Surjewala said: "The minister has no right to remain on his post. Prime Minister Narendra Modi, who talks of transparency and honesty, should get this (Rijiju's involvement in scam) investigated by an independent agency.
"Till that time, the Prime Minister should either dismiss the Minister of State or ask for his resignation."
Surjewala also demanded an investigation against all the senior officials associated with the project.
Rijiju on Tuesday slammed a daily newspaper for "planting" a story about his alleged involvement in a power project and said if they visit Arunachal Pradesh, they will be "thrashed with shoes".
The newspaper claimed that he had written letters to clear payments of the contractors in the construction of two dams for the 600MW Kameng Hydro Electric Project in Arunachal Pradesh.