What led to Scam?Rising global iron-ore prices driven by Chinese demand brought focus to the iron ore rich Bellary region of Karnataka. This iron ore is alleged to have been illegally mined after paying a minuscule royalty to the government. The major regularities involve mines in Bellary, including those of Obulapuram Mining Company owned by G. Karunakara Reddy and G. Janardhana Reddy who are ministers in the Government of Karnataka.
Root level cause?• Mr. Y.S. Reddy gave permission for mining to Reddy brothers and extended the lease period from 2004 to 2017, which was illegal.• He was knowing the fact that there were 39 Non-Bailable cases against them in the court.
ILLEGAL ASPECTS Collusion of officials and politicians in permitting illegal mining Underpayment of royalties to state Environmental damage
CLUE..• The Income Tax Department raided the residential premises belonging to Health Minister B. Sriramulu in Bangalore, and offices and residences of two BJP legislators, who are involved in mining business. The premises belonging to BJP MLA from K. B. Nagendra and BJP MLA from Suresh Babu, both were considered close to the Reddy ministers, and so were raided in Bangalore as well as in their home towns .
CLUE..• According to the sources in the IT Department, a large number of documents have been seized, and their bank accounts have been frozen. The raids were said to be conducted at over 50 premises. The raids assume importance in the background of allegations from opposition parties that the ruling BJP is paying off MLAs from other parties to resign from their post. An important aspect of the operation is that it appears to be targetted against close confidants of the Reddy brothers. A large number houses, offices, business establishments, mining and construction firms have been raided by the IT Department.
Results of Raid• Income tax officials unearthed under-invoicing and tax evasion of around Rs 86,42,88,802 by the Obulapuram Mining Company (OMC), run by Karnatakas Reddy brothers and also their trusted confidante and state health minister B Sriramulu.
LOKAYUKTA REPORT-2008• A report published by the LokAyukta uncovered major violations and systemic corruption in mining in Bellary, including in the allowed geography, encroachment of forest land, massive underpayment of state mining royalties relative to the market price of iron ore and systematic starvation of government mining entities.
LOKAYUKTA REPORT-2010• It gives details of the methods in which miners, government officials and ministers colluded to defraud the government of mining revenues. The report details the complete breakdown of democratic governance in the bellary area
LOKAYUKTA REPORT-2010• The report uncovers the "zero risk system", a protection and extortion racket, masterminded by G. Janardhana Reddy. The report describes the illegal money transfers to foreign companies and tax shelters by mining entities such as Obulapuram Mining Company, Associated Mining Company, GLA Trading and GJR Holdings owned by the Reddy Brothers. The report tells about illegal mining, bureaucrats-politicians- businessman nexus.
LOKAYUKTA REPORT-2010• Even banks and public sector companies also participated in the loot. There are more than 100 names involved in illegal operation. NDMC, Adani enterprise, JSW Steel are some major name in fraud list. Charges against these companies are illegal movement of iron ore from mining yard without permits and without paying royalties, forest encroachment, mining lease violations, overloading of trucks and sandry violation etc.
LOKAYUKTA REPORT-2010• The iron ore was illegally exported to china through ports of southern India and payment is made through more than 4000 banks account. Also the damage to environment can not be calculated.
Outcome of the Bill• Karnataka govt. accepts the Lokayukta Report to illegal mining.• Lokayukta Report indicated 687 officials hands on in gone with mining barons.• Action was initiated against 187 “corrupt officials”
Consequences thereafter..• Justice N. Santosh Hegde resigned from the LokAyukta position on 23 June 2010 citing inability to be effective in his anti-corruption mandate owing to a non-cooperative government of Karnataka.
• More than 30 kg of gold and Rs 1.5 crore in cash was found by the Central Bureau of Investigation in a swift, secret, early morning raid, that led to the arrest and imprisonment of powerful former Karnataka BJP minister Gali Janardhan Reddy.
• Former Karnataka minister G Janardhana Reddy being taken to Chanchalguda central prison in Hyderabad. was arrested on 5 September 2011 by the CBI and moved to Chenchalguda jail for judicial remand.