The Reddys Mining Saga

Vijay Simha from Tehelka wrote an article “The Hell Diggers”,  highlighting how Janardhana Reddy looted iron ore. The article was written way back in the Magazine in 2010 (Tehelka Magazine, Vol 7, Issue 13, Dated April 03, 2010). The complete article can be viewed at http://www.tehelka.com/story_main44.asp?filename=Ne030410coverstory.asp

I would like to highlight in brief about how they looted nation wealth. Am glad he is in jail right now and I hope he gets convicted with maximum punishment which will serve as a deterrent for people who try to dodge the law and take the entire state government into hostage. 

Obalapuram Mining Company (OMC) was started by Janardhana Reddy. The ore rate skyrocketed with the demand driven by Beijing Olympics in 2008. But Reddy had a problem. He did not have mining lease. Around 100 leases were already given out in Bellary and about 60 leases were granted in neighboring districts of Chitradurga and Tumkur for mining. These leases were for a long period (20 years). Reddy did not have a single lease. He wanted to cash in on the boom. 

Indian law states that a mining lease can lapse if mining is not done for two years after a lease is granted. Reddy picked this loophole and started scouting for such leases. The owner of the lease with no money to lease was an easy prey for Reddy. Reddy raised ‘raising contract’ with such owners, a sort of outsourcing in todays terminology J.His men with money and muscle power ensured that in no time he had the raising contracts of 48 of the 65 mine owners.

Lets pour some light on Royalty(the fee which miner needs to pay government).  Ore with 65 percent or more iron (Fe) had a royalty of Rs 19 a tone, ore with iron content between 62 and 65 percent, the royalty was  Rs 11 a tonne, and for ore with less than 62 percent iron, the royalty was Rs 8 a tonne. This is as good as giving it for free.

After having acquired majority of the mining leases in the Bellary region, the exponential growth of Reddy started.

The next task was to get the ore from mines to port. One permit from the Mines and Geology Department, and other from Forests Department is needed for this. Fake permits were created. As per the rules the trucks have to be loaded correctly. A 15 MT truck were often loaded with 24 MT or more, while a 25 MT truck up to 50 MT. Reddys made about Rs 20 crore per day with close to 10,000 trucks doing the rounds. All the inspectors en route to the port were bribed heftily and none could object. With his own government in the state, he ensured that the officials he wanted were posted.

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 anywhere between Rs 5,500 and Rs 7,000. The profit margin was huge.

Just imagine a single lorry carrying 25 MT will be sold at 187500(One lak Eight Seven thousand). The cost of transportation was mere 10000-00Rs. Reddy minted money like anything. In no time he became a multi millionaire. We all know about his wealth status.

With YSRs (then Andra CM) help he got a mining license in border Andra Pradesh. The greed was such that the area allotted to his firm got extended to Karnataka illegally. They even removed the border markings. He is now arrested for this case only.
 

Finally the law has caught up with Gali Janardhana Reddy. I truly hope that investigation is completed at the earliest and he gets sentenced to maximum punishment.