President Jakaya Kikwete accepted Lowassa's resignation and dissolved his cabinet late on Thursday. State House did not say when a new cabinet was expected to be appointed.

A committee which has been investigating a contract awarded to U.S.-based Richmond Development Company LLC since November, handed its report to parliament on Wednesday.

The report queries the transparency with which Richmond won the 172.9 billion tanzania shillings tender in 2006, and Lowassa's influence in its choice to generate power.

"We are encouraged ... parliament has been able to uphold its mandate ... by handling this sensitive matter in a manner that has made it possible for the Prime Minister to offer his resignation," private-owned Guardian newspaper's editorial said.

"We wish to commend all Members of Parliament and those of the select committee for living up to public expectations by saying ... that the country's corridors of power should not be seen to be immersed in vice."

Lowassa tendered his resignation on Thursday saying he had not been given a chance to defend himself before the parliamentary committee.

Along with the Prime Minister's office, the Ministry of Energy and Minerals among others was involved in tendering for emergency power generation to ease power cuts that hit Tanzania in 2006 after a regional drought hit hydroelectric generation.

Another paper stressed the need for Kikwete to rid his government of officials seen to be promoting graft.

"It is commendable that Kikwete has seen this impediment just two years into his presidency," state-run Daily News said in its editorial.