With political and bureaucratic patronage, it has cost Karnataka an estimated 16,000 crores…

“The CEC has dealt with a number of cases involving illegal mining in Orissa, Haryana, Rajasthan, Chhattisgarh, Madhya Pradesh and Uttar Pradesh. In many of these cases the extent of illegal mining was found to be quite extensive. However all these cases pale into insignificance when compared with the illegal mining on a colossal scale that has taken place in Karnataka, particularly in Bellary, and that too with the active connivance of the concerned departments and also public representatives.”

These observations of the Central Empowered Committee (CEC) set up by the Supreme Court sums up the extent of illegal mining in the iron ore-rich areas of Karnataka — particularly within the Bellary, Hospet and Sandur (BHS) region — and its penetration into state politics.

The story of illegal mining in Karnataka and Andhra Pradesh is now well-documented, although the process of prosecution of the accused is moving at a snail's pace. The mining rush and unbridled extraction of ore began in 2004 when global iron ore prices soared, driven by demand from China.

Huge loss

The CEC report notes that rampant illegal iron ore mining with political and bureaucratic patronage since 2003 in Karnataka has cheated the exchequer of Rs.16,085 crores and pushed the state perilously close to exhausting its mineral reserves.

The range of documented illegalities is broad. Every single mine in the state operated in breach of the Forest Conservation Act, says a report handed over by the Amicus Curiae A.N.D. Rao to the Supreme Court. The quantum of iron ore illegally exported is 2,98,60,647 tonnes, valued at Rs. 12,228-crore — an amount larger than the combined budget allocation for the development schemes of several states.

The violations, on both the Karnataka and Andhra Pradesh side of the border, included the notorious mechanisms of transferring leases through raising contracts, illegal grant of transport permits, excavating outside the leased areas, granting of stock-yard licenses, damaging water bodies and polluting the environment: the list is endless.

An area of 2,800 acres of forest land in Karnataka was ruined by illegal mining according to the Karnataka Lokayukta report. Of the 266 iron ore mines, more than half are located in forest areas, according to the CEC. The total iron ore reserves in Karnataka are estimated to be 1,148 million tonnes according to Indian Bureau of Mines.

While the Supreme Court suspended the operation of all mines (both legal and illegal) in Bellary, Chitradurga and Tumkur districts based on the recommendations of CEC, the final report of the Lokayukta caused an unprecedented political upheaval in the state, with the Chief Minister, B.S. Yeddyurappa, the first Chief Minister in the country to be indicted in a Lokayukta investigation, being forced to step down.

Acting too late?

G. Janardhana Reddy, whose wealth and political clout created what Karnataka Lokayukta referred to as “the Republic of Bellary”, was arrested by Central Bureau of Investigation in connection with alleged illegal mining corruption and destruction of forest wealth in Andhra Pradesh. The arrest is the result of cases registered by the K. Rosaiah government in Andhra Pradesh in December 2009.

Chhattisgarh, the state with the second largest mineral wealth, recorded over 7,000 cases of illegal mining by the end of 2009, and cases were filed against 2203 persons. Indeed, the growth of the Maoist movement is attributed to long-standing official inaction against illegal mining companies. The Chhattisgarh government has collected over Rs.2 crore in fines in some 3,000 cases of illegal mining and transportation in the last two years.

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