the stars of India’s economic boom once seen
as untouchable. Police have questioned businessmen including
Anil Ambani, the billionaire chairman of the Reliance ADA Group.

Notices have gone out to telecoms firms asking why their
licences should not be cancelled, sparking questions about
regulatory stability.

On Monday, a parliamentary panel probing the scandal called
top Indian tycoons Ratan Tata and Anil Ambani to depose before
it. [ID:nL3E7ET07M]

The scandal has weighed on the benchmark Mumbai stock market
, which is down 6.8 percent since the start of the year,
underperforming the MSCI’s broader emerging markets equities
index , which is down about 1 percent.

The corruption scandals, which include charges of
graft at the 2010 Commonwealth Games and of officials at
state-run banks taking bribes for corporate loans, have
tarnished Singh’s image as a clean and effective leader.

They could also affect the performance of the ruling
Congress party in five state elections that begin in mid-April,
in which the Congress must perform well or risk the coalition
unravelling.

(Additional reporting by Stanley Carvalo in ABU DHABI; Editing
by Alistair Scrutton and Jeremy Laurence)

UPDATE 3-India police to charge ex-minister in telecoms graft case