Mine of scams

Published : Oct 07, 2011 00:00 IST

The arrest of the influential mining baron and former Minister G. Janardhana Reddy blows up in the ruling BJP's face.

in Bangalore

CORRPUT, more corrupt and most corrupt. This seems to have become the commonest way in which the people of Karnataka distinguish the scam-tainted politicians and bureaucrats of the State. In recent months, the ruling Bharatiya Janata Party (BJP) has suffered major embarrassments with several seasoned and influential politicians being indicted by the Lokayukta (ombudsman) on charges ranging from corruption and misuse of office for personal gain to criminal trespass and misconduct, causing loss to the exchequer, forgery, and stashing away black money in tax havens abroad.

In August, a court in Bangalore issued summons to B.S. Yeddyurappa in connection with 16 cases of corruption. Yeddyurappa was forced to quit as Chief Minister on July 31 after the Lokayukta report indicted him in a massive illegal mining scam. His two sons, one of whom is a BJP Member of Parliament, have been asked to appear in court in connection with illegal land deals. The same court sent former Minister Katta Subramanya Naidu to judicial custody on charges of irregularities in the payment of compensation for acquisition of land by the Karnataka Industrial Areas Development Board. His son Katta Jagadish, a Bruhat Bangalore Mahanagara Palike councillor, was also sent to judicial custody after his bail plea was rejected. Jagadish had been arrested in October last year for allegedly bribing a witness in the case, but was later bailed out. Another BJP Minister in trouble is C.P. Yogeshwar. The Serious Fraud Investigation Office (SIFO) of the Union Ministry of Corporate Affairs has accused him of corporate fraud, criminal conspiracy, forgery and cheating and has recommended criminal prosecution. The SIFO investigated complaints against Megacity (Bangalore) Developers and Builders Limited, of which Yogeshwar is the managing director.

The image of the party with a difference has taken a severe beating since it came to power in Karnataka in May 2008. It is now associated more with corruption, internecine battles and scandals than with clean governance and development-oriented or progressive policies.

What has dealt a body blow to the party's image is the arrest in the first week of September of former Tourism Minister Gali Janardhana Reddy, one of the three influential Reddy brothers of Bellary. The mining barons Janardhana Reddy, G. Karunakara Reddy and G. Somashekara Reddy and their confidant B. Sriramulu have never baulked at courting controversy. They have wielded considerable influence in the State party ever since they became part of BJP leader Sushma Swaraj's campaign team when she contested the Lok Sabha byelection from Bellary against Congress president Sonia Gandhi in 1999.

From an obscure small-time financier, Janardhana Reddy, a director of the now infamous Obalapuram Mining Company (OMC), has in the past decade emerged as one of the richest individuals in the country (he recently donated a bejewelled crown reportedly worth Rs.40 crore to the Venkateswara temple in Tirupati) and, more importantly, as a politician and power-broker of immense reach and clout, to the extent of even bankrolling the BJP's efforts in 2008 to form its first ever government in a southern State. In return, the Bellary brothers extracted from the BJP ministerial berths in the Yeddyurappa Cabinet for Janardhana Reddy and Karunakara Reddy, and also Sriramulu. They even got their sister elected to the Lok Sabha on the BJP ticket in 2008. Somashekara Reddy is the Chairman of the Karnataka Milk Federation. The mining barons have run Bellary district like their fiefdom.

In early August, Janardhana Reddy, Karunakara Reddy and Sriramulu were left out of the new Cabinet formed by Yeddyurappa's successor, Chief Minister D.V. Sadananda Gowda. Sriramulu's name figures in the Lokayukta report on illegal mining along with those of Janardhana Reddy and Karunakara Reddy. Piqued at being denied a ministerial berth, Sriramulu resigned his membership of the Assembly (his resignation has not been accepted yet). But the coup de grace was yet to come.

On September 5, sleuths from the Central Bureau of Investigation (CBI), in a pre-dawn inter-State operation (Bellary, Hyderabad and Bangalore), raided the houses of Janardhana Reddy and his relative B.V. Srinivasa Reddy, who is the managing director of OMC, and arrested them. The raid on Janardhana Reddy's palatial house in Bellary from where he was picked up and driven 400 km to Chanchalguda Central Prison, Hyderabad yielded Rs.3 crore in cash, 30 kg of gold and several important documents. In the following days, the CBI also raided the premises of a number of relatives and key associates of Janardhana Reddy. The arrests sparked violence in Bellary, with hoodlums stoning buses and other vehicles and vandalising the Deputy Commissioner's office.

