The baron might go. The robbery goes on



Karnataka was once the poster for India’s growth story. Today, it’s a flag for everything that can go wrong. Ashok Malik sounds the alarm calls from the state. With Imran Khan

IT IS now fairly clear that the BJP is going to replace BS Yeddyurappa as chief minister of Karnataka. The second and final report of Justice N Santosh Hegde, Karnataka’s Lokayukta, on the extent and consequences of illegal iron ore mining in the state, have left the ruling party in Bengaluru with little choice. As a senior BJP leader put it: “Even those who have been supporting Yeddyurappa in the BJP central leadership have had to stay quiet this time. It has reached the line of no return.”

In many ways Yeddyurappa is the perfect villain. He is manipulative and runs a government that has won over — with a series of inducements — Congress MLAs by getting them to resign and contest by-elections as BJP candidates. He is cynical in that he has made ministers of three of the state’s most infamous mining contractors (including the Reddy brothers, Gali Karunakara and Gali Janardhana). A prominent newspaper columnist recently accused him of running India’s most corrupt state government.

While that final epithet may be usual editorial exaggeration, the point is Yeddyurappa — and his family, particularly his sons, BY Vijayendra and BY Raghavendra, and son-in-law, RN Sohan Kumar — has come to symbolise the junction at which two of the most pernicious influences on contemporary Karnataka society meet: its real estate and mining syndicates.

In particular, one example is telling, and telling of a continuum. It forms part of a set of five petitions — recording 15 individual cases of abuse of authority — that Bengaluru lawyer Sirajin Basha has filed in a local court. The case goes back to 2003, when the Bangalore Development Authority (BDA) acquired over 3,000 acres of land in Greater Bangalore for group housing projects. The 3,000 acres included a patch of one acre and 12 guntas (40 guntas make an acre) acquired in Rachenahalli village, near Bengaluru’s new airport. Of this patch, 26 guntas belonged to a man called Panduranga and 26 guntas to a lady called Gowramma.

Later in 2003, SN Krishnaiah Shetty, then an MLA, registered a power-of-attorney in his favour that was apparently executed by Gowramma and Panduranga. In March 2006, Shetty used the power-ofattorney to execute and register two sale deeds, selling the land of the two villagers for a total of Rs 40 lakh. The buyers were Vijayendra, Raghavendra and Sohan Kumar. Having sold land that had already been acquired by the government (and for which compensation had been paid), Shetty then waited till 2008. In September that year, he applied to the BDA for denotification of the patch. In a petition on behalf of Gowramma and Panduranga, he insisted they needed the land for family use.

This wish was granted in a quick 11 days. The denotification order was passed by the chief minister himself. The story doesn’t end here. The land, a little over one acre, was then sold to South West Mining Company — part of the Jindal Group, and with iron ore mining interests in Karnataka — by Yeddyurappa’s children. A trust run by them received Rs 20 crore for the transaction. The market value of the land was less than Rs 2 crore.

Coincidentally or otherwise, Yeddyurappa was the chief minister who denotified the land. At the time, he handled the portfolios for the BDA, forests and mining. As such, he had conflicts of interests written into every element of the larger transaction. In a sense, this case mirrors the sweetheart deals companies run by DMK family members have been accused of, in return for favourable policy changes by DMK telecom ministers. It leaves Yeddyurappa and the BJP with very little defence.

All for one: The notorious Reddy brothers seem to have their hand in every political pie,
All for one: The notorious Reddy brothers seem to have their hand in every political pie, Photo:KPN

II THE KARNATAKA corruption saga is an endless soap opera that has dragged on for months, if not years. It goes back really to the BJP’s Assembly election victory in 2008. Yet, it is not one that lends itself to pat assessments. For one, as a visit to the state would testify, Yeddyurappa is hardly the hate figure there that he is in New Delhi and the national media.

