Bellary Mining Scam

K.Bhagavan
17L31E0170
G.Karunakar Reddy, G.Janardhana Reddy,
G.Somashekara Reddy
 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 causes:

• 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.
 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.
• 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.
• 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
• 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.
• 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.
 Out come of 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 there after

• 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.