Frontline
Volume 26 - Issue 03 :: Jan. 31-Feb. 13, 2009
INDIA'S NATIONAL MAGAZINE
from the publishers of THE HINDU
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THE STATES

Mines of scandal

VIKHAR AHMED SAYEED
in Bangalore

The Karnataka Lokayukta’s report emphasises that illegal mining has caused severe loss to the State exchequer.

M. AHIRAJ

A mining area in Bellary district, which has emerged as a metaphor for unbridled exploitation of mineral wealth.

THE impact of the global recession in terms of the slump in India’s iron ore exports to China, a major market, seems to have had a beneficial side effect in Karnataka: it has slowed down illegal mining. The fall in both demand and global prices began in September 2008 and has led to a piling up of mined iron ore and restricted mining output to a minimum now. As a result, illegal mining, which is associated with large-scale corruption and environmental vandalism and has been going on in the State for the past eight years, is no longer viable.

Bellary district accounts for almost 75 per cent of the iron ore mined in the State (Tumkur and Chitradurga districts account for the rest) and has emerged as a metaphor for unbridled exploitation of mineral resources. The increase in demand from China saw the rise of the so-called ‘Bellary billionaires’, a group of people who mined wealth and influence in a short span of time.

They drove fancy foreign cars on roads that resembled extended ditches because of the movement of heavy vehicles transporting iron ore, and took off in helicopters and small aircraft from the backwardness to which they contributed in no small measure. Bellary ranks 18th among 27 districts in the Human Development Index (HDI), according to the Karnataka Human Development Report of 2005. (Karnataka has 29 districts now after Chickballapur and Ramnagram were designated districts in 2007.)

According to the report, Bellary is among the bottom-most districts in terms of social indicators such as literacy, health and access to drinking water. It points out that even though the district is ninth in income index of districts, the indication is that “…higher income does not automatically translate into an improved literacy and health status for the people if that income is not equally distributed”.

Media reports over the past few years of large-scale illegal mining going on in the area received an endorsement of sorts from the Karnataka Lokayukta in its report submitted to the State government in December 2008. The 2,000-page report, including annexures, examines the illegalities associated with iron ore mining in the period between January 2000 and July 2006 and emphasises that rampant illegal mining has caused severe loss to the exchequer. The government has appointed a three-member committee to look into the findings.

The Lokayukta, Justice Santosh Hegde, took up the task on the basis of a government order (G.O.) in March 2007 by the H.D. Kumaraswamy-led Janata Dal (Secular)-Bharatiya Janata Party coalition government. A subsequent G.O. in September last year extended the period under scrutiny until that date. The second part of the report, covering the period from 2006 to 2008, is to be submitted soon.

‘China boom’

The ‘China boom’ is often cited as the reason for the increase in the demand for iron ore over the past decade. According to a report, “Rich Land, Poor People: Is ‘Sustainable’ Mining Possible?”, brought out in August 2008 by the Centre for Science and Environment (CSE) in New Delhi, China bought most of the Indian iron ore in the past few years, “including high grade ore, low grade ore, fines, lumps, concentrates and even the soil of areas like Goa, Joda-Barbil and Bellary-Hospet…”. Indian iron ore exports to China increased to 83 per cent in 2005-06 from 30 per cent in 2000-01. Prices of iron ore in the world market grew by a whopping 118.5 per cent between 2002 and 2005.

With estimated reserves of more than nine million tonnes, or more than 40 per cent of India’s iron ore reserves, Karnataka ranks fourth in iron ore production after Bihar, Orissa and Chhattisgarh. According to the Lokayukta report, iron ore output from Karnataka increased by 237 per cent in 2006, when the production was 40.83 million tonnes if 2001 is taken as the base year, when the production was 12.09 mt. This perhaps points to lackadaisical state control over mining activities and to miners resorting to all forms of illegal mining.

The report, which also has a substantial number of photographs, examines how unplanned exploitation of the valuable mineral resource was carried on for so many years. It points to large-scale transgressions of the Forest (Conservation) Act, 1980; the Mines and Minerals (Development and Regulation) Act, 1957; and the Karnataka Minor Mineral Concession Rules, 1994. The report also looks at the damage to the environment and roads because of illegal mining in government revenue land and the transportation of ore. The Lokayukta had visited several areas in the three districts from May 2008.

One of the names in the report is that of N. Dharam Singh, who was the Chief Minister between May 2004 and February 2006 and also held the portfolio of the Department of Mines and Geology.

About his role the report states, “[B]y giving illegal permits for transportation of minerals mined illegally, Sri N. Dharam Singh has been responsible for causing loss of Rs.23,22,11,850 to the state exchequer, which act of Sri N. Dharam Singh not only becomes a misconduct, unbecoming of a public servant and it also establishes that he has abused his position as public servant, which loss should be recovered as damages from him” [sic].