Neither the man nor his methods are easily dismissed. Yeddyurappa has made the BJP a formidable electoral force in the state, far stronger some argue than it was when it came to power (see box). Even political opponents acknowledge that he is a clever and hard-working man. As a Janata Dal (Secular) or JD(S) functionary says, almost in admiration: “He is an astute politician. He has delivered on social welfare schemes, particularly those aimed at the girl child and at farmers in BJP strongholds in central and north Karnataka.”

As for his way of doing things, “crass and vulgar corruption” has become something of a Karnataka trademark says Sandeep Shastri, Bengaluru-based academic and convenor of the Lokniti Network. One of Yeddyurappa’s potential successors in the BJP is very critical of him. “What’s been revealed is the CM’s ‘pickpocket corruption’,” he says, in the stylised rhetoric that seems to come to politicians south of the Vindhyas. “What remains unrevealed is his ‘robbery corruption’.”

All very well — but surely the Reddy brothers should also be removed if Yeddyurappa is. Suddenly the would-be successor is not too sure. “They are very essential to the party,” he says. “They have given the BJP a hold in Bellary and Raichur. We were nothing there even 10 years ago. Besides, you can call them early investors in the party.”

“Early investors in the party”? It is an astonishing description of the brothers, political fixers and small-time businessmen, who rode the commodities boom and the pre-2008 OIympics steel demand surge in China to ravage the earth of Bellary for iron ore.

The Bellary brothers come with their political clout. Their business and strongarm network in the district gives them enormous leverage at election time. In 2009, they are believed to have funded the BJP in Karnataka and their friend, the late YS Rajashekhara Reddy, then the Congress’ Andhra Pradesh chief minister, in the neighbouring state.

Stepping stones: An iron ore mine in Bellary, ravaged by rampant mining
Stepping stones: An iron ore mine in Bellary, ravaged by rampant mining, Photo: Shailendra Pandey

At one stage, the Reddy brothers led a revolt of some 40 MLAs — a third of the BJP’s legislative strength in the 224-member state Assembly. “Their actual influence,” says a leading businessmen in Bengaluru, “should be about 17-20 MLAs. These are people they have financed and got elected. But of course, money could get them to buy more.”

The Reddy brothers’ business partner is B Sriramulu, Karnataka’s health minister and a Scheduled Tribe (ST) strongman in Bellary. Sriramulu’s community appeal and the Reddys’ mobilisation capacities have helped convert Bellary — which even at the turn of the millennium was one of the Congress’ safest seats in the country — into a BJP bastion. It has also savaged the ecology of the district, and made them laws unto themselves as mining barons.

III NEVERTHELESS, THE Reddys are not alone. Bellary district, with three iron-rich talukas of Bellary, Hospet and Sandur, is home to over 1,000 mining leases. The adjoining districts of Chitradurga, Tumkur and Raichur have another 30-odd leases. Much of the mining is in the Bellary reserved forest, among the greenest expanses in peninsular India and declared a protected area by the British in the 1890s.

Iron ore began to be mined here as far back as 1873, but has reached frenetic proportions in the past 10 years. As an environmental activist puts it: “This is a problem that extends across parties. Even SM Krishna’s Congress government expanded the area of legal mining by under- reporting the forest and tree cover.”

Even Yeddyurappa’s potential successor is loath to rid the party of the Reddy brothers. ‘They are very essential for us,’ he says. ‘They are early investors in the party’

The consequence is Wild West lawlessness. Mining companies keep breaching state borders (Andhra Pradesh is on the other side of the forest and has limited iron ore reserves). Illegal mining, meaning encroaching upon a another miner’s lease area and then threatening him into surrender, as well as mining in no-go forest areas, is rampant. The implications are truly frightening. SR Hiremath, engineer activist and executive director of the Samaj Parivartana Samudaya, an NGO that took the issue of ecological damage caused by illegal mining to the Supreme Court, points to a National Environmental Engineering Research Institute (NEERI) report: “It estimated that about 10 million tonnes of iron ore extraction per year was ecologically sustainable.”


