The Australian government has set up an inquiry in the case of Indian doctor Mohammad Haneef, who was falsely implicated for having links with terrorists, following a report that more cases could fail if police and intelligence agencies don't work more closely.

Attorney General Robert McClelland confirmed that the government would consider any requests from the inquiry to subpoena witnesses, including former Immigration Minister Kevin Andrews. It was also likely that the Indian doctor would be part of the inquiry, The Australian quoted him as saying.

The inquiry would examine how authorities handled the case against Dr Haneef, who was held in jail for 25 days on suspicion of being linked to a car bomb plot in London [Images] and Glasgow, and submit its report on September 10.

The review follows a public outcry and criticism from human rights groups over the treatment of the Indian doctor.

Andrews had revoked Dr Haneef's visa to live and work in Australia, saying he failed a character test because he knew people involved in the British bomb plot.

The judicial inquiry, however, would have no powers in its existing terms of reference to do so, McClelland said, adding, if key figures were unwilling to appear, the government would consider giving the power to subpoena witnesses by reconstituting the inquiry as a royal commission.

John Clarke, a retired judge, would conduct the inquiry according to the terms of reference. He has indicated that it would obviously and clearly be desirable for Dr Haneef to be invited to appear.

Clarke had indicated that he was prepared to travel to India and that the government would provide necessary assistance for Dr Haneef's representation to travel for the purpose of providing advice to the inquiry.

Andrews said he would reserve his decision on whether he will appear as a witness until he has seen the terms of reference.

Federal prosecutors and senior police, including Australian Federal Police Commissioner Mick Keelty, would also be grilled.