Mr Rao yesterday issued a terse denial on state-run television. But the stockbroker, Harshad 'Big Bull' Mehta, who is on bail awaiting trial on fraud, corruption and forgery charges, insisted that he had paid Mr Rao for his 'political patronage and blessing'. Speaking at a crowded press conference yesterday in an expensive Bombay hotel, Mr Mehta, 38, who earned his nickname from both his hefty size and his aggressive deal-cutting, admitted that he did not bribe Mr Rao directly. But his accusations are damaging enough. Already Mr Rao's political antagonists are demanding that he either refute the charges or resign.
The right-wing opposition group, the Hindu Bharatiya Janata Party (BJP), issued a statement by its trio of chiefs, Lal Krishna Advani, A B Vajpayee and Murli Manohar Joshi, calling for Mr Rao's immediate resignation.
'The country cannot afford a scam-tainted prime minister,' the BJP said. The Indian Communist Party also called for Mr Rao's dismissal, and the left- wing Janata Dal party called for a swift investigation into the stockbroker's accusation.
Mr Mehta claimed that two suitcases full of money were delivered to Mr Rao's Delhi residence on 4 and 5 November 1991 and collected by Mr Rao's two personal aides. The arrangements for the pay-off were made under the direction of Mr Rao himself, the stockbroker alleged. At the time Mr Rao was campaigning in a by-election in his home state of Andhra Pradesh, which he easily won. Mr Mehta said he had not disclosed this payment earlier 'out of fear of reprisals'.
Mr Rao returned to Delhi from Oman yesterday and immediately summoned his cabinet and state chief ministers in an attempt to limit the damage. These accusations are a stiff blow to the 79-year-old prime minister, a quiet, sour-faced scholar whose only detectable extravagance is buying books.
His Congress government rules with a frail minority and Mr Rao faces a growing rebellion inside his party. His foes cricitise him for doing nothing while Hindu zealots destroyed a Muslim shrine last December, which convulsed India in communal riots and left more than 2,000 dead.
Mr Mehta, the flamboyant owner of 29 foreign cars and countless mansions and estates across India, and once worshipped as a guru of greed, is now trying, with his disclosure, to bargain for immunity from prosecution. He faces a maximum 50-year jail term for his role in a massive banking and shares scam. When the fraud was exposed in May 1992, it caused staggering losses for small investors and several foreign banks.
Using co-conspirators in government and state banks, Mr Mehta was able to tap funds idling in banks to manipulate the share market. The huge scale of his fraud led investigators to suspect that Mr Mehta could only have carried it out with connivance from the highest Indian officials.