What, mine? No worries

Electorally, the mining scandal may not be the death knell for the BJP yet

Past prime: SM Krishna and Kumaraswamy are no threat to the BJP
Past prime: SM Krishna and Kumaraswamy are no threat to the BJP

WHILE BS Yeddyurappa may be in the eye of a storm, the BJP is actually fairly well placed in Karnataka. The next Assembly election is due in 2013 and as things stand, despite the mining mafia and the stink of corruption, the BJP would be fancying its chances.

As chief minister, Yeddyurappa has focussed attention on north and central Karnataka, which gave the BJP big victories in the 2008 election. “His first priority,” an opposition politician says, “was to deliver on his commitments there.” He has also made inroads into Old Mysore, the Vokkaliga heartland where the BJP was usually a poor third. As JD(S) leader HD Kumaraswamy says, “In Old Mysore and in the rural areas near Bengaluru, it used to be JD(S) versus the Congress. Now it’s the JD(S) versus the BJP.”

The Congress is described as a hopelessly divided house. Analyst Sandeep Shastri says, “During the 2008 election, we counted 23 prospective chief ministers in the Congress ranks.” Little has changed since then. SM Krishna, once the darling of Bengaluru and the party’s urban, urbane and Vokkaliga face, is more or less retired from state politics.

About the only grassroots leader who matters is Siddaramaiah, the former JD(S) rebel who joined the Congress, and belongs to the Kuruba (shepherd) community. At eight percent of the population, the Kurubas are the largest of Karnataka’s Backward Castes. Yet even Siddaramaiah may be in for challenging times if the BJP nominates its state unit president KS Eshwarappa, who is also a Kuruba, as chief minister.

Predictions of a split in the BJP or a Lingayat revolt in case Yeddyurappa is removed seem to be overstated. “The Lingayats are old supporters of the BJP,” says a political observer, “and can hardly go to the JD(S), which is a Vokkaliga party. Unless the BJP commits suicide and completely humiliates Yeddyurappa, it can manage the Lingayats.”

The key for the BJP here will be getting Yeddyurappa to bless (if not choose) his successor. Wild suggestions that he will be replaced by his son or his confidante, Energy Minister Shobha Karandlaje, have been discounted. Ananth Kumar, former Union minister, has been lobbying with the BJP leadership in New Delhi. His image and caste — Kumar is a Brahmin — go against him

If you invest Rs 1,000 to mine the ore, you sell it for Rs 6,000. That profit oils the whole political spectrum. This is not what the 1991 liberalisation compact was about

Two men stand a realistic chance: Eshwarappa and Jagadish Shettar, minister for rural development and panchayati raj. Shettar is a Lingayat. While his selection will mollify his community, it may not please Yeddyurappa. It is felt Yeddyurappa will favour Eshwarappa.

The bigger questions are for the Congress to confront. It has lost ground rapidly in Karnataka in the past three years. While it has 30 percent of the vote, it may be slipping into a low-level equilibrium. Indeed, in recent months, the opposition to the BJP and to Yeddyurappa’s excesses has come from the JD(S), with Congress protests limited to photo-ops.


So what is the actual figure? Asked this question, a civil servant who assisted Hegde only smiled sardonically, “The official figures are 48 million tonnes a year. As for the real numbers, quantifying the illegal mining, read the report.” Even if the NEERI tabulation was extremely conservative, there is no question that the environment has been mutilated in Bellary and its nearby districts.

The capital of the Karnataka mining industry is Sandur. This was once pristine country, Gandhi and Tagore visited it and waxed lyrical about it. “It was and much of it still is dense and green,” says the civil servant. “It gets 800-1,000 mm of rainfall a year, so you can imagine. It was as thick and forested as the Western Ghats. But today, entire expanses of medicinal plants have vanished. Streams have gone dry.”

