How Bellary was laid waste

Karnataka’s Lokayukta Santosh Hegde’s report is a sordid story on the rise of India’s mining poster boy, Bellary. The protagonists of the script, the Reddy brothers, used muscle and money to grease their way through government departments. Initially, it was all gold. But Hegde’s report exposed the dingy substrate of Bellary’s mining operations. Heads have rolled, and the political establishment of Karnataka has been shaken up. BJP leader B S Yeddyurappa was made to quit the chief minister’s post. The Supreme Court has stepped in to ban mining on the basis of a report by the Central Empowered Committee (CEC).

The biggest losers have been the environment and the people living in the area. M Suchitra reports from Bellary and Kumar Sambhav Shrivastava analyses the CEC report

By Kumar Sambhav Shrivastava, M Suchitra
Published: Wednesday 31 August 2011

How Bellary was laid waste


The all-powerful iron ore mining mafia of Karnataka has hurled red dust into the eyes of democratic India with impunity, and for long. Convinced of their invincibility, the Reddy brothers, along with their mentors and cohorts, have ravaged the state’s rich mines. Between April 2006 and July 2010 the state lost Rs 16,085 crore due to illegal mining. [related-content]

When Karnataka Lokayukta Justice N Santosh Hegde submitted his 25,228-page final report to governor H R Bharadwaj on July 27, it revealed the colossal plunder of public wealth by those in power. The report gives, with evidence, a detailed account of corruption, collusion and illegalities committed right from the ground level.

The report of the watchdog against corruption forced chief minister B S Yeddyurappa to resign, causing much embarrassment to the ruling Bharatiya Janata Party. His successor, D V Sadananda Gowda, dropped from his cabinet tourism minister Gali Janardhan Reddy and revenue minister Gali Karunakara Reddy, indicted in the report. Besides the Reddy brothers, those indicted were Yeddyurappa’s cabinet colleagues: health minister B Sriramulu and food and civil supplies minister V Somanna.

The names of more than 700 mining officials and 400 companies engaged in mining, iron ore trade and steel manufacture figure in the report. Four mining majors—JSW Steel Ltd owned by the Jindal Group, Adani Enterprises Ltd, Sesa Goa Ltd and MSPL Ltd owned by the Baltoda Group—are listed as accused, besides the National Minerals Development Corporation (NMDC), India’s largest public sector iron ore producer. So is former Karnataka chief minister and Janata Dal (S) leader H D Kumaraswami. The name of Aarti A Lad, proprietor of mining firm VSL Enterprises and wife of business magnate-turned-Congress MP Anil Lad, also figures in the report.

Karnataka contributes about one-fourth of the country’s annual iron production, which is 245 million tonnes. Sixty per cent of this comes from the state’s Bellary district which has 124 mines, most of them within forest area.

The frenzy to extract iron ore started in 1999. And with it began the saga of unholy collusion between the political class and the mining and steel industries. Joining hands, they gifted new leases and renewed the defunct ones. Large-scale mining led to massive environmental destruction.

In March 2007, the Karnataka government asked the Lokayukta to probe allegations of illegal mining. It was asked to “fix responsibility and initiate action against all public servants, including ministers, whether in office or otherwise”, beginning from 2000.

But investigating a mining lobby with immense money and muscle power was no mean task. The minister in-charge of Bellary district was Janardhan Reddy, the mining baron himself. Almost all officials in the forest, revenue and police departments were handpicked by the Reddy brothers.

“It was indeed a tough mission,” recalls Hegde. U V Singh, chief conservator of forests who led the investigation, was physically attacked. “But we refused to succumb,” says Singh. The report gives a detailed account of the irregularities committed in granting mining leases, mining, stacking, transporting, trading and exporting the iron ore. Numerous cases of illegal activities were also found—that of mining without lease or after expiry of lease period, encroachment of forests and even others’ mines, transporting ore without permits or with fake permits, overloading trucks, under-invoicing and benami transactions.

The activities were carried on in violation of many laws, including the Mines and Minerals Development and Regulation Act (1957), Forest Conservation Act (1980), Environmental Protection Act (1984), Foreign Exchange Management Act (2006) and Panchayati Raj Act. This was in connivance with the departments of police, mines, forest, revenue, weights and measurements, commercial taxes, labour and the Karnataka State Pollution Control Board ( KSPCB).

The Lokayukta report reveals that Karnataka’s iron ore was being exported through Goa in the name of domestic consumption. The state’s high-quality ore was mixed with its inferior Goa variety and transported from Bellary in railway wagons. But there was no system to identify the illicit consignments. According to the Karnataka Forest Act, 1969, no forest produce can be transported by rail or sea without valid permits.

The report convincingly nails the Reddy brothers’ claim that they never engaged in iron ore mining in Bellary. It devotes an entire chapter to describe the illegalities committed by the Associated Mining Company, in which Janardhan and his family have a stake. The politician forced almost all miners to pay him “tax” through “raising contract”. Raising contract is an illegal agreement through which a mine owner permits a third party to run the business and take a share of the profits or “lift” an amount of iron ore from his mines. Those who refused were denied permits to transport ore. “We were also asked to pay them, but we did not oblige,” says Raghavendra Rao, assistant general manager of MSPL Ltd.

imageThe report also clearly states involvement of public sector companies. At a time when private players were making huge profits through legal and illegal mining and exports, NMDC was shipping ore at much lower rates (see ‘Losses to the Karnataka exchequer’). This was perhaps to help private players make big money.

The National Agricultural Cooperative Marketing Federation of India Ltd (NAFED), which otherwise deals in procurement of oilseeds, pulses and cotton, also traded in iron ore through dubious means. So did Mysore Minerals Ltd, a Karnataka government firm with 40 mining leases.

Hegde has listed names of officials involved and their bribery rates at the Belekeri Port. The amount, he says, “progressively increased” from Rs 22 lakh in 2004-05 to Rs 48 lakh in 2005-06 to Rs 66 lakh in 2006-07 and Rs 1.28 crore in 2007-08. The Lokayukta report has strongly indicted the KSPCB for encouraging and abetting illegal mining. It cites instances when the board avoided mandatory public hearings or conducted public hearings without involving villagers for granting new mining licences. During peak mining period when air and water bodies were increasingly getting polluted, the board turned a blind eye.

Action awaited

For Hegde, the mission is accomplished. His term ended five days after he submitted the report. But he is not sure if the state government will take action. “My first report was completely ignored,” he says.

In December 2008, Hegde had submitted a 274-page report which warned that the deposits would not last more than 20 to 30 years even under moderate rate of mining. It recommended a ban on all trades of iron ore, including export. The report said the mineral should be reserved only for domestic consumption. It also pointed out that the rate of royalty, between Rs 16 and Rs 27 per tonne, was absurdly low. It recommended action against many for contravening the law, including former chief minister N Dharam Singh, who held the portfolio of the department of mines and geology.

But no action was taken except filing of a few criminal cases against companies. Operations of 16 companies were suspended but they managed to get a stay from the state high court and resumed mining. In December 2009, a special task force of the Indian Bureau of Mines ordered suspension of operations in 12 mines for violating mining plans. Similar orders were passed against 18 companies in April 2010. But exports went on unabated.

At present, the Central Empowered Committee of the Supreme Court is reviewing statements of big companies like JSW Steels, Adani Enterprises, Sesa Goa and NMDC that have refuted Lokayukta’s charges.

But the miners are incorrigible. A day after the apex court banned mining activities in Bellary for three months, Fomento Mines Company was caught transporting 3,724 tonnes of ore worth Rs 75 lakh by rail. Is this an indication to what the future holds?

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