By Omer Farooq BBC News, Hyderabad

VW offered compensation to revive its plan to build a plant

German car maker Volkswagen has said it is still keen on building a plant in the Indian state of Andhra Pradesh.

The firm's India envoy, Frank Elbe, offered the reassurances at a meeting on Monday with Andhra Pradesh Chief Minister YS Rajasekhara Reddy.

Plans to build the factory were put on hold after recent allegations of bribery involving the company's former head of operations in India.

Mr Reddy said the company had full government support for the venture.

'Unfortunate'

After an hour-long meeting, the two men told journalists that Volkswagen was serious in its intentions to enter the Indian market.

Mr Elbe, a former German ambassador to India, described the suspected irregularities committed by the former head of Volkswagen's Indian operations, Helmut Schuster, as unfortunate.

He said the incident had forced the company to temporarily put the project on hold.

Volkswagen would assume responsibility for the damage caused by the alleged illegal dealings and would compensate the state government, he said.

'Equity advance'

It is alleged that Mr Schuster took bribes from potential suppliers and set up companies to secure foreign contracts for Volkswagen.

The Andhra Pradesh government deposited more than $2m as its part of the proposed plant's equity in the account of a Delhi-based company, reports say.

Chief Minister Reddy said the relationship between Volkswagen and the Andhra Pradesh government should continue.