Participating in a televised debate with other writers and politicians, Rana, a big name in contemporary Urdu poetry, said he had decided to return the award because he was dismayed over the recent developments in the country.
"I am returning the Sahitya Akademi award. I won't accept any award from the government in the future," he said.
"Writers and litterateurs have been associated with one party or the other. Some are said to be linked with Congress while others with BJP.
"I am a Muslim and some may label me as a Pakistani. Many areas in this country are not linked with electricity but Muslims here are linked to Dawood Ibrahim," the poet said.
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Rana has voiced concerns against the "growing religious intolerance in India."
"Certain ministers from the Centre have made irresponsible remarks against the authors who returned their awards. The authors' decision have not been taken seriously," the Varanasi based writer, who won the 2011 award for his fiction "Rehan Par Raghu", said.
Singh, a former professor at the Banaras Hindu University, known for his novels and short stories, rejected as "very ridiculous", the allegations that authors were "politically motivated".