‘Mined at a legal pace, Bellary has enough iron ore to last 30 years. But it is likely to be ravaged in just six’
The Reddys pay Rs 27 per tonne of ore to the state. They sell at Rs 7,000 and make about Rs 20 crore a day.
Bellary is a small district of Karnataka, close to its border with Andhra Pradesh. One of the most backward areas of Karnataka, among the bottom-10 districts of the state,Bellary, is crucial for its iron ore mining. A little over half of Bellary is what is known as the mining belt. And even here, the actual iron ore deposits are in a third of the area.
Estimates in 2008 said Bellary had close to 1,000 million tonnes of iron ore reserves of all grades. When mined at a pace legalised by the Indian Bureau of Mines,it will last for about 30 years ABOUT 60 percent of Bellary’s iron ore reserves are what is described as “fines”, a high-quality grade of iron ore in powder form, which is commercially in big demand. The 600 million tonnes of Bellary “fines” has become a prized commodity afterChina began buying the stuff a decade ago. The frenzy to feedChina, and make as much money as possible before the rates fell, has triggered a host of illegal practices. Karnataka authorities say all the iron ore inBellary could be taken out in six years if things continue the way they are now.
The three Reddy brothers are children of a police constable – but they have come a long way from their humble childhood days. All three brothers are in politics – the two elder brothers, Karunakara and Janardhan are cabinet ministers.
They had made considerable money running a chit fund in the 1990s, but the real money began pouring in when they got into iron ore mining with a Rs 50 lakh investment – just ahead of the boom fed by the Beijing Olympics.
They obtained the lease to the Obalapuram mines in Andhra Pradesh. At the peak of the boom, iron ore was fetching almost four thousand rupees a tonne – and they were mining millions of tonnes a year. Their earnings run into thousands of crores.
For many, the Reddy brothers ofBellary came out of nowhere. Now of course, they are very well known – as mining millionaires many times over. This is the Obulapuram mine – the main source of their incredible wealth.”
They are protégés of Sushma Swaraj – and have been since she took on Sonia Gandhi in Bellaryin 1999. They even threatened the survival of the Yeddyurappa government in Karnataka late last year – and succeeded in making the chief minister agree to many of their demands for their continued support.
The Reddys already have enough money to last them several lifetimes – but to curb their mining activities is to cut at a huge source of their power.
Janardhana Reddy, 43 ,is feared for his razor sharp thinking. Being raised in a head constable’s house — his father Chenga Reddy was with theBellaryCitypolice station — appears to have taught him two things: that money is a critical component on the path to power, and that the law is not something you worry about, you simply find a way to keep it busy as you do your thing. From pretty early on in his life, Reddy worked at improving his financial reputation. He formed a chit fund company that soon spread to 46 branches across Karnataka, before charges of cheating surfaced.
He moved into hospitality, setting up a small hotel. When that bored him, he started a four-page Kannada tabloid. From his experience with the tabloid, he lost the fear of media that bothers average businessmen. By now, Reddy had gotten over two fearsome social forces: the law and the media. This made him think big. Another striking trait in Janardhana Reddy is loyalty to family. Though he has the biggest profile in the family, he has so far kept his brothers close. Karunakara Reddy, the eldest, is the Karnataka Revenue Minister and Somasekhara Reddy, the other brother, is chairman of the Karnataka Milk Federation. All of them are spoken of as one unit in public — it is always the Reddys. Janardhana Reddy places such value on friends and family that B Sriramulu, the current state health minister, who he has known for barely 10 years, is considered the fourth brother.
Janardhana Reddy believes he can read people. He thus has strong likes and dislikes. Those he likes, he cherishes. Like the family of former Andhra Pradesh chief minister YS Rajasekhara Reddy. YSR and Janardhana Reddy were closer than Janardhana has been with any Bharatiya Janata Party (BJP) senior. YSR helped Janardhana Reddy when his Obalapuram Mining Company was born. After YSR died, Reddy planned and funded a campaign to make YSR’s son, Jagan Mohan, the chief minister of Andhra Pradesh. So strong was the campaign that only a resistant Congress high command inDelhicould halt it.