The CBI's action is a corollary to cases registered in December 2009 at the instance of the K. Rosaiah government in Andhra Pradesh under Sections 120-B, 420, 379, 411, 427 and 447 of the Indian Penal Code and provisions of the Prevention of Corruption Act, the Indian Forest Act and the Mines and Minerals (Development & Regulation) Act. The allegations are that companies owned by Janardhana Reddy, a known associate of the late Andhra Pradesh Chief Minister Y.S. Rajasekhara Reddy, were spiriting away iron ore illegally, mining ore beyond the permitted boundaries, and destroying forest wealth. In its remand report submitted to the court, the CBI stated that OMC mined iron ore illegally from several locations, including neighbouring Karnataka. It used the mining licence granted by the Andhra Pradesh government as a front to export iron ore mined in locations other than those allotted to it. The company in fact did nothing new: for decades iron ore and granite mining companies in the region have secured through a licence the right to mine in a designated place. But, in connivance with officials up and down the government machinery, these mine owners have mined in adjoining areas, including forest lands, all the while keeping their own designated mine area preserved' for future use. The material mined is, of course, shown as mined from the designated area.

In the case of OMC, the CBI concluded that active mining was not done by the company in the designated leased area of 68.5 hectares in D. Hirehal mandal of Anantapur district. Rather the company illegally brought iron ore extracted in other areas, showed it as excavated in the leased area, and obtained permits on the basis of this from the district mining authorities. The CBI remand report further stated that the quality of iron ore in D. Hirehal was very low and not of commercial grade. Investigations also revealed that OMC, using raising contracts (by which the original lessee, in contravention of the Mineral Concession Rules, subleases his mining rights many a time under duress to a third party who then extracts the ore) mined ore in Karnataka, and transported it using permits issued by the Andhra Pradesh government.

The CBI report making use of satellite images of the leased area also demolishes OMC's claim that it lifted 29 lakh tonnes of ore between 2007-08 and 2009-10. According to the report, there was no major mining activity (in the leased area) and no possibility of 29 lakh tonnes being excavated. The CBI, which physically inspected the area with the assistance of Singareni Collieries and used latest techniques such as 3-D terrestrial laser scanner, established that the total volume excavated from the area since inception was only 1,56,827 cubic metres or 5.48 lakh tonnes from which the actual volume of ore could be only 1.45 lakh tonnes. Of this, just 40,387 tonnes was extracted from the leased area. The CBI report concludes that OMC obtained the lease at D. Hirehal for the sole purpose of justifying its illegal mining activities, and then conspired with State government officials to mine and transport ore from other areas. CBI officials said they were trying to establish the source and destination of the iron ore as well as the locations where the money obtained from the transaction was deposited.

Several of the charges highlighted in the CBI report had been brought out in December 2008 when the first report of the Lokayukta indicated the involvement of OMC and its friends in various illegal mining activities in Karnataka. Without naming OMC, the Lokayukta report had brought out the deep involvement of a powerful personality from Bellary who has his mine in Andhra Pradesh but along with his front men was carrying on the illegal transportation of ore.

Despite knowing the extent of illegal mining in Bellary, the Yeddyurappa government failed to take concrete action. It also did not act on the Andhra Pradesh government's decision to initiate a CBI probe against the illegal activities. Investigations by the Lokayukta and the Central Empowerment Committee set up by the Supreme Court have shown that illegal mining started around 1999-2000 and that successive administrations were aware of it. It grew in size during the tenure of N. Dharam Singh and H.D. Kumaraswamy and reached its peak during the rule of Yeddyurappa. It is common knowledge that the cost including lease fee, extraction, loading, transport, cess and labour of mining a ton of medium-to-good grade ore, hardly amounts to Rs.1,000. Payments to officials called keep quiet allowance to ensure that the ore is smoothly mined and transported accounts for another Rs.1,000. The ore fetches between Rs.5,000 to Rs.6,000 a tonne, which means the miner gets a profit of Rs.4,000. Each truck is overloaded beyond its capacity of 10 or 20 tonnes, and today there are even double or triple axle trucks that can carry 30 tonnes of ore. Every day and night hundreds of these trucks trundle up and down from the pits to the steel plants, rail heads or docks. Each truck fetches a profit of at least Rs.80,000.

According to the Karnataka Lokayukta Act, the Sadananda Gowda government will have to initiate action against those indicted in the illegal mining scandal within three months. As such, the State has set up a high-level official committee headed by Additional Chief Secretary K. Jairaj. The committee has started deliberations on the action to be initiated against those indicted in the report and will look into the connivance of as many as 787 officials of various departments with the mining mafia. The Chief Minister has also referred the Lokayukta report to the Advocate-General.

