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News of the World alleged that Rafiq Qureshi wanted 20 million rupees (400,000 dollars, 310,000 euros) for the girl, who played the young Latika in the British hit film set in India.
"Slumdog Millionaire", a rags-to-riches tale of children from the slums of Mumbai, won eight Oscars in February, including the best picture Academy Award.
The weekly tabloid said a Mumbai informant told them that Qureshi was touting for the highest offer, having already been approached by a Middle Eastern family.
Qureshi now acknowledges he received an offer to adopt Ali but says he pretended to be interested in an effort to be polite.
"In India, you never say 'no' directly, least of all to guests," he said. "You try not to offend people by refusing to help. They said they were childless and desperately fond of Rubina after seeing her in the film. I felt sorry for them, but I was never going to give her up."
Ali echoed her father's statements, saying, "I trust my father. He loves me. He has never said that he wants to give me up. I did meet an uncle and auntie in a big hotel but it was not about adoption. I will never give any foreign journalist an interview again."