From Minister to Collector — how all come to the aid of the Rs 3,000-crore mining party

The boy doesn’t want to let go of the bat — when he is bowled out,the umpire,who is his father’s de facto chief of staff,calls it a no-ball. Every last ball of an over,he’s allowed to take a run so that he can bat again. The rules change midway,a 10-over game becomes a “Test”. So that the boy continues to bat and the MLA continues to bowl.

The child,in cricket gear with name etched on his shirt,is Keerithi,the son of mining tycoon and Karnataka Tourism and Infrastructure Minister Gali Janardhana Reddy. He may not understand the scale of his family’s empire but this little game of backyard cricket is a pointer to the phenomenal control his father has over Bellary politics and administration.

This was the subject of a two-month investigation by The Indian Express that reveals how and why Janardhana Reddy is the pivot of one of the most powerful quartets in Indian politics and business. Along with brothers Karunakara Reddy (eldest) and Somasekhar Reddy (youngest) and “best friend” B Sreeramulu — all from the BJP — the Reddys today run a veritable independent republic. Where,quite like the 10-year-old Keerithi,they ensure that the umpires,the officials whose job is to report the Reddys’ violations,report to the Reddys themselves.

All for a thriving mining empire that,on paper,is limited to just four mines in Andhra Pradesh and doesn’t even exist in Karnataka but on the ground effectively straddles two states and six districts. It brought in Rs 3,000 crore in revenue last year riding on a record 700 per cent surge in global iron ore prices since the Reddys got their first mine in 2002. And it secures a political fiefdom that not only extends to Vidhana Soudha,the seat of power in Karnataka,but to the BJP’s politics in New Delhi and even that of the Congress in Andhra Pradesh.

The Reddys own two mining companies — Obulapuram Mining Company Private Ltd that has three mining leases and a partnership firm,Anantapur Mining Corporation,that has one mining lease. All these four mines are in Andhra Pradesh,strategically bordering neighbouring Karnataka.

“The Reddys are powerful,both financially and physically,” state Lokayukta and former Supreme Court judge Justice Santosh Hegde told The Indian Express. He should know — his report on illegal mining has been gathering dust with the government for more than a year now. “Because of the influence they have,they can even get officers of their choice.”

Result: a local administration and police that have effectively been reduced to rubber stamps. From S Muthaiah,Deputy Conservator of Forests,Bellary,who did little to collect forest development tax arrears and till date turns down requests for mining permits by the Reddys’ arch rivals,to Seemantha Kumar Singh,who brings uniformed support,and B Shivappa,Deputy Commissioner,who was handpicked by the Reddy brothers after the 2008 elections and now heads the district-level task force to tackle “illegal mining.”

The Indian Express investigated the cast of key characters,the source of their clout and how they serve the Reddy Republic — beginning with the Reddy brothers themselves.

1. Janardhana Reddy,besides being Infrastructure and Tourism Minister in Karnataka,is also District Minister-In-Charge of Bellary that covers nine Assembly constituencies and lies at the heart of his mining empire.

Last year,Bellary accounted for roughly two-thirds of the 45 million tonnes iron ore Karnataka produced — the state is the second largest producer of iron ore in India.

Reddy was at the periphery of politics till 1999 when,along with Sreeramulu,he volunteered to be the campaign assistant for BJP’s Sushma Swaraj.

Reddy dabbled in the finance business for a while but when the banking regulator tightened the noose on such businesses,he surrendered the certificate of registration for his Category A deposit-taking non-banking finance company,Ennoble India Savings and Investment Ltd,to the Reserve Bank of India on July 12,2005.

According to an RBI spokesperson,his company continued to have outstanding public deposits of Rs 2.69 lakh as on September 30,2009.

In the early years of this decade,Reddy entrenched himself in the BJP,making a mark when Swaraj contested the general elections against Congress president Sonia Gandhi in 2004. Today,he is effectively Bellary CM — he can and does call review meetings with local officials.

“He is the ultimate guiding factor on all issues in the district. But he does not act quickly in public interest,only in personal interest,” says Leader of Opposition in the Karnataka Legislative Council V S Ugrappa. “He controls the entire administration. Nothing can move without his clearance,” Ugrappa says.

For instance,on October 22,2009,in a political stand-off with the Reddys,Karnataka Chief Minister B S Yeddyurappa transferred out a set of government officials from Bellary; officials who were considered “close” to the Reddys. These included the Deputy Commissioner,the Superintendent of Police,the Deputy Conservator of Forests and the Deputy Director of Mines and Geology.

By November 6,however,all these men were back in Bellary after the Reddys held the Chief Minister to ransom with a political rebellion.