The abiding signature of Hospet and Sandur, says a local, is the red dust thrown up by the never-ending line of trucks that rush past with their precious cargo of iron ore. “Red dust, red water, red soil,” he says, “that’s all you see.”

The ecology of mining has an equally evil twin in the political economy of mining. In one infamous case, the Reddys and Sriramalu were charged with blowing up an old temple revered by a local community, because a wealth of iron ore lay below. The case was never pursued by the police.

Show-stopper: Bengaluru has become an urban dystopia,
Show-stopper: Bengaluru has become an urban dystopia, Photo: Reuters

Clearly the iron ore lobby is too hot and too lucrative for any politician to even want to disturb it. “How can we do it?” admits a JD(S) politician. “The returns are astronomical. If you invest Rs 1,000 to bring out iron ore, you sell it for Rs 6,000.” That profit is distributed across the political spectrum. If the Reddys and Sriramulu and Yeddyurappa benefit in the BJP, so does Anil Lad in the Congress. And former chief minister HD Kumaraswamy of the JD(S). Hegde’s report mentions all of them.

Iron ore mining is not just another scandal or ecological threat. In fundamental ways, it has distorted Karnataka’s politics for the foreseeable future. If it has been helped in this endeavour, it is by the real estate mafia that has also hijacked the state’s corridors of power.

IV WHAT IS happening in Karnataka will no doubt have an old-school socialist and an anti-reforms intellectual saying, “I told you so.” However, it can be equally —if not even more — disquieting for a free market liberal. This is not what the liberalisation compact of 1991 was supposed to be all about.

Until 10 years ago, Karnataka was the poster-boy of the new India — the state of Bangalore and Infosys, the migrant magnet of technology wizards and young kids earning more at BPOs than their parents ever did, the land that saved the world from Y2K.

Today, Karnataka identifies with all that can go wrong with India. International trade and private enterprise have translated into not virtuous growth but iron ore pillage — with buccaneers uprooting a finite national resource and simply shipping it to China. Admittedly, the Yeddyurappa government has moved towards a policy of value addition by building steel plants in Karnataka and using local iron ore, but there has been no attempt to actually curb robber-baron mining.

The growth of Bengaluru as a business metropolis has meant windfall gains of quite another kind. Land prices have shot up in the past 20 years, and discretionary allotments of plots as well denotification swindles have been rampant. Misuse of the so-called “G category” allotments (first reported by TEHELKA on 4 December 2010) saw Krishna give away 633 acres of BDA plots to chosen favourites and at sub-market prices. His successors have not met that number but have strenuously tried to. Dharam Singh (Congress) gave away plots to his daughter and domestic staff, Kumaraswamy to politicians across parties, Yeddyurappa to his sister and son. For a good 15 years, it’s been a free-for-all, even if completely legal.

Indeed, as VS Acharya, Karnataka’s education minister and himself a beneficiary of Kumaraswamy’s G category munificence, insists: “There is no wrong that this government has done that previous governments have not also done.” What a charming euphemism for brazenness.

V LIKE OTHER states, Karnataka is no stranger to corruption. In the 1970s and 80s, the liquor lobby had its favourites and exercised influence on CMs such as Devraj Urs and Ramakrishna Hegde. The education lobbies — private engineering colleges, profitable with their capitation fee system — were also a robust interest group. So why are the inter-linked real estate and mining lobbies any different?

Shastri sees one obvious change: “The earlier lobbies worked behind the scenes. The mining and real estate lobbies are now in the forefront of politics. They don’t just influence government, they are government.” This has led to toxic competition. As Shastri puts it, “What one government does, the other does better.” Or worse.

The problem is not limited to Karnataka. The Reddy brothers are emblematic of the commonalities the political culture of the state has developed with Andhra Pradesh. Both these states have been economic success stories of the period after the mid-1990s. Both have given rise to voracious, almost pathological corruption and crony capitalism that makes sleaze and swindle in even Punjab or Haryana seem positively small-time.

