Jakarta – President Megawati Sukarnoputri has given police the go-ahead to investigate allegations of a multimillion-dollar graft case involving the governor of the war-torn province of Aceh.

A national police spokesman, Major-General Paiman, said yesterday that the police will investigate Governor Abdullah Puteh's alleged role in marking up the price of power generators bought for the local government.

The purchase caused a loss of 30 billion rupiah (S$5.6 million) to the state, said Maj-Gen Paiman. "As a state official, the police need presidential approval to question the governor. He will be questioned soon in Jakarta," he said.

The case involves an agreement to purchase generators and a loan from the provincially-owned Regional Development Bank. The anti-corruption commission is also investigating a separate 12 billion rupiah purchase of a Russian-made MI-2 helicopter, complete with VIP cabin, by the Aceh provincial administration about two years ago.

Commission deputy chairman Erry Rijana Hardjapamekas told AFP: "It's suspected the price should be six billion because the navy bought one at that price."

The police on Monday wrote to Mrs Megawati asking for her approval to question Mr Puteh, local newspapers reported. The corruption commission requires no presidential permission to question a governor. It has the power to file charges before a new court to be inaugurated in July.

Nine members of the Aceh provincial parliament have already been arrested for misusing the provincial budget and the former mayor of Banda Aceh has been detained in a separate scandal over funds meant for community economic projects.

Mr Puteh has denied any wrongdoing. President Megawati issued a decree last week severely curtailing his powers. Last week, she placed Mr Puteh in charge of the civil emergency status, which replaced a year of martial law, in the province.

The case has complicated the handover of control from the military to a civilian authority after the government downgraded martial law in Aceh on May 19.

The government imposed military rule in Aceh after it pulled out of internationally brokered peace talks and launched a large-scale offensive to control a separatist insurgency.

At least 2,000 people have been killed during the operations, the army says. Human rights groups say most of them were civilians. The Free Aceh Movement has been waging an independence battle since 1976.

Aceh is rich in oil and other resources. But local residents have long complained that unemployment and poverty are widespread while local officials seem only interested in their own welfare. Residents have expressed hope that the end of martial law would bring a new battle against corruption.