We will be guilty of eroding public confidence and failing to provide just and fair governance to the citizens of our country

Telugu Desam

The main opposition Congress Party has already begun a nationwide campaign to demand Mr Modi's resignation.

But the BJP has rejected the demand with its party president accusing the Congress of politicising the issue.

More than 700 people, mainly Muslims, died in the Gujarat riots and the BJP administration has been criticised for its handling of the crisis.

Major blow

In a resolution on Thursday, the Telugu Desam party said public confidence would be undermined if Mr Modi was allowed to stay in office.

"We will be guilty of eroding public confidence and failing to provide just and fair governance to the citizens of our country," the party said.

Vajpayee must find new strategies to rescue his party

The demand is being seen as a serious development for the BJP which is dependent on the Telugu Desam's support to stay in power.

"By calling for Mr Modi's ouster the [Telugu Desam] struck an unexpected blow at the BJP leadership just on the eve of its important meeting," The Hindu newspaper said.

Three other BJP allies have also called for Mr Modi's removal.

But the party dismissed the criticism of Mr Modi's handling of the riots in Gujarat.

"I strongly condemn the hue and cry of those who demanded the head of Modi," party president Jana Krishnamurthy said in his opening speech.

"The nation needs to be saved from these factors whose only aim seems to be to destabilise the BJP," he said.

Budget under fire

Mr Krishnamurthy also called for a re-think of the government's economic policy in the wake of recent electoral reverses for the BJP.

He said the recent budget proposals of low interest rates and withdrawal of tax benefits passed by Finance Minister Yashwant Sinha was unpopular with middle-class voters.

Some 100 members of the BJP are attending the three-day summit - being held in the western state of Goa - including Prime Minister Atal Behari Vajpayee and Home Minister LK Advani.

The BJP now controls only three states in the country - Gujarat, Himachal Pradesh and Jharkhand - while the Congress Party controls 14.

The mood is likely to be much more optimistic at the Congress Party's two-day summit in the north-eastern state of Assam which also begins on Friday.

The meeting will be led by the head of the Congress Party, Sonia Gandhi, and will examine strategies for the forthcoming elections.