The Chhattisgarh Police have arrested two men suspected of channelling Rs.15 lakh from the Essar industrial group to the guerrilla army of the banned Communist Party of India (Maoist). A spokesperson for Essar has denied the allegations, as has the sister of one of the arrested men.

“B.K. Lala was arrested yesterday at the Palnar weekly market with Rs.15 lakh in cash,” said Dantewada Superintendent of Police Ankit Garg over the phone, “On interrogation he said the money was from the Essar group and intended for the Maoists.”

Mr. Garg said the money was withdrawn from Mr. Lala's State Bank of India account in Kirandul.

The police are yet to ascertain the precise source of the money; yet sources said that Mr. Lala worked as a contractor for Essar, carrying out odd jobs and renting excavation equipment to the company.

The arrest comes a fortnight after the WikiLeaks website released a secret US embassy cable titled “Anti-Maoist operations in Chhattisgarh begin”, quoting an unnamed “senior representative” of the Essar group of industries as saying that Essar paid the banned Communist Party of India (Maoist) “a significant amount not to harm or interfere with their [Essar's] operations; when the Maoists occasionally break this agreement and damage Essar property or threaten personnel, Essar sets different Maoist groups against each other to suppress the situation.”

An Essar spokesperson has denied these claims, as have representatives of the CPI (Maoist). “Essar is a law-abiding corporate. We don't think it is appropriate or necessary to react to such allegations,” said an Essar spokesperson.

The police have also arrested a man called Lingaram Kodopi who, the police claim, was collecting the money on behalf of the Maoists. “Kodopi's sister, Soni Sori was also present at the spot, but escaped,” said Mr. Garg, “All three were apprehended red-handed.”

In a phone call made to this correspondent, Soni Sori has denied the police's allegations. “Linga and I know nothing about this contractor called Lala,” she said, “We have never met him, and we have no connection with the Maoists.”

Ms. Soni said her brother was arrested when a large group of policemen, dressed in civilian garb, entered their house in Palnar and arrested Lingaram. “They refused to tell us why they were arresting him, and tried to take me along as well, but I refused to go along,” Ms. Soni said.

Ms. Soni is currently in hiding as she fears for life. “The police have issued public statements claiming I was collecting Rs.15 lakh for the Maoists. This is completely false. I am very scared as the Maoists might kill me, thinking that I am extorting money in their name,” she added.

In July last year, the Dantewada Police had issued a press release alleging that Mr. Kodopi was in fact a senior Maoist commander who had received weapons training in Delhi and Gujarat. The claim was withdrawn after Mr. Kodopi held a tearful press conference on July 12, 2010, in Delhi, pointing out that he was first picked up by the Chhattisgarh Police in September 2009 and illegally detained for 40 days. Mr. Kodopi was finally released when his family filed a habeas corpus at the Chhattisgarh High Court at Bilaspur.

Last year, Mr. Kodopi was studying in a private journalism institute in Noida. In April that year, he had appeared before the Indian People's Tribunal in Delhi and served as a translator for several young tribal women who said they were victims of police atrocities. Family members say he returned to Chhattisgarh in 2011.

Essar's operations in the troubled Dantewada district have attracted persistent speculations of a possible deal between the company and the banned CPI (Maoist). The company operates an 8 million tonne per annum plant in Bailadila where iron dust sourced from the National Mineral Development Corporation's mines is converted into slurry and dispatched to Visakhapatnam via a 267-km pipeline that cuts through Maoist-controlled lands.

While Maoists occasionally damage the pipeline, it is currently operational and it is unclear how the company managed to lay the pipeline in the first instance.

In a meeting last year, Maoist leader Ganesh Uieke told this correspondent that the pipeline was laid at a time when the guerrillas were not sufficiently active in the region. Mr. Uieke had pointed to the Maoists' successful opposition to a proposed Essar Steel plant, in Dantewada's Dhurli and Bhansi villages, as proof that the guerrillas were actively fighting against mining companies.

Yet a former Maoist commander, speaking on condition of anonymity, told this correspondent that the guerrillas collect yearly payments to allow companies to operate in Dantewada. “We need the money to finance our operations,” he said, “but we can't collect from the poor villagers for whom we are fighting our battle.”