“Why just Karnataka and Andhra Pradesh,” asks an indignant minister in Yeddyurappa’s government when this thesis is put to him, “Tamil Nadu is just as corrupt.” It is remarkable that there is no denial, not even an attempt at denial — only claims of precedence and parity.

Potential successors KS Eshwarappa, Jagdish Shettar

Businessman and MP Rajeev Chandrasekhar certainly sees Karnataka, Andhra Pradesh and Tamil Nadu as representing “the same model”. He puts down the necessary ingredients: a regional supremo, dizzying real estate and infrastructure wealth, a play for resources and mining contracts, the growing value of government contracts and public procurement. This has made being in power extremely lucrative. For businessmen, it has made absolute control of policy-making — sometimes by personally taking charge of a ministry — necessary.

“A new form of political entrepreneur has emerged,” Chandrashekhar argues, “he invests in elections, making retail-level purchases of votes. It’s worth it. The returns are so huge. In some cases, inf– rastructure budgets have quadrupled in a decade.” Unlike the past, election promises are not about building a project for a community or constituency. There is straight transfer of cash. All three big southern states have seen this phenomenon.

Karnataka has been a relatively late arrival to this universe. Tamil Nadu and Andhra Pradesh have had experience of state-specific parties but in Bengaluru it has always been a national party that ruled. Krishna was answerable to the Congress, and even the Janata Party/Janata Dal chief ministers reported to an institutional structure in New Delhi.

The stakes are so high, the returns so dizzying, it has made businessmen want absolute control of policy-making. That includes personally taking charge of a ministry, if necessary

In contrast, Yeddyurappa has carved out much greater autonomy in a BJP where the central leadership has been historically at its weakest in the post- 2004 period. Those who have tried to rein him in have been challenged by others he has won over. Five senior BJP leaders, including two former presidents, are said to have business interests or economic relationships in Karnataka.

VI IF THE BJP’s handicap is Yeddyurappa, paradoxically, Yeddyurappa’s handicap is the BJP. At one level he doesn’t understand the fuss. In three years, he’s made the party heftier in the Assembly and in state politics. He’s played the caste card and consolidated the Lingayats behind the BJP. He’s assiduously delivered on promises to rural loyalists, given Karanataka a separate agriculture budget and run the most effective Panchayati Raj programme since, political scientist Shastri says, “Ramakrishna Hegde pioneered it in the 1980s”. What more does he need to do?

True, he’s made money and his sons and son-in-law have become millionaires. Even so, if he were a regional party leader, he would’ve been hailed as a pragmatic power practitioner, his excesses would’ve been forgiven, the UPA and the NDA would’ve lined up for his MPs. Instead the BJP treats him as an embarrassment. Why — because of some big-city middle-class squeamishness?

The fact is Yeddyyurappa is a regional leader in a national party — and a regional leader completely bereft of a sense of the larger, national picture. Yeddyurappa delivers the rural vote and has expanded the BJP’s catchment area, but in white-collar Bengaluru he is loathed. The city is a nightmare. Despite a few new flyovers and the Bangalore Metro — which starts operations in September — its traffic and infrastructure have Mumbai levels of dystopia.

Chandrashekhar recently met a business delegation from the United States that was left stunned by its first visit to Bengaluru. “The airport looked world class,” says Chandrashekhar, “and the end-destination, Electronics City, was fine and full of smart people. The two ends of the pipeline, run by the private sector, were in good shape. The pipeline itself, the city, the roads, the squalor, was a government-run mess.”

That sums up the BJP’s predicament with Yeddyurappa. He negates the party’s anti-corruption campaign against the Congress in the rest of the country. He costs the BJP middle-class backing. He leaves it terrified it will be left carrying the can — and paying the price nationally — for the sinking of Bengaluru into urban chaos.