Such display of clout isn’t new. Accused in a criminal case for damaging the century-old Sugulamma Devi Temple in September 2006 during illegal mining on the Karnataka-Andhra Pradesh border,Janardhana Reddy got the BJP Cabinet in Karnataka to drop the case on June 18,2009,despite objections from the state police and law departments. Reddy denies the temple was damaged because of his mining operations.

2. Karunakara Reddy is State Revenue Minister,a portfolio again crucial to the mining business. For,land surveys,vital in deciding boundaries and resolving disputes,fall under his purview.

As the next part of this investigation will show,having the Revenue portfolio within the family means a range of benefits: from granting favours in land disputes between miners to keeping silent on a long-standing demand of miners to re-fix inter-state borders where boundary pillars have been destroyed.

Besides helping his brother in the NBFC business,Karunakara edited a newspaper run by the family called Ee Namma Kannada Nadu (This Kannada Land of Ours).

In 2004,he was elected the first BJP MP from Bellary. After becoming the Land Revenue Minister,his department pushed ahead the acquisition of fertile agricultural land for an airport the Reddys are trying to build in Bellary amid protests by farmers.

3. Somasekhar Reddy,the third brother,was earlier a Development Officer with the Life Insurance Corporation,and as a politician,he has been mayor of the Bellary Corporation and a vice-president of the Bellary zilla panchayat. He is Bellary City MLA and chairman of the lucrative Karnataka Milk Federation,a consortium of milk co-operatives,and wields political control over hundreds of families dependent on dairy farming across the state.

Then,as city MLA,he also has a say in affairs ranging from setting up of police checkposts and appointments of officials to government departments in Bellary.

4. B Sreeramulu,State Health Minister,an MLA from the Bellary reserved constituency and Minister In-Charge of neighbouring Gadag,is in Reddy’s words,“my best friend”.

He is a member of the influential Nayaka ST community in the Bellary region and the “political face” of the Reddys.

Sreeramulu,who has risen from slums to become a political force and has a police history of assault and violence in Bellary,helps the Reddys rally support.

On February 10,2009,he,along with Janardhana Reddy,got the BJP Cabinet to drop criminal cases filed against him for allegedly burning the cars of a Congress candidate ahead of the polls for Bellary City in May 2008. The cases were termed by Home Minister V S Acharya as being “political in nature”.

Until May 18,2008,he was also on the board of Janardhana Reddy’s flagship mining firm,Obulapuram Mining Company.

5. B Shivappa,Deputy Commissioner (District Collector and also the District Magistrate) belongs to the Nayak community. Handpicked by the Reddy brothers after the 2008 elections,he heads the district-level task force to tackle “illegal mining” and,under law,the police report to him.

Revenue land management — this covers 15 per cent of land in Bellary — is his responsibility. Though his direct influence is limited,the fact that he represents the state in the district requires him to coordinate with various agencies involved in the mining business and allows him to wield considerable clout with all district-level officers.

He,however,said that the Deputy Commissioner’s office is not involved in regulating mining in the district. “It is with the Forest and Mines and Geology Departments.”

In January this year,mining regulator Indian Bureau of Mines (IBM) was stopped from inspecting the mines of Anand Singh,a BJP MLA and a known Reddy friend,whose mines abut that of Janardhana Reddy’s biggest rival Rahul Baldota,promoter of MSPL Ltd (Mineral Sales Private Ltd),in Vyasankere. Hospet’s forest officers stopped IBM from carrying out the inspection and finally the Central mines ministry had to intervene. Reddy is alleged to have a sharing arrangement with Singh wherein he gets a percentage of the ore produced from the Vyasankere mines.

As DC,it was for Shivappa to facilitate the inspection by a Central team. Asked to explain his inaction,he said he adhered to rules and regulations. “Everybody says we are favouring the ministers. We are not favouring anyone.”

6. S Muthaiah,Deputy Conservator of Forests,Bellary,is key to the Reddy brothers since almost 85 per cent of land in Bellary is forest land.

All mines on forest land need transport permits from Muthaiah to move ore. It’s his discretion to issue permits. The Reddy brothers even got a BJP ticket for his brother S Thippeswamy to contest the Molkalmuru seat in Chitradurga district but he lost. He was transferred along with Shivappa,but reinstated on the insistence of the Reddys.

