NEW DELHI, 6 August — Prime Minister Atal Behari Vajpayee yesterday intervened to stanch a potentially embarrassing scandal from damaging his government by canceling nearly 3,000 petrol station allotments across the country.

Stunned by a newspaper exposé that revealed that relatives and associates of leaders of the Hindu extremist Bharatiya Janata Party (BJP) and some allies cornered a bulk of these allotments, Vajpayee moved swiftly and axed all allotments from January 2000 till date.

Only allotments made to families of soldiers killed in the Kargil conflict in 1999 continue to be valid.

Facing opposition attack in Parliament over the allotments, Petroleum Minister Ram Naik later announced that the Central Bureau of Investigation (CBI) would probe all allotments which the paper said had been doled out as favors against established norms.

Vajpayee’s decision came at a meeting with top ministers and BJP colleagues shortly after a belligerent opposition stalled proceedings in both houses of Parliament demanding Naik’s resignation for the second consecutive working day.

After the prime minister’s meeting, the government announced a sweeping change in petrol pump dealership allotment norms, scrapping dealer selection boards and throwing the dealership open to competitive bidding at auctions.

The exposé, published by The Indian Express in a series of investigative reports since Friday, is the most damaging the government has faced since the March 2001 videotaped scandal of corruption in defense deals carried out by the website Tehelka.

But Naik refused to quit insisting he was never directly involved in the allotment of these petrol pumps and so could not be held liable.

"I see no reason to resign. My ministry or I have done nothing wrong," Naik told a press conference. "Dealer selection boards headed by retired judges made these allotments."

Naik said although all allotments were above board, the prime minister canceled them as he felt the exposé had raised doubts that needed to be allayed.

The minister stressed that these allotments were different from the allotments that Petroleum Minister Satish Sharma of the Congress party had made to his friends in 1996, which the Supreme Court had later struck down.

The BJP, which claims to be a "party with a difference" and has been caught on the defensive over the scandal, cheered the decision.

"The prime minister has intervened and put a lid over the controversy. It is a very good step," said BJP General Secretary Arun Jaitley. Jaitley denied that the disclosures had sullied the BJP’s image.

"Only a few, not all allotments were made to BJP members and their families." But said BJP MP V.K. Malhotra: "It was the best thing to do to avoid further damage to the BJP’s public perception."

Malhotra’s apprehensions were not unfounded, said analyst G.V.L. Narasimha Rao. "The scandal has the potential of causing serious damage to the BJP’s image. It gives the opposition a stick to beat the government with."

The opposition welcomed the cancellation saying it was an admission of guilt, and demanding that the petroleum minister was bound to resign.

"It is an admission of guilt, and the guilty should not be let off without an investigation," Congress MP P.R. Dasmunshi said. "Naik should not be allowed to hold the office. We will continue to demand his resignation."

Dasmunshi said the cancellations were a triumph for the nation. "Vajpayee had no choice but to take this decision."

But Indian Express Editor-in-Chief Shekhar Gupta said mere cancellation was not enough.

"The government should investigate how and why this happened," Gupta demanded.

"If they claim everything was done according to the procedure, are BJP members and their families especially talented at running petrol pumps that they should be chosen for distributing the stations?"