Yeddyurappa may not be responsible for the entirety of the situation. His successor may be no better and may not have the will or ability to alter Karnataka’s political economy. Nevertheless the state’s extraordinarily cynical and rapacious polity deserves at least a modicum of a shake-up. Karnataka’s politics has lost its moral compass. Before it even tries to get it back, it needs to get itself a new leadership.

Ashok Malik is a senior journalist.

Mining the state hollow

The Lokayukta report exposes how illegal iron ore mining in Karnataka has adversely impacted the ecology.Imran Khan finds out how deep the rot goes

Photo: K Venkatesh

IN A 25,228 page report on illegal iron ore mining in Karnataka, Lokayukta Santosh Hegde has laid bare the human and environmental catastrophe illegal mining has caused in the state. Apart from indicting six ministers, including Chief Minister BS Yeddyurappa, the report has also indicted 784 bureaucrats and JD(S) leader and former CM HD Kumaraswamy. According to the report, between 2006 and 2010, illegal mining, transport and export of iron ore cost the exchequer Rs 16,085 crore. It notes that, in a period of one year (2009-10) Rs 1,800 crore was incurred as loss to the public exchequer in terms of royalty.

As many as 98 of 148 mines in Bellary are located in forest land. As many as 124 mining leases are operating on 9,750 hectares of forest land. The report has also focussed on de-reservation of forest land under Yeddyurappa, opening the lid on the area being misused. Some highlights from the Lokayukta’s report.

Illegal legal iron ore exported from Karnataka (In lakh tonnes)
Year 2003-04
Permitted 25,27,001
Exported 45,76,964
Year 2004-05
Permitted 64,51,665
Exported 1,16,91,183
Year 2005-06
Permitted 92,99,600
Exported 1,14,71,092
Year 2006-07
Permitted 60,55,833
Exported 1,08,00,478
Year 2007-08
Permitted 89,73,490
Exported 1,47,34,538
Year 2008-09
Permitted 76,64,125
Exported 1,10,60,251
Year 2009-10
Permitted 60,71,482
Exported 1,31,99,419

. IN THE period from 2003- 04 to 2009-10, as much as 304.91 lakh metric tonnes of iron ore had been exported without valid permits. Furthermore, 71.28 lakh metric tones was illegally exported in the year 2009-10. At a conservative rate of Rs 5,000 per metric tonnes, the nominal value of the illegally exported iron ore from Karnataka comes to Rs 15,245 crore. Hegde has time and again noted that the ban on export of iron ore had no effect on the illegal mining in the state.

. DIRECTOR, MINES and Geology estimated quantity of iron ore purchased (and reported by registered dealers) from the unregistered dealers ie illegally mined iron ore, comes to about 64 lakh metric tonnes.

. ON 18 MARCH 2010, the Karnataka Forest Department seized 8.06 lakh metric tonnes of iron ore at Belekeri Port. The Lokayukta said the matter was sub judice.

. IN THE Lokayukta report dated 18 December 2008, it was stated that 1081.40 hectares of forest area is under illegal mining/encroachment by way of mining pits over burden dumps, construction of roads, etc, undertaken by various lease holders outside their sanctioned mining lease area.

. FOREST OFFENCE cases have been registered by the Karnataka Forest Department in 56 cases. As many as 31 mining lease holders have filed cases before the Karnataka High Court against the forest offence cases registered by the Karnataka Forest Department 2008.

Photo: K Venkatesh

.MORE THAN 100 mining companies are violating forest laws. As of now, the Lokayukta has registered cases against more than 55 mining companies.

. PRODUCTION OF iron ore during the year 2009-10 was about 50 million tonnes. The total iron ore mineral reserves is about 1,148 million tonnes as assessed in 2005 by the Indian Bureau of Mines. At the present rate of mining, mineral reserves of the state will be exhausted in about 20 years. With the state government agreeing for the setting up of seven mega steel plants, with a production capacity of up to 7 million tonnes each, natural resources might exhaust even sooner than that.

Imran Khan is a Senior Correspondent with


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