Iron ore politics

Published : Aug 11, 2006 00:00 IST

Charges of corruption against the Chief Minister forces the government to order an inquiry into the irregularities in iron ore mining.


THE iron ore mining sector in Bellary district in Karnataka and the expanding web of illegal and corrupt practices that sustains it are finally to be brought under official scrutiny.

The explosion in iron ore mining, powered by a spurt in the international prices of iron ore in the past four years, has resulted in the overnight enrichment of mine owners in the area.

Of the 54 mining lease-holders in the reserve forest areas of Bellary division, the majority got their leases between the 1960s and the 1980s. Another 57 received temporary leases after 2004 from the government on patta or revenue lands.

Following the mining boom, there has been wholesale violation of laws governing mineral extraction and environmental protection by sections of the lease-holders. They have escaped prosecution largely by bribing the administrative and law-enforcing machinery at the district and State levels.

The mining sector escaped any serious official investigation in the past. It was only when the weight of the scandal threatened the very survival of the present coalition government headed by H.D. Kumaraswamy of the Janata Dal (Secular), that the Chief Minister ordered an inquiry into all aspects of illegality in the mining sector.

The allegations made by G. Janardhana Reddy, a Bharatiya Janata Party (BJP) Member of the Legislative Council (MLC) and a wealthy mine owner himself, that bribes totalling Rs.150 crores were collected from mine owners by Forest Minister C. Chennigappa on behalf of the Chief Minister rocked the government and dominated the proceedings of the Legislative Assembly and the Legislative Council for several days.

The BJP is a constituent of the ruling coalition. Reddy and the Opposition Congress demanded an inquiry by the Central Bureau of Investigation (CBI) into the allegations. The Chief Minister has instead appointed a commission of inquiry, to be headed by U.L. Bhatt, a former Chief Justice of the Madhya Pradesh and Assam High Courts. The commission will file an interim report in two months and the final report in six months.

The commission has been asked to identify all the fraudulent activities relating to mining from January 1, 2000, until the present, the "systemic distortions for high-profit margins" in the mining sector.

In particular, it has been asked to look into two issues. The first is the outcome of the government order, issued by the S.M. Krishna government in March 2003, to dereserve 11,620 acres (4,648 hectares) of government land for private mining.

The second relates to the joint venture contracts entered into by Mysore Minerals Ltd (MML) that are alleged to have favoured select individuals and companies by arbitrarily allotting iron ore mines and iron ore stocks at rates far below the market price.

"There have been complaints of certain influential individuals who were part of the power structure within the government, who by manipulating the records and interfering in the affairs of MML caused huge losses to the corporations and the State", the notification says. The Commission is also to look into the practice of issuing transport permits for illegal mines on government land.

Profits from mining have gone through the roof in the recent mining boom. "As per a rough estimate, the 50-odd operating leaseholders (lessees) of Bellary district had earned a total profit of around 30,000 to 35,000 million [3,000 crores to 3,500 crores] rupees in the last financial year," an official note prepared by a senior district police officer states. Approximately 30 million tonnes of iron ore was extracted in the district in the last financial year.

The profit that a lease-holder makes for every tonne of ore depends on the market price of the ore. "As a thumb rule," the note says, "it can be safely stated that a leaseholder makes profit in the range of $20 to $40 per tonne of iron ore fines (62.5 plus grade) and Rs.400 to Rs.600 per tonne of iron ore lumps."

This wealth has created a new class of businessmen-politicians whose millions have given them considerable clout in State politics and within the three major political parties in Karnataka. The BJP is a case in point.

If the election campaign of BJP leader Sushma Swaraj set the momentum for the party's growth in Bellary, the wealth from mining appears to have sustained it thereafter. The party has broken the Congress stranglehold over the district. Several of its elected representatives either are mine owners or are in the mining business.

The Member of Parliament from Bellary, Karunakara Reddy, is from the BJP, as are several of the MLCs and the Members of the Legislative Assembly (MLAs) from the area. B. Sriramulu is the BJP MLA from Bellary city, Anil Lad from Kudligi, and Somalingappa from Siruguppa. The BJP has a majority in the Bellary City Corporation, and in the Bellary, Siruguppa and Kudligi taluk panchayats.