Those he hates, he crushes. Like Yeddyurappa, who tried to change a few things in the corruptBellaryadministration. It triggered such wrath in Reddy that he got together about 40 MLAs, took them to Hyderabad threatened to install another person as chief minister. It took all the negotiating skills of the BJP in Delhi leadership save the Yeddyurappa government. The chief minister was forced to sack his favorite people and was so crushed that he wept on television at the turn of events.
Thus, Reddy can set goals and stick to them with striking clarity. He has a problem, though. He has spent much time with political toughies who can bludgeon their way through. This makes him think like a street fighter. He is able to scare people. He is able to buy people. For instance, he employs a battery of high-profile lawyers in Delhi, who would cost anybody a fortune. But Reddy has a problem when he has to deal with people who have known money and ambition. He is uncomfortable with people who prefer subtlety. He cannot massage egos gently. This makes him a misfit in Delhi. All the lawyers in the world can’t give him the image he so seeks. He, therefore, is an unknown in Delhi. The Rashtriya Swayamsevak Sangh (RSS), which runs the BJP, doesn’t like Reddy. And he has made no impression on Congress president Sonia Gandhi either. Bellary, he can get away. InDelhi, he can’t.
When Reddy got into mining,Chinawas hungry for iron ore to construct a newChinain time for the 2008 Beijing Olympics. Chinese steel production is still in a gallop after the Olympics. For instance,Chinaproduced 48.7 million tonnes of steel in January 2010. (Indiamanaged 5.4 million tonnes.) Reddy calculated he didn’t have to pay much for the ore, which he could export toChina. According to the Mines and Minerals (Development and Regulation) Act of 1957, the presiding Act on mining in India, the best quality iron ore “fines” — with 65 percent or more iron (Fe) — had a royalty of Rs 19 a tonne.
There was a mad rush to get a mining lease when the boom hit in 2002. The rush was such that people didn’t even know where they were seeking a lease for. Karnataka Lokayukta Santosh Hegde remembers: “They would produce a map of Hospet taluk or of Sandur taluk, and give the government the name of a village with some boundaries for grant of lease. This would go to the Central Government, which was as careless as the state government. There was no cross-checking of facts, no counter-checking, and no sending of a team of surveyors and of the mining department to find out if there was a place of such a description. And, they started granting leases.”
Leases were a problem for Reddy. Indian mining laws state that a lease, once granted and not annulled for any reason, runs for 20 years before it comes up for renewal. By the time the Obalapuram Mining Company became active, 100 leases were given out inBellaryand about 60 leases were granted in neighbouring districts of Chitradurga and Tumkur. So, Reddy went to good friend YSR. In 2007, the Obalapuram Mining Corporation Pvt Ltd Bellary (its full name) was granted leases to mine iron ore in Anantapur district of Andhra Pradesh, an area close to the state’s border with Karnataka. OMC has two leases that will come up for renewal in June 2027, if not cancelled earlier. One lease is over 68.5 hectares, the other over 38.5 hectares.
Companies considered friendly to Reddy, or influenced by him, also got iron ore leases in Anantapur. Bellary Iron Ores Pvt Ltd has a lease for 44.52 hectares that lasts until the year 2016, Y Mahabaleshwarappa and Sons has a lease for 60.7 hectares until 2018, Sai Balaji Minerals has a lease for 4.04 hectares until 2027, and a lease in the name of ‘Murli Mohan Reddy’ is listed for 4.7 hectares until 2028. These are the only leases granted for iron ore mining in Anantapur.
Reddy began mining legally in the area he was allowed to. However, the quality of iron ore in Anantapur was poor, with barely 35 percent Fe. This was not what he got into mining for. This was never going to make him a big player. By then, however, Reddy had built a crafty team of advisors who have today built a reputation for almost always thinking ahead. One of those advisors, who spent years as an advocate in Andhra Pradesh, apparently put it into Reddy’s head that he must mine in Karnataka and show the mining as done in his Andhra Pradesh mines. That would get him the high quality ore. But, the leases were already given out in Karnataka and Reddy would have to wait 20 years when the leases would be looked at anew.
