* Proposals follow tighter controls on internet, courts
* Plans broaden eavesdropping, data collection powers
* Obama urges policies "rooted in rule of law" (Adds deputy PM, opposition comment)
By Orhan Coskun
ANKARA, Feb 20 (Reuters) - Battling a corruption scandal, Turkish Prime Minister Tayyip Erdogan is seeking broader powers for his intelligence agency, including more scope for eavesdropping and legal immunity for its top agent, according to a draft law seen by Reuters.
The proposals submitted by Erdogan's AK Party late on Wednesday are part of what his opponents regard as an authoritarian backlash against the graft inquiry. Earlier this month, parliament passed laws tightening government control over the Internet and the courts.
The bill gives the National Intelligence Organisation (MIT) the authority to conduct operations abroad and tap pay phones and international calls. It also introduces jail terms of up to 12 years for the publication of leaked classified documents.
It stipulates that only a top appeals court could try the head of the agency with the prime minister's permission, and would require private firms and state institutions to hand over consumer data and technical equipment when requested.
"This bill will bring the MIT in line with the necessities of the era, grant it the capabilities of other intelligence agencies, and increase its methods and capacity for individual and technical intelligence," the draft document said.
Erdogan's response to the corruption inquiry - purging thousands of officers from the police force and reassigning hundreds of prosecutors and judges - has raised concern in Western capitals, including Brussels, which fears the EU candidate nation is moving further away from European norms.
It has also shaken investor confidence in a nation whose stability over the past decade, following a series of unstable coalition governments in the 1990s, has been based on Erdogan's firm rule, helping send the lira to record lows last month.
Erdogan, barred by AK Party rules from seeking a fourth term as prime minister, has long been expected to run for the presidency in an August vote. But the rules could be changed to allow him to stay on in his current role in an "emergency", Deputy Prime Minister Bulent Arinc said.
U.S. President Barack Obama, speaking by telephone with Erdogan late on Wednesday for the first time since the graft scandal erupted, discussed a raft of regional issues but also stressed the importance of Turkey's domestic stability.
"(Obama) noted the importance of sound policies rooted in the rule of law to reassure the financial markets, nurture a predictable investment environment, strengthen bilateral ties, and benefit the future of Turkey," a White House statement said.
The corruption scandal, which blew up in December with the detention of businessmen close to Erdogan and three ministers' sons, poses one of the greatest threats to Erdogan's 11-year rule.
He has cast it as an attempt to unseat him by a U.S.-based cleric with influence in the police and judiciary before local elections in March and the presidential race five months later.
The feud with powerful preacher Fethullah Gulen, a former ally who has denied orchestrating the corruption investigation, is centred around a struggle for influence over state institutions and has drawn in the MIT before.
In February 2012, Erdogan blocked an inquiry into intelligence chief Hakan Fidan that his supporters saw as a challenge to his authority from a Gulen-influenced judiciary, in what was a turning point in his relations with the cleric.
"The prime minister is completely getting rid of the principle of accountability ... The MIT is becoming his private organisation. This is a transition from police state to intelligence state," said Engin Altay, a member of parliament for the main opposition Republican People's Party (CHP).
With the police and judiciary purged and the new laws on the Internet, courts and MIT, Erdogan appears to be gaining the upper hand - at the cost of further polarising the nation.
The judiciary bill, which is awaiting approval from President Abdullah Gul, will give the government more say in the naming of judges and prosecutors. The Internet law will enable the authorities to block access to web pages within hours without a prior court order.
Social media and video-sharing sites have been awash with alleged recordings of ministers, including Erdogan, and business allies, presented as proof of wrongdoing in the graft scandal. Reuters has been unable to verify their authenticity.
Riot police used tear gas to disperse protests against the Internet controls in Istanbul this month, while the judicial reforms led to fistfights in parliament.
A ruling party official said the MIT bill would be discussed by a parliamentary commission on Saturday and be on the general assembly's agenda next week. The opposition is expected to challenge the bill, but the AK Party's majority means it is likely to pass and be sent for Gul's approval. (Additional reporting by Ece Toksabay in Istanbul and Tulay Karadeniz in Ankara and Sujata Rao in London; Writing by Nick Tattersall; Editing by Alistair Lyon)
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