The allegations over pay-offs made under coercion by mine owners to members of the JD(S) threaten to destabilise not just the coalition but the BJP as well. It has brought to the surface the differences between the two factions in the BJP, the one led by Deputy Chief Minister B.S. Yediyurappa and younger leaders like Reddy, whose swift rise in the party is attributed to his financial clout.

Reddy was suspended from the party for failing to prove his charges of corruption against the Chief Minster. He nevertheless remains defiant. "I stand by my charges, I am a loyal worker of the party, and the State government did not get the clearance from the central leadership before suspending me," he told Frontline.

The commission of inquiry will not have to start from scratch in its investigations as the contours of corruption and illegality within the mining sector in Bellary has already been laid out in official notings and media reports.

According to the investigations of a police officer in the district, there are four types of illegalities that are commonly committed. The first is when mining operations are carried out without government lease or permission. The second is when mining operations are carried out in contravention of the terms and conditions of the lease, as for example when mine owners encroach on areas outside the lease agreement, or excavate more ore than permitted in the lease agreement.

The third illegality is the theft of extracted minerals belonging to the government or a lessee. And lastly, there are illegalities in transportation and in the violation of pollution control laws.

According to data from the office of the Conservator of Forests in Bellary, there are just 54 official mining leases that are in operation in reserved forest areas - "3,800 hectares out of a forest area in Bellary district of 30,000-odd hectares," C. Jayaram, Conservator of Forests, Bellary Division, said.

"There are only small violations in our jurisdiction, and we have taken action on them," he said.

A report prepared by Chennigappa in March 2006, soon after he assumed office, suggests otherwise. According to the report, there were massive violations of the Karnataka Forest Act in Bellary that were causing a "huge loss of revenue (such a loss would run into crores if a thorough enquiry is done)". His report accuses the operators of several mines of "very serious violations of various mining conditions/Forest Conservation Act/ Karnataka Forest Act/ Environmental Protection Act/ Mines and Minerals Acts, etc".

According to Mathew Guru, the owner of a large transport business in Bellary, the mining boom has benefited not just mining lease-holders but the district as a whole as it has given jobs to lakhs of people.

"On an average the cost of mining is between Rs.200 and Rs.250 a tonne. The price of C-ore and fines (iron ore dust) is Rs.1,400 a tonne at the mines and Rs.2,700 if transported to the harbour. Most mine owners in Bellary are worth more than Rs.1,000 crores," he said.

Roughly 7,500 lorries move out of Bellary daily carrying ore and fines (ore dust) to the ports in the east and the west. The dust these lorries generate settles on everything.

At the Government Model Higher Primary School in Taranagar, Sandur taluk, respiratory disorders among children in the last five years have increased substantially because of the dust that is thrown up by the lorries that ply up and down the road in front of the school, according to Sundaresh Kumar, the physical instruction teacher in the school.

"At least 2,000 lorries pass in front of the school every day," he said. "By the evening the children are covered in red dust."

Even as the mine owners turn from millionaires to billionaires, the mine workers - thousands of migrant agricultural workers among them - labour under the most appalling conditions. In the smaller and most often illegal "float-ore" mines, working families dig shallow pits to bring up lumps of iron ore that is then broken down by hand. At larger mines, they operate heavy machinery such as excavators and dumpers.

They drive the endless convoys of ore-laden lorries from work sites to ports in Mangalore, Karwar, Vishakhapatnam and Chennai. They work for over 12 hours a day in the lung-choking environment created by swirling ore-laden clouds of red dust that permeate even the small hovels that entire families crowd into to sleep. Their living quarters have no water, electricity or sanitation.

"There was no work for us in our village in Kushtagi [Raichur taluk]: here we get Rs.5 for every putti [iron basin] of ore we break down," said Sharadamma, an emaciated young mother of three, as she and her friends Padma and Shara pick up dry twigs from the roadside near Subburayanahalli village in Sandur, a region whose forested hillsides and fertile valleys are being fast denuded by uncontrolled private mining. She can break roughly 10 puttis on a good day of work. "The rate used to be Rs.8 for a putti, but now that so many people want work, the price has been pushed down. We are our own enemies."

The biggest wrongdoing committed by mining companies, with the exception of state-owned companies, is the gross exploitation of labour, including children, the class that creates their wealth. This is an issue that does not find a mention in the terms of reference of the Bhatt Commission of Inquiry, nor in any of the official reports on the mining sector. A report that investigates mining illegalities but which does not investigate the violations of labour rights will, indeed, be a partial one.

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