SUCH WAS the madness inBellarythat everyone, even those who couldn’t afford to buy expensive machinery and were using pickaxes and shovels, were at it in any bit of open land. It was like gold rush. Says Hegde: “You could also find many illegal mineral storage plots there. Storing mineral is again controlled by law. But no law is followed here and in the process, we found huge illegal mining.” Thus, there were two problems now. Reddy couldn’t get a lease in Karnataka for 20 years and he couldn’t be like the others, desperately chancing luck in every bit of open land.
So, Reddy began looking for mine owners who had leases but didn’t have the expensive machinery and men to do the mining. He also put his men to scout for disputes between mine owners. Indian law states that a mining lease can lapse if mining is not done for two years after a lease is granted. Mine owners with no money to mine were likely to lose the lease. Also, owners with disputes would get hit because courts rarely deliver a verdict in two years. Such mine owners were easy pickings for Reddy. Reddy offered to resolve disputes.
Both sides prefer to pay a man with muscle and get on, instead of trusting the state to deliver. Reddy is believed to have begun mining in Karnataka on leases where the owners had no men or machines to do so, and where the owners had disputes. Reddy’s rivals accuse him of doing this in the form of a ‘raising contract’, a sort of a rent agreement where Reddy agrees to do the work for a cost. According to an estimate 48 of the 65 mine owners working inBellaryhave ‘raising contracts’ with Reddy, where he pays the paltry royalty for the ore he transports
Getting the ore from the mines to the port is a huge process. To do so, you need two permits: a Mineral Dispatch Permit, given by the Mines and Geology Department, and a Forest Way Permit, given by the Forests Department. In addition, the trucks have to be loaded correctly. A single rear-axle vehicle, which has four wheels at the back and two wheels in the front, has loadable capacity of 15 MT (metric tonnes). A double rear axle vehicle has a legal capacity of 25 MT. To drive them, you need drivers with proper licences. And there is only so much ore that each mine is allowed to send out a day, which the Indian Bureau of Mines calculates individually for each mine based on height, area, etc.
Transporting the ore legally was a drag for the OMC. It reeked of conformity and had nothing to do with ambition. To go where he wants to, Reddy needs money fast. So, his men overload vehicles and order them to make the trip from the mines to the ports and back rapidly. This means doing more than 600 km in less than 24 hours, day after day, from the nearest port. A 15 MT truck is often loaded with 24 MT or more, while a 25 MT truck can have up to 50 MT. You can’t see the material in a properly loaded truck, because it will be below eye level when the back of a truck is clasped shut. An overloaded truck will have material than can be seen, because it goes above the sides of a truck when the back is shut. It’s easy to spot. Yet, between 30 percent and 50 percent of the trucks are overloaded and no one stops them. On a good day, the Reddys make about Rs 20 crore with close to 10,000 trucks doing the rounds. On lean days, they still make about Rs 12 crore.
The cost of taking ore from a mine to the port is about Rs 300 to Rs 400 a tonne. The same tonne is sold for about Rs 5,500 currently, when there is a recession. More than a year ago, a tonne sold at over Rs 7,000. Such incredible profit margins meant that Reddy’s profile changed drastically. He got richer by the day, whileBellarycontinued to languish. The beauty of such an arrangement is that barely anything can be proven in court. There’s nothing on paper in Karnataka to link the Reddys to anything illegal. It’s only when the investigators get a break, like with the hundreds of fake permits at the Bellikere port, that they can even begin to try to get their man.
Mining illegally also means you need a place to store the stuff you shouldn’t have taken out in the first place. So, some investigators in the Lokayukta’s team found huge areas of forests used for dumping the material. Says Hegde: “The encroachment was such that no person with the desire to maintain the ecology or the environment would ever get in.” Then, there is the pollution. The iron ore is often carried in open body vehicles. The dust flies and en route, all water bodies, plants, and houses, everything, turns red.
