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India to claw back fees amid telecoms storm

Indian and foreign phone companies could be forced to pay more than $1bn each to the New Delhi government after a critical audit of a controversial allocation of mobile licences, the Financial Times reports.

The decision comes amid one of India’s biggest corruption scandals in the Congress-led government’s six years in power, which has damaged the ruling party’s image and strained ties with a crucial coalition ally, Tamil Nadu’s DMK.

Even Prime Minister Manmohan Singh, known as India's ‘Mr Clean,’ is battling to save his image amid accusations of failing to intervene in time when his telecoms ministersold mobile phone licences for a fraction of their value.

Telecoms Minister Andimuthu Raja resigned earlier this month, after a report from the government auditor said the state may have lost up to $31 billion in revenue in the granting of telecoms licenses in 2007-2008.

Mr. Raja’s appointment was part of a deal with the DMK, which, with 18 parliamentary seats, is Congress’ second biggest ally in government.

“But the DMK has become weaker in recent years, relying on support of other parties including Congress to hold power in Tamil Nadu. So it is unlikely the DMK would pull out of the [ruling] coalition as it needs Congress as much as Congress needs it,” a Reuters analysis said.