"Rai is a grass root worker, who is a sitting Congress MLA and has fought a number of elections successfully and he will be the best candidate in Varanasi", party spokesman Randeep Surjewala told reporters announcing the candidature.
Rai, who allegedly has questionable credentials, will also face AAP leader Arvind Kejriwal, who has decided to fight the election in Varanasi.
Congress President Sonia Gandhi has taken the decision after taking a comprehensive view in the matter, he said suggesting that Rai's connect with the local people has brought him the nomination.
At the Manifesto release press conference two weeks back, Gandhi had declared that the party will "definitely challenge" Modi in Varanasi.
"Rai can ably lead people in Varanasi and he has been fully acquainted with the problems faced by them", Surjewala said in reply to a volley of questions over his candidature and as to why the Congress overlooked offers from senior leaders like Digvijay Singh, Anand Sharma and Rashid Alvi.
Among the local leaders, the names of Rai and former MP Rajesh Mishra were being considered. Mishra was an MP from 2004 to 2009.
Surjewala replied in similar vein when asked as to why Rai has been put up in Varanasi when it has fielded national General Secretary Madhusudan Mistry, a close aide of Rahul Gandhi, to take on Modi in Vadodara, the second seat from where the Gujarat Chief Minister is contesting.
He dismissed suggestions that the Congress has put up a weak candidate in Varanasi as a quid pro quo with BJP in Rae Bareli from where Sonia Gandhi is contesting.
Surjewala also brushed aside questions that Rai could become another Ramesh Chand Tomar, the Congress candidate from Gautam Buddha Nagar who embarassed the party by joining the BJP just ahead of the Lok Sabha polls.
Expressing confidence that the party nominee will emerge victorious, the Congress spokesman also appealed to all non-BJP parties to back the candidature of Rai.
AAP leader Arvind Kejriwal has also declared to contest against Modi in Varanasi. Samajwadi Party, which is ruling Uttar Pradesh, has fielded Kailash Chaurasia from the holy city.


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