In the short span of 15 days,a new Deputy Divisional Forest Officer,Biswajith Mishra,collected almost Rs 20 crore in forest development tax arrears (fixed at 12 per cent of the value of ore extracted) of the total Rs 250 crore arrears from miners. In fact,during the fortnight Mishra was the DCF,he raised notices to the tune of Rs 100 crore. Muthaiah did not collect Rs 20 crore in the 18 months he was there before Mishra. “It is not true that I have not collected royalties in my tenure. I have collected over Rs 200 crore,” he says. But,he doesn’t talk about the arrears.

On allegations that the Reddys’ rival MSPL has not got permits for a year now,he said: “Some companies like MSPL have outstanding royalties of Rs 875 crore. In some cases we have given permits following directions from the courts. We have given records of dues to courts on the basis of records given by the Mines and Geology Department.”

7. Seemantha Kumar Singh,Superintendent of Police,Bellary,brings uniformed support to the Reddys. He ordered dropping of a September 2008 FIR filed against Janardhana Reddy citing technical grounds. In the complaint,Tapal Chandrashekar,a mining rival of the Reddys,said men from OMC attacked his men and took away machinery and equipment. Reddy was accused of provoking the attack in the FIR registered by the Toranagal sub-inspector. The Bellary SP ruled that the complaint was false since it was the Forest Department that had seized the mining machinery of the Tapal brothers. The sub-inspector was transferred soon. Singh justified the transfer saying he should have verified the facts before registering the complaint.

Singh,however,says there are no restrictions on registering cases against any one. “The only standing instruction to the police force is not to interfere in mining and forest issues in order to limit the scope for controversy.” He says the police sub-inspector was suspended last year because he registered two complaints in the same case against Janardhana Reddy.

In November 2009,MSPL wrote to the Karnataka Chief Minister saying the Bellary police illegally detained its Executive Director (Mines) Meda Venkataiah despite no complaint having been registered against him. MSPL said Venkataiah was forced by the police to give a statement in connection with an attempt-to-murder complaint filed by OMC’s Managing Director Srinivas Reddy against MSPL Executive Director Rahul Baldota.

The SP justified the detention of Venkataiah saying he did not respond to police requests for a statement and had to be forced to go to the police station by policemen.

In the other case,the Janardhana Reddy group alleged that the life of the MD of OMC was under threat from the MSPL management. They did not register a complaint but took up a petition and enquired into it and recorded the statement of MSPL officials,says Singh. “There is nothing illegal in Bellary as far as the police are concerned.”

8. S P Raju,Deputy Director,Mines & Geology,Hospet,issues mining permits in the most active region for mining in the Bellary Forest Range. He ignored clear directives to issue permits to Reddy rival MSPL from the Director of Mines and Geology and,instead,slapped notices demanding Rs 92.72 crore as outstanding iron-ore royalties last year.

Raju was raided on January 23,2009,for possessing wealth disproportionate to known sources of income. He was found to own properties worth Rs 1.21 crore. According to the Lokayukta,during a stint in Chitradurga,Raju allowed a company to mine iron ore on a licence for manganese. He was also transferred in November 2009 by the Chief Minister but returned soon.

When contacted,Raju said: “People are saying things in Bellary all the time that we are working in favour of the minister. There’s too much of local politics which gives rise to these allegations. We are sorting out all outstanding legal issues of miners and all problems are slowly getting resolved.”

The Reddys may be all in the BJP but they are unapologetic about their relationship with the late Andhra Pradesh chief minister and Congress strongman Y S Rajasekhara Reddy. For,it was during YSR’s tenure that OMC and AMC bagged all four mining leases on Andhra land that borders Karnataka. YSR’s picture still adorns the entrance of Ennoble House,the headquarters of the company in Bellary.

The Reddys were slapped with seven notices on illegal mining by the Forest Department in Anantapur in October-November 2009,got an indictment by the Supreme Court-appointed Central Empowered Committee in November 2009 for “encroachment” into unallotted forest land,and faced a probe by the CBI in Andhra Pradesh. Janardhana Reddy was barred from mining in his four leases and the apex court asked OMC and its sister company AMC to seek reprieve from the High Court in Hyderabad. That reprieve finally came on February 26 — within 100 days after the Andhra government suspended operations in all their mines on November 25,2009.

In a nutshell,the High Court set aside the state government suspension order and observed that the border dispute between OMC,AMC and the S K Modi-owned Bellary Iron Ore Pvt Ltd,another rival mining company,be resolved in a civil court.

As The Indian Express found out,the Reddys’ companies applied for and got forest permits this month from Kallol Biswas,Deputy Conservator of Forests,Anantapur,for transporting iron ore. Ironically,it was Biswas who in October-November 2009 issued a string of seven notices to OMC and AMC for a variety of illegalities on forest land.

Tomorrow: Raising a mine,Breaking the rules