Accusations that Australian actress Tania Zaetta had sex with Australian soldiers in Afghanistan have dominated the Indian press recently and could derail her Bollywood career.

Two of the country’s biggest newspapers — the Times of India and Hindustan Times — picked up the story. It has also been mentioned on entertainment websites.

The Department of Defence has apologized for the scandal and said it would investigate the leaking of the allegations, which were made in a briefing to Australian Defence Minister Joel Fitzgibbon.

Zaetta is still "shattered’’ by the scandal and the impact it would have on her Bollywood career, said her agent, Max Markson, from Australia.

"She spent 10 years going into that marketplace,’’ Markson said. "I’d say [it will cost her] seven figures — definitely a million dollars.

"It’s very serious. Sexual allegations even in this country are bad but over there, it’s abhorrent.

"I’ve already had Times of India on the phone. It’s already a big story over there.

He welcomed the Defence Department’s apology as a "first step’’, and said legal action would help further "vindicate’’ Zaetta.

"We’ve briefed lawyers on this in terms of suing News Ltd. for publishing defamatory allegations about her,’’ he said.

The scandal had already jeopardized some projects in India, Markson said, but he would not elaborate about what those projects were.

He said he and Zaetta were trying to appease any concerns from directors and producers in India.

"We’ll try and set their minds at rest, but the damage has been done.’’

Zaetta would not be conducting any more interviews, Markson added.

The scandal was likely to harm Zaetta’s Bollywood prospects only in the short-term, said Raj Suri, an Australian-based photographer who has been involved with Bollywood for about eight years.

Suri’s brother, Sanjay, is also a Bollywood actor and producer.

"As a Western woman working in the Indian film industry, some mud might stick, but not to the extent that I think it would jeopardize everything,’’ Suri said.

An embarrassed Department of Defence issued an apology to Zaetta for the sex scandal leak amidst reports that she was going to sue the Department of Defence.?In an interview with Nine Network’s Today programme, Prime Minister Kevin Rudd said: "She’s of course entitled to her legal rights and she should prosecute those based on the advice that she receives. I won’t comment on that...there’s a full defence investigation under way in relation to two matters — what transpired there (Afghanistan), and secondly, on the question of the actual handling of this document."

Zaetta was named in a confidential briefing paper — officially referred to as a "hot issues brief" — to Australia’s Defence Minister Joel Fitzgibbon as having slept with special forces soldiers last month at a military base in Tarin Kowt, the capital of Oruzgan province in Afghanistan.?

Defence spokesman Brigadier Andrew Nikolic said: "We apologize unreservedly to those named. We have called on News Limited to assist our enquiries by returning any material they have obtained."

An initial document, prepared internally to brief the minister, did contain the names but was withdrawn within minutes because of privacy concerns. The final version of the document did not include names."