The Bellary Mining Scam

(Published in The New Indian Express, School Edition, dated 20 September, 2011, retrieved from http://expressbuzz.com/school/the-bellary-mining-scam/315562.html)


NOTE: This article is not opinion. It's a factual summary of the scam.

The probe into illegal mining in the iron ore rich Bellary region of Karnataka has seen the Lokayukta submit and withdraw his resignation, the Chief Minister send in his resignation after three days’ drama, and two former State Cabinet Ministers pushed to the centre of a probe by the Central Bureau of Investigation (CBI).

The mining scam in Karnataka began with allegations that the Reddy brothers – Gali Karunakara Reddy and Gali Janardhana Reddy – had paid a very small amount to the government as royalty, and used their connections to secure contracts for their Obulapuram Mining Company to operate in the Bellary region.

Ironically, the government requested the Lokayukta to look into an issue that, years later, would implicate top politicians.

How it All Began

In December 2008, then Lokayukta of Karnataka, Justice Santosh Hegde published a report saying there was corruption in the mining projects in Bellary. Among the violations he cited were encroachment of forest land, underpayment of royalties to the state, and mining in a larger area than permitted.

The report said mining was being done in prohibited areas, including protected forest land. It also said the excessive mining had damaged the ecological system of the forest, causing certain plant and animal species to disappear, and altering the rainfall pattern.

In addition, the Lokayukta found that bureaucrats and politicians had been involved. In many cases, officials didn’t check whether mining was only going on in the areas permitted in the lease. Also, mining companies seemed to be lying about the amount of ore they were extracting and exporting. This meant they paid much less royalty to the government than was due, causing huge losses to the state.

Following this, the Indian Bureau of Mines suspended 11 mines out of 26 mines in the area for violations under Mineral Conservation and Development Rules 1988. The Supreme Court constituted a committee – the Central Empowered Committee (CEC) – which cracked down on three mines in Andhra Pradesh being worked by the Obulapuram Mining Company, and directed the state government to stop the operations.

The Controversy of 2010

As investigations into the mining in Bellary were on, the Lokayukta received a complaint in February 2010 that a suspicious convoy of vehicles was parked overnight near Belekeri port, and that the drivers were indulging in rowdy activities. A recce team sent to the site found that the lorries were illegally transporting iron ore.

On a single night in May 2010, a special team sent by the Lokayukta stopped ninety-nine lorries, and found that most carried no documents and that the few documents they presented were forged. After seizing computers from stockyards, the team found that vast quantities of iron ore had already been sent away, and were likely to be at Belekeri and Karwar ports.

Deputy Conservator of Forests for Karwar, R Gokul, reported that  5 lakh tonnes of ore were found in Belekeri port, and about 50,000 tonnes in Karwar. After filing a complaint to the Magistrate, he seized ore amounting to 8.5 lakh tonnes. The mining companies began to fight the case in the High Court of Karnataka.

As the case was dragging on, a news report said 5 lakh tonnes of the seized iron ore had been exported secretly. While the Lokayukta said it could not happen without the collusion of the port authorities, the Minister for Ports Krishna Palemar accused the investigating official, Gopal, of being involved and recommended his suspension. A furious Santosh Hegde resigned immediately, setting off public protests.

Finally, Chief Minister B S Yeddyurappa admitted in Assembly that between October and March that year, 35 lakh tonnes of ore had gone missing, and praised Gokul for his diligent work. He also said that between 2003 and 2010, the state lost about 3.64 crore tonnes of iron ore.  The state banned export of iron ore from Karnataka to curb illegal mining soon after.

Meanwhile, the national leadership of the BJP successfully persuaded Santosh Hegde to withdraw his resignation and continue investigations into the mining irregularities.

The Lokayukta Report of 2011

The final report on illegal mining was submitted in July 2011. It accused mining moguls, ministers, government officials and even banks of conspiring to cheat the state of thousands of crores of rupees. The report said the Obulapuram Mining Company, Associated Mining Company, GLA Trading and GJR Holdings, all owned by the Reddy Brothers, were involved in illegal transactions. In its thousands of pages, the report also recommended legal action against six hundred public officials, and over one hundred mining companies.

