The last-minute change to have the attorney general represent the prime minister suggests increased concern within the ruling Congress party over a widening scandal that has touched both political and corporate India.

Congress party officials closed ranks behind Singh on Friday and his media adviser Harish Khare told Reuters rumors that the prime minister had offered his resignation to party chief Sonia Gandhi were "totally incorrect. Totally rubbish."

The telecoms scandal is the biggest challenge to Singh, 78, since he became prime minister in 2004, and how the next few days unfold will be key to his political survival.

Were Singh to resign it would not lead to the unraveling of the coalition government as much of the political decision-making lies with Gandhi and a large part of daily government decisions are handled by Finance Minister Pranab Mukherjee.

Telecoms Minister Andimuthu Raja was sacked at the weekend after months of pressure from the opposition and Indian media. Raja is accused of selling telecoms licenses too cheaply, potentially losing the state $31 billion in revenues, according to a government audit. Raja has denied the accusations.

Raja is a member of the DMK, a regional party from Tamil Nadu that helps give the Congress party a majority in Parliament. The opposition claims Singh failed to act because he feared upsetting his coalition partner.

Telecom shares suffered significant losses on Thursday on investor uncertainty, and the case has already led to opposition parties halting Parliament proceedings, thereby threatening to freeze passage of key legislation or approving additional spending plans by the government.

Indian firm Swan Telecom, which has since been bought by the UAE's Etisalat, and several other companies, which now are part of Telenor's India operations, were among those singled out in the government audit report regarding discrepancies in their license applications.

On Tuesday, the Supreme Court took the rare step of publicly criticizing Singh for "alleged inaction" in taking 16 months to decide if Raja should be charged and investigated, a blow to the image of a prime minister seen as one of the country's most honest politicians.

"Manmohan Singh has certainly squandered some moral capital over this spectrum scandal," said an editorial in The Indian Express on Friday.