To do all this and stay ahead of the system every day is a colossal task that Reddy appears to have managed superbly so far. But there was still one big thing. Even if he manages to grab a share of every mine inBellary, which is not the case because a few owners are resisting him, he still needs to show that the stuff has come from his mines in Andhra Pradesh. The way to do this is to extend the area of the OMC from Anantapur into Karnataka. This is where the altering of the boundary between Andhra Pradesh and Karnataka comes in — and this is where Anjaneya, the deputy general manager who threatened to blow the whistle early on in the story, returns to the narrative.
In the AGK mines, where Anjaneya worked, they changed the inter-state boundary pillars (which are on the hilltop) frequently. Since the Andhra Pradesh government was friendly with Reddy, things went smoothly each time the Andhra side made an inspection. They would help the Reddys push the boundaries into Karnataka, and when the Karnataka side visited, the Reddys would put the boundary pillars back at the original spot.
Apparently, the boundaries were changed two to three times in a year. A trijunction point, which was a marker since the British times, was demolished and created confusion on where the base point was for any surveyor to identify.
By thus altering the boundaries and working in the Karnataka mines, the OMC is said to have exported 27 lakh tonnes of commercial grade iron ore in the name of the AGK mine. Early on, the ore was transported from Karnataka and stocked near theKakinadaand Krishnapatnam ports in Andhra Pradesh. But, after YSR’s death, the OMC has sensed that it is dangerous to risk Andhra now and has stuck largely to ports in Karnataka. To take the ore from Karnataka to Andhra, the OMC is understood to have constructed a spanking 4 km road through the forests. This is the subject of another investigation.
Boundaries between mines were altered as well. “The pillars, made of cement and brick, are meant to show the point from where a neighbour mine has to be surveyed. The pillars would have the respective names of the mines and the mining lease numbers on either side. The law says there should be a pillar every 20 metres between mines. But they have converted these pillars into mobile units, which move at will. They have changed everything.”
“Reddy came there with seven or eight people. They rode in Scorpios. Some goondas followed them and attacked a foreman of the Tumti mine. The foreman who was being attacked did not know who Sreenivas Reddy was or who the attackers were. He knew only me. He identified me and filed a case against me and 15 others. The case is going on in a Sandur court, listed as crime number 99 in Toranagallu police station.”(Anjaneya Former DGM of Obalapuram Mining Company-OMC).
Reddy’s Wealth.
The Reddys do not shy away from showing off their wealth. They own latest SUVs and choppers.
Janardhana Reddy is said to own a gold chair worth more than Rs. 20 million.
In June 2009 he presented a diamond-studded crown to adorn Lord Venkateswara at Tirupati. The crown is estimated to cost Rs. 45 crore (Rs. 450 million).
In 1998, Janardhana Reddy’s finance company, Ennoble India Savings, collapsed, leaving unpaid debts of over Rs. 200 crores.However, by 2008, he and his wife declared assets of Rs. 115 crores.
- In May 2009, the family spent an estimated Rs 20 crore on a wedding. The helicopters owned by the family ferried over 10,000 guests to the wedding even as 500 air conditioners helped them forget outside temperatures of 42 degree Celsius. A month later, the brothers donated a Rs 42 crore diamond-studded crown to a temple deity.
- http://en.wikipedia.org/wiki/G._Janardhana_Reddy
- Supreme Court Case is on the operations of Reddy brothers.
- Reference: Tehelka, Outlookindia, Economic times,Oneindia news,Wikipedia.
- Related:
- Mining baron and former Karnataka MinisterG. Janardhana Reddyand Managing Director of Obalapuram Mining Company B V Srinivas Reddy were arrested on Monday by the CBI after searches at their premises allegedly led to seizure of over 30 kg of gold and more thanRs.4.5 crore in cash.A 15-member CBI team from Hyderabad conducted searches atJanardhana Reddy‘s house and claimed to have seizedRs.three crore in cash and over 30 kgs of gold, official sources alleged.
A sum ofRs.1.5 crore was also seized from the residence of Reddy’s brother-in-law Srinivasa Reddy, who is also the Managing Director of the company owned by the Reddy family, they claimed.
“Janardhana Reddy and Srinivasa Reddy have been arrested under Prevention of Corruption Act and we are taking them to Hyderabad”, CBI DIG P V Lakshminarayana, who is heading the team, told reporters in Bellary.
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