The Land Mine Explodes

Karnataka’s illegal mining scam has claimed its Chief Minister. But, with so many people involved, it will be a long while before the dust settles

Some months ago, former Karnataka Chief Minister BS Yeddyurappa, a great believer in di­vine sanction and spiritual advice (he was seen bowing to a Lingayat caste mutt head after his 31 July resignation), was told to perform a ritual yogic invocation of Solar Power as a way to overcome his political troubles. The BJP leader was told to do a surya namaskar in the buff.

It is not known whether he followed the instructions, but Karnataka’s king has had no proverbial robes for quite some time. Even BJP President Nitin Gadkari had publicly—and ironically—been reproachful of the way deities were being dragged into politics in South India, where the party had only just made its mark. Yeddyurappa’s was the first ever BJP government in the south (now headed by Sadanand Gauda, who has the backing of the former CM). But the reason Yeddyurappa had to quit office was the mining sector report of Karnataka’s Lokayukta, which has high­lighted a series of cheque ‘donations’ in 2010 worth Rs 30 crore made to Yeddyurappa’s family members and an educational trust run by them. The trail of these payments has led to JSW Ltd, which admits to having paid Rs 20 crore, but only for a one-acre plot of land in a Bangalore tech park. The Lokayukta, however, believes these payments were for dubious mining privileges.

Karnataka’s most prominent miners, though, are not the Jindals of JSW but the Brothers Reddy of Bellary, who are not just exporters of iron ore, but members of the state cabinet of ministers. Along with their cronie B Sreeramulu, Janardhan and Karunakar Reddy have pretty much behaved as super-legislators in the Assembly, their influence clear to just about everyone.

In their cosiness, what the CM and mining cabal did not count on was an earnest team of investigators under Lokayukta N Santosh Hegde (who, in­cidentally, retired on 2 August). To the former CM’s dismay, the core team of five, led by an Indian Forest Service of­ficer, UV Singh, burrowed its way deep into the mining sector, and unearthed enough dirt to show how several of Reddys’ mining firms—including some benami ones—flouted the law in Bellary, running a parallel administration there, to extract huge quantities of grade 60-fe iron ore for exports (under-invoiced, of course, and mostly to China).

Since most of these operations didn’t exist on paper, even the truck permits be­ing fake, the report pegs the loss to the state exchequer at Rs 16,085 crore over 2006–10 just in terms of unpaid royalty for the ore. And this, mind you, is not a notional loss. Actual ore was dug out and sent overseas, and unlike in the country’s telecom sector, there is no case to be made for giving away public resources cheap­ly to keep costs low for the aam aadmi.

Plus, there are enough irregularities for the Income Tax Department, Enforcement Directorate, Directorate of Revenue Intelligence, Customs, Indian Bureau of Mines and Reserve Bank of India to chew on. The investigation was quite comprehensive, bringing under its glare all kinds of government officials from departments such as mines and ge­ology, transport, ports and customs; as well as executives from a vast web of banks, mining companies, investment firms, transporters and private ports, all involved in a heist that has taken place in broad daylight (read ‘A Land Mine Waiting to Explode’, Open, 23 January 2010).

So vast was the extent of the illegal mining operation, sprawling across Karnataka’s borders, that Justice Hegde—who referred the charges against Yeddyurappa to the Governor for action—complained at one point that the scam was beyond his jurisdiction and wherewithal: “I do not have enough po­licemen competent to investigate it. I hope the Supreme Court, which has al­ready formed a Centrally Empowered Committee to look into the operations of the mining mafia in Andhra Pradesh [the Reddy brothers’ Obalapuram Mining Co is named for illegal mining in Andhra’s forest areas], would look into my report.”

Justice Hegde is pleased, nonetheless, that the report has gained so much trac­tion. It has been a learning experience for him, he has said, and a useful primer for the Centre’s proposed Lokpal Bill, on which he is part of the drafting commit­tee as a representative of civil society.

The Lokayukta had also reported irreg­ularities in the mining sector back in December 2008, but those revelations had caused only a few murmurs. The lat­est report, backed by detailed evidence, has claimed a CM already and could cre­ate much havoc in the months to come.

