New Delhi/bangalore | July 29, 2011 3:10:27 am
The exit of Karnataka Chief Minister B S Yeddyurappa is set to turn the heat on mining magnates,the Reddy brothers,two of whom are Cabinet Ministers in the state.
The Lokayukta report indicts the Reddy brothers on three specific counts: forcing miners to enter into partnerships with their front companies,under-invoicing iron ore exports to their Singapore trading group firm and parking funds in tax havens and acquiring ownership of a mine in the state by displacing original partners.
Indicting the Reddy brothers for misuse of official power,outgoing Lokayukta Santosh Hegde has recommended that Tourism Minister G Janardhana Reddy,Revenue Minister G Karunakar Reddy (brother) and B Sreeramulu (associate,friend and Health Minister) who were directors of the Reddy flagship Obulapuram Mining Company Private Ltd (OMC) during the period of its misconduct be removed from the Cabinet.
According to the report,a mining group including Reddy-promoted OMC,sister company,Anantapur Mining Company and Associated Mining Company (Janardhana Reddy and his wife being its partners) controlled,directly or indirectly,15 mines violating state mining laws. This system of raising a contract had been confirmed in an investigation by The Indian Express last year in which several of the original lease owners had complained of intimidation and threats.
Iron ore illegally mined from these mines out of about 160 mines in Bellary,Chitradurga and Tumkur districts,in just 14 months of calendar years 2009 and 2010 stood at 73.99 lakh MTs. At a moderate rate of Rs 2,500 per MT,its value comes to Rs 1,849 crore.
This mining group had formed four front companies Devi Enterprises,Madhushree Enterprises,Sree Minerals,Basaveswara Minerals to enter into partnerships with miners and made them part with 40-60 per cent of the iron ore output. The latter two front companies were promoted by B V Sreenivas Reddy,one of the promoters of Reddy flagship OMC. Devi is promoted by two ex-employees of Brahmani Industries,a company originally promoted by the Reddys.
The report also said that Janardhana Reddy,the mastermind behind the Rs 3,000-crore mining empire,under invoiced sale of iron ore to his own firm in Singapore,and parked Rs 215 crore so earned in tax havens. During November 2007-December 2009,when Reddy was the director of GLA Trading International Pte Ltd,the company imported 8.52 lakh MT iron ore from OMC. The extent of under-invoicing Rs 215 crore was arrived at taking into consideration the average rate at which OMC sold the iron ore to other consignees and to GLA in the same month and year. The Lokayukta said that one share of GLA was transferred in the name of GJR Holdings International Ltd with its address at Isle of Man,a tax haven,indicating that the money so made illegally was parked in tax haven.
The report also termed illegal the complete takeover of a partnership firm,Associated Mining Company,by the Reddy brothers on August 1,2009. This firm had an iron-ore mining lease over 6.9 hectare in Sandur district. Janardhana Reddy and his wife took control of the firm,but the transfer did not get any approval from the state or the Central government.
Overall,the Lokayukta has estimated the total loss to the state government due to illegal exports at Rs 12,228 crore during the five years beginning 2006-07 till December 2010,when the state banned iron ore exports.
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