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Australian prosecutors have dropped charges against Dr Mohamed Haneef, the Indian doctor held in Australia in connection with last month's attack on Glasgow airport. 

The Commonwealth Director of Public Prosecutions, Mr Bugg, said on Friday that a review he carried out found that there was insufficient evidence to support the charges of providing material support to terrorism laid against Dr. Haneef and that "embarrassing" mistakes were made. 

Dr Haneef was released from gaol and into "residential detention" until Immigration Minister Kevin Andrews reviews his earlier decision to cancel Haneef's visa.

Mr Bugg said that a prosecutor had told a Brisbane court incorrect information. He said that one of his prosecutors told the court that the SIM card at the centre of the affair was found in a Jeep which was laden with explosives and driven into Glasgow International Airport on June 30. 

"The first related to the SIM card and was based on a misunderstanding of the facts," Bugg said.

"The second related to the residence of Dr. Haneef in the U.K. and was based on incorrect material provided by the AFP."

Australian Federal Police chief Mick Kelty denied that the AFP had made any mistakes and said investigations would continue. He refused to rule out laying further charges against Dr Haneef.

Australian Immigration Minister Kevin Andrews who previously suspended Dr Haneef's work visa after he was granted bail has said he will review his decision to cancel the visa on character grounds. Mr Andrews said that Haneef had to reside in a place of his choosing and was free to move about the community but had to report to Immigration officials daily by telephone and in person every few days.

Speaking last night, Prime Minister John Howard attempted to distance his government from the affair claiming that his government had no control over how the police operate. 

Australian civil rights groups and political parties have strongly criticised the handling of the investigations.

Haneef accompanied by his lawyer Peter Russo and his cousin Imran Siddiqui when he flew out of Brisbane Airport on Thai Airways flight TG 992 to Bangalore, India.