In an annexure, submitted by Dr. U.V. Singh, a senior officer of the Indian Forest Service (IFS), the Obulapuram Mining Company (OMC) comes under the scanner. The directors of OMC, G. Janardhan Reddy, G. Karunakar Reddy and B. Sriramulu, are currently Ministers in the B.S. Yeddyurappa-led BJP government. According to the annexure, OMC has a mining lease in Andhra Pradesh, bordering Bellary district, and the company has encroached into Karnataka by entering into a raising contract agreement (RCA) with Hind Traders, a mining lessee on the Karnataka side of the border.

An RCA, as described in the report, is “an agreement entered into between the holder of a mining lease/quarrying lease and a contractor providing entrustment of work for carrying out mining of minerals/quarrying of minor minerals and to sell them or to use them for self-consumption on payment of premium or consideration to the holder of the mining lease/quarrying lease.” This concept is not recognised in any piece of legislation relating to mining.

Apart from entering into illegal RCAs, OMC also built roads to transport the ore and in the process destroyed the inter-State border line, the annexure stated.

In a press conference held in Bellary soon after the findings of the report became public, Karunakar Reddy, who is the Revenue Minister, disagreed with those pertaining to OMC and said that U.V. Singh was not technically qualified to conduct the survey.

Several bureaucrats have also been charged with serious misdemeanours. The list includes six officers of the Indian Administrative Service (IAS) and one of the Indian Police Service (IPS), apart from senior officers of the Department of Mines and Geology and Mysore Minerals Limited (MML).

The findings about MML are interesting because this public sector undertaking consistently incurred losses when even small miners made windfall gains from the Chinese demand. Under the rules of the company, the Chairman and Managing Director (CMD) has the power to “fix sale price and revise them from time to time depending upon market and/or other conditions” and to “enter into contracts for sale of ores and minerals”.

However, at MML the sale prices were not revised periodically and ore was sold at a cheaper rate than the prevailing market price. Contractors who mined with MML’s sanction apparently did it without checks or supervision by MML, the report said.

In a separate subsection titled ‘Recommendations by Ministers and Legislators’, the report states that influential contacts played a significant role in the allotment of contracts. It states: “The relevant files made available for perusal indicate that the Managing Director used to allot iron ore fines and mud to persons who used to approach him directly or through some others like politicians [Ministers, former Ministers or MLAs or MLCs or former MLAs or MLCs], officers, former or present Directors of MML and others.” The report puts the total loss to the exchequer from MML at Rs.7,64,19,838 between 2000 and 2007.

In its section on damage to roads and the environment, the report states that National Highways number 17, 48 and 63 have been damaged, as have been “other arterial roads leading to these National Highways…because of the excessive use of overloaded mineral-laden lorries”. National Highway 17 connects the mining belt to Mangalore port, while NH 48 is used to reach Goa and Karwar and NH 63 connects NH 48 and NH 17 from Bellary and Hospet respectively. The report also concludes that there has been a serious impact on the air, water and noise pollution in the Bellary, Hospet and Sandur region.

Media reports on the campaign phase of the Assembly elections held in May last year estimated that Rs.15 crore to Rs.20 crore had been spent per candidate in each of the nine constituencies in Bellary, far exceeding the officially designated amount of Rs.12 lakh for a candidate. At the same time, a sum of Rs.11.14 crore, which was apparently meant to woo voters, was recovered from the district by the Election Commission, the highest amount recovered from any of the 29 districts in the State.

Legislators from the Congress who had spoken to Frontline after the elections blamed the Bellary mining lobby of being instrumental in getting the support of six independent legislators for the BJP, which helped the party to form the government for the first time in the State.

The Congress, too, has its own share of mining barons from Bellary. Even Kumaraswamy was accused by Tourism Minister Janardhan Reddy of having taken hefty bribes from miners in July 2006 when he was the Chief Minister, and this led to speculation that the JD(S) was under the influence of the mining group. While this allegation remains unproven, it is clear that the mining money has pervaded all levels of the State’s establishment, from the level of government employees at the taluk level and across the three main parties in the State.

Under Section 7(2-A) of the Lokayukta Act, the body does not have the right to initiate civil or criminal action against any person. It can only present its findings and make recommendations. One of the suggestions it has made is a ban on the trading and export of minerals.

The Lokayukta has also recommended that disciplinary action be initiated against those found guilty and that efforts be made to recover the money that has been lost by the exchequer.

On the basis of the report, Kumaraswamy, while on a visit to Bellary, accused Yeddyurappa of shielding the three Ministers from Bellary and demanded that action be taken against them.

There was a heated discussion in the legislature on January 19 with Opposition members demanding a probe by the Central Bureau of Investigation (CBI) into the illegal mining and ruling party members blaming the previous dispensations for the same offences.



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