After all, it is not just Yeddyurappa. As many as four former CMs are also under suspicion for their alleged connivance with miners—issuing licences for min­ing in a limited area, and then looking the other way as they bulldozed their way into as much land as they could.

The five investigators, as they’ve been dubbed in memory of the Alfred Hitchcock series, did not have it easy. They were assaulted, threatened and even physically barred from some areas. “But, in the end, we were only doing our duty,” says Singh, with a near shrug.

Over the 11-month-long investigation, Singh himself suffered an attack on a vis­it to Bilikere, a private port, to see what was going on. He was alone. “Most of the work was undercover, as we were dealing with well-connected politicians,” says another official of the team. Since miners were unwilling to show their records, the investigators had to worm their way in from the other end. They visited ports in Murmagao, Panaji, Bilikere, Karwar, New Mangalore, Chennai, Ennore, Krishnapatnam, Visakhapatnam and Kakinada to get details on ore shipments. While miners would under-invoice their exports, the exact quantities shipped out were being recorded. The numbers were vastly greater than either the truck per­mit quantities or declarations made to royalty collectors of the state.

“It was a laborious process,” says Singh, “as there were 400 mining and benami companies to be examined, hundreds of trucking companies and hundreds of thousands of documents to compare. But we did it, like a proper investigating agency.” The team went through 400,000 files, 5 million manual and electronic en­tries, and finally delivered a 25,258-page report with annexures bearing testimo­nies, pieces of evidence and true copies.

“Mining companies got fake permits issued, and the illegally extracted ore was sent to private ports, as they thought the accounting standards would be lax at Krishnapatnam and Bilikere,” says an­other investigator, who prefers anonym­ity, “But these ports turned out to be more cooperative [than they thought], as they maintained proper records, including bribe entries that were paid to officials of several departments to turn a blind eye to the incoming truckloads of ore.”

As the probe progressed, the team real­ised that some of the findings had to be corroborated by other central agencies. So they alerted the Income Tax director general of investigations, recounts Singh. The department raided several firms, turning over information promptly.

Threatening calls, asking investigators to lay off, were routine. But the team per­sisted. On more than one occasion, Singh was handed a mobile phone during a raid, with a man at the other end identi­fying himself as either a minister or his confidant, and demanding to know whether he had a go-ahead from the cab­inet minister in charge of Bellary. The minister, Singh didn’t need to be told, happened to be Janardhan Reddy.

Iron ore exports have been at the centre of a controversy for at least five years now, with Indian steelmakers ar­guing that precious raw material should be retained within the country for val­ue addition and not given away cheap­ly. Bellary, however, was prospering on China’s ravenous demand for ore.

Independent journalists Kestur G Vasuki and Maya Jaideep, makers of Heat in Dust, a documentary on the district’s 2005-06 mining boom, recall that Chinese demand turned intense in the run-up to Beijing’s 2008 Olympics. The film was made around the time the Reddy brothers made their startling claim that mine owners had paid HD Kumaraswamy, the then CM, a Rs 150 crore bribe. Though the story fizzled out on lack of evidence, ironically, it was that allegation that drew Janardhan Reddy into the spotlight.

Vasuki says that the film was difficult to make. Their crew was detained for three days by some miners to block them from filming anything. “In a way, the Rs 150 crore allegation backfired, and singed the ambitious empire of the brothers who [later] largely funded the May 2008 Assembly polls in which the BJP emerged as the top party, only a few seats short of a majority.”

The film also focuses on the large-scale destruction of agrarian systems in the area, as farmers turned their land over to miners. According to Jaideep, the neo-rich and powerful managed to bulldoze just about everything and everybody in their way to capitalise on the boom.

Those who have been sickened that all this could happen in a democracy, how­ever, are not celebrating Yeddyurappa’s downfall yet.

The Five Investigators themselves feel that justice will be done only once all the accused, including more than 600 gov­ernment officials indicted for taking bribes, are brought to book. There is a lot of red dust that might fly around before any of this settles.

BS Yeddyurappaillegal miningKarnataka