Former Indian communications minister, A. Raja, and two aides were arrested on Wednesday in connection with alleged irregularities in the awarding of 2G mobile licences in 2008, the country's Central Bureau of Investigation (CBI) said.
The CBI started the inquiry in October 2009, but received criticism from India's Supreme Court late last year for delaying the investigations.
Irregular allocations to some Indian operators of 2G licences and spectrum in 2008 may have cost the country about $39 billion (£24 billion), according to a report by the Comptroller and Auditor General of India (CAG) that was presented to Parliament in November.
These licences were issued at 2001 prices without an auction, even though other government agencies such as the Ministry of Finance had asked the Department of Telecommunications (DOT) to review the decision, the CAG said. Some companies were favoured by this move, it added.
Raja was minister for communications and IT when the alleged irregular allocations were made. He quit his post in November ahead of the presentation of the CAG's report, which was leaked to the local media.
India's new telecom minister, Kapil Sibal, said last month that the loss to the exchequer from the 2008 allocations was "presumptive." His government had followed the policy of the previous government, which ruled until 2004, and had adopted a spectrum policy that was promotional in nature, with revenue considerations being secondary, Sibal added.
Sibal however agreed with the CAG that "prima facie" there was something wrong in the procedure adopted to allocate 2G spectrum, though he did not go into details.
Raja is from the DMK (Dravida Munnetra Kazhagam), a coalition partner in the ruling United Progressive Alliance (UPA) led by the Congress party.
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