Many officials connected with the investigations into the illegal mining, including the former Lokayukta N. Santosh Hegde, opined that the State government should seek a CBI probe into the mining activities so that the full extent of the illegalities could come to light. The CBI does not have the jurisdiction to do so in Karnataka and it is unlikely that the BJP government whose response over the past two years for a CBI inquiry has been dilatory at best will ever agree to it. H.D. Kumaraswamy, whose name also figures in the Lokayukta report for flouting rules while renewing a mining lease, has defended himself saying that he was only obeying the court orders. Congress leaders indicted in the report include V. Muniyappa, an MLA, and Anil Lad, MP. Karnataka Pradesh Congress Committee (KPCC) president G. Parameshwara said both Muniyappa and Lad had recorded their statements before the new Lokayukta, Shivraj Patil, replying to the notices served on them by him. He said Muniyappa had explained to the ombudsman that he had acted in accordance with court orders in taking decisions pertaining to mining and had caused no loss to the State exchequer. Lad told the Lokayukta that he had committed no illegality.

The Congress has demanded that the State government entrust to the CBI investigations into the whole gamut of illegal iron ore mining, its export, under-invoicing and encroaching of forests lands in Bellary district. According to Parameshwara, the CBI is in possession of documentary evidence of income tax evasion to the tune of over Rs.83 crore by Janardhana Reddy, who is the director of OMC.

Contrary to their public pronouncements, many senior BJP leaders secretly feel that the arrest of Janardhana Reddy and the legal travails of Yeddyurappa have given the party the breather it needed to regroup and refocus. A senior Minister described the arrest of Janardhana Reddy and the resignation of Sriramulu as a stroke of good fortune and said that there was no threat to the survival of the BJP government. Sadananda Gowda, State party president K.S. Eshwarappa, Yeddyurappa, Rural Affairs Minister Jagadish Shettar and even BJP national president Nitin Gadkari have all made the right political noises by criticising the arrest of Janardhana Reddy and alleging that it was a politically motivated move by the Congress-led United Progressive Alliance government, and that the CBI was a puppet in the hands of the Congress. But scratch the surface and the views are quite different. A senior Minister told Frontline that the time had come for the BJP to make a clear distinction between the party and those associated with corruption, adding that apart from these individuals, their corruption and antics, there [was] a party. There is also the feeling that with both the Reddys and Yeddyurappa tied up in legal knots, the BJP's national leaders can now boldly maintain that the people accused of corruption are being questioned or are facing legal issues. While there may not be any threat to his government at the moment, Sadananda Gowda is aware of the battering the party's image has taken in recent times. I am trying to set an example. I have taken the pledge that I will live only out of my salary. Also, I will not entertain any person who tries to influence me. And no file will stay pending in my office for more than 15 days.

The Reddy brothers at one point commanded the loyalty of around 40 legislators. But within days of being out of power, the number has dwindled to single digit, as can be seen by the number of visitors Janardhana Reddy has entertained at the Central Prison in Hyderabad. The brothers' demand (before Janardhana Reddy's arrest) to be re-inducted into the Cabinet was rejected by Gowda. The Reddys still have an element of hope [to make it into the Cabinet], but it is diminishing by the day, a Minister said.

For Sadananda Gowda, the choice is either to clamp down on the Reddys by asking the CBI to inquire into the numerous transgressions listed in the Lokayukta report and ensure that their political base in Bellary is seriously damaged, or to continue to support openly a group that can otherwise create trouble for him and the party. So far he has played it safe. A senior Minister told Frontline that the Chief Minister was preoccupied with keeping the factions led by Yeddyurappa and BJP general secretary Ananth Kumar united, and trying to emerge out of the former's shadow. The fight between these two leaders is still on with both wanting to lead the party. Also, since 1985-86 when our strength in the Assembly was just two, Yeddyurappa has been the de facto leader of the party. It will take time for him to understand that he is no longer No. 1, the Minister said.

The Ministers are happy with the way Sadananda Gowda has been conducting himself, which is the antithesis of the absolute power Yeddyurappa exemplified.

Sign in to Unlock member-only benefits!
  • Bookmark stories to read later.
  • Comment on stories to start conversations.
  • Subscribe to our newsletters.
  • Get notified about discounts and offers to our products.
Sign in


Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide to our community guidelines for posting your comment