But the most damning part of the report was the indictment of Yeddyurappa. It accused the Chief Minister and his family of accepting bribes in the form of donations to family-run trusts from mining corporations as well as overpricing land they sold to the companies, in exchange for issuing mining leases. It said former Chief Minister H D Kumaraswamy approved illegal mining contracts too.

The report put the loss to Karnataka due to cheating by mining corporations at 16,085 crores for the period 2006-10. It also carried details of the impact of mining on the health of the people in the area as well as on the ecosystem.

What Happened After the Report Came Out?

Parts of the report leaked out to the press a week before the Lokayukta was to submit it to the Chief Secretary. Calls for Yeddyurappa’s resignation began. The Chief Minister fought to keep his place, despite his own party asking him to step down.

On 31 July, he finally resigned and his close aide Sadanand Gowda took over as Chief Minister. Yeddyurappa has maintained that he is innocent. Incidentally, this is also his stance with respect to other charges of corruption, including land scams. Karnataka Governor H R Bhardwaj has approved Yeddyurappa’s prosecution and allowed police to question him.

In early September, former Karnataka Tourism Minister Janardhana Reddy was arrested by the CBI. Ten days later, the CBI questioned his brother, former Karnataka Revenue Minister Karunakara Reddy.

Since then, CBI investigators have opened the brothers’ bank lockers, reportedly finding cash of Rs. 2.5 crore and 15 kg of gold. Searches have also been carried out in the house of Janardhana Reddy’s driver, and in the bank lockers of his brother-in-law BV Sreenivasa Reddy, who is the Managing Director of Obulapuram Mining Company.

TIMELINE
December, 2008	Karnataka Lokayukta Santosh Hegde submits interim report on illegal mining, following which Indian Bureau of Mines suspends 11 mines out of 26 mines
November, 2009	CEC asks Andhra Pradesh government to stop mining operations in 6 mines, including 3 owned by Reddy brothers
February, 2010	Lokayukta acts on complaint about suspicious movement of lorries near Belekeri Port
May, 2010	Forest Department official Gopal seizes 8.5 lakh tonnes of illegal iron ore at Belekeri
June 21, 2010	After 5 lakh tonnes of the seized amount go missing, Minister for Ports recommends suspension of Gopal
June 23, 2010	Lokayukta Santosh Hegde announces his resignation in protest
July, 2010	BJP placates Hegde, persuades him to withdraw his resignation; State bans export of iron ore from Karnataka.
20 July, 2011	Parts of the Lokayukta’s final report on illegal mining, indicting Yeddyurappa and the Reddy brothers, leaked to the press
27 July, 2011	Santosh Hegde submits report on illegal mining in Karnataka, Yeddyurappa leaves for Delhi to meet the BJP High Command
31 July, 2011	Yeddyurappa resigns as Karnataka Chief Minister
2 August , 2011	Hegde retires as Lokayukta. Justice Shivaraj V Patil takes over.
3 August, 2011	Sadananda Gowda takes over as Karnataka Chief Minister
10 August, 2011	Lokayukta police file FIR against Yeddyurappa
5 September, 2011	CBI arrests Janardhana Reddy from his Bellary residence, begins crackdown on his and his brothers’ property and assets

THE NUMBERS GAME

Along with the annexure, the Lokayukta’s report runs into 25, 578 pages

Yeddyurappa’s family is said to have sold an acre of land, purchased at Rs 40 lakh, for Rs 20 crore

Reddy brothers’ lockers found to contain Rs 2.5 crore cash, 15 kg of gold

Obulapuram Mining Company MD Srinivasa Reddy’s lockers found to contain Rs 2.6 crore cash, 14 kg gold

Rs 4 lakh in cash, 2 kg of silver, and some documents seized from Janardhana Reddy’s driver’s house