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The Bellary mining scandal involved the three mining baron brothers from Karnataka. The Bellary mining also led to the resignation of the then chief minister B S Yeddyurappa who was responsible for a loss of about Rs16, 085 crores for the state government. From various investigation reports it is very clear that Gali Karunakara Reddy and Gali Janardhana Reddy paid a huge amount of money to bag contracts for their mining company named as Obulapuram Mining Company in Bellary in the state of Karnataka. The other allegations regarding the Bellary scandal also involves the encroachment upon forest land, under-paid royalties to the state, and mining in a larger area than permitted. The Lokayukta of Karnataka which is an anti-corruption ombudsman organization headed by Justice Santosh Hegde in a report to the media published stated that the then Chief Minister B. S. Yeddyurappa along with few of his other family members and for his personal benefit accepted bribes in the form of donations to the account of their trusts from the three mining baron brothers.


B S Yeddurappa was also found guilty for selling certain highly priced lands to the mining companies in exchange for issuing mining leases. Bellary region in the state of Karnataka is noted for its rich iron ore. There was an extremely heavy rise in the global market for iron ore requirement and also simultaneously the price and the demand was mainly increased by the Chinese government. The iron ore got from the mines of Bellary is supposed to have mined in an illegal manner just by paying an extremely small amount of royalty to the Government which is strictly against rules. There was a set of regularities and guidelines which is supposed to be strictly followed by all the mines in Bellary region including the mines owned by the brothers G. Karunakara Reddy and G. Janardhana Reddy namely Obulapuram Mining Company. It is to be noted that both the brothers were the cabinet ministers in the state of Karnataka government. It was a major fault from the side of the Mr. Y.S. Reddy who granted permission for the Reddy brothers to go ahead with the mining and also he extended the period of lease for mining from 2004 to 2017 which is against law.

Mr. Y.S. Reddy did all this in spite of knowing the fact that the Reddy brothers were already charged with nearly 39 Non-Bailable cases against them in the court of law. The root cause of this coming up as a major scandal are illegal facts carried out by the officials and politicians in permitting illegal mining and underpayment of royalties to the state. The Bellary mining scam was unearthed in the year 2011 by the Karnataka Lokayukta. However of recent the Lokayukta has come up with a final elaborate report on illegal mining which has played a major role in the political game changing which sent many people in power behind bars and also accelerated a government change in the state of Karnataka. Apart from this there was an intensive investigation done by the newspaper media, The Hindu which with the help of a whistle blower, who informs on a person or organization regarded as engaging in an unlawful or immoral activity. In the case of Bellary scandal the whistle blowers were from the Railways, the Karnataka Commercial Taxes Department and the CBI, points to losses to the State exchequer between January 2006 and December 2010 that are, at the very least, Rs. 1 lakh crore or eight times the estimated figure given in the Lokayukta report.

According to the investigation report it is very evident that nearly Rs. 2,000 crores was lost by the state in commercial taxes. Another partial saying of the scam story of mining states that the iron ore which was mined in Bellary in an illegal manner was mainly exported to China to cater to an infrastructure boom triggered by the Beijing Olympics. This is only part of the story of the scam.

The organization of the Lokayukta which after its investigation states during the period of 2006 to 2010 nearly 12.57 crores tonnes of iron ore was exported from Bellary, Karnataka. But however the detailed document reports of the Hindu reveals that nearly 35 crore tonnes of ore was transported out of Bellary in the same period. So it is very evident that apart from the 12.57 crores tonnes of iron ore which is exported overseas, the remaining 22.43 crores tonnes was only sold in the local market. This results in a loss of about Rs. 12,228 crores to the national treasury according to the Lokayukta report. Also the government granted permission for extracting and mining only 9.58 crores tonnes of ore of which the remaining 2.98 crores tonnes of iron ore from 12.57 was very clearly illegally mined and exported. Also the average amount per tonne at which the iron ore was exported was Rs. 4,103 per tonne. There are lot of dividing factors between the findings of the Lokayukta and "the Hindu" were the formers report was mainly based on the Customs Department data on ore shipments exported from 10 ports in Karnataka, Goa, Tamil Nadu and Andhra Pradesh between 2006 and 2010, to calculate the quantum of ore that left the country. Whereas the Hindu report was based on the amount of iron ore which was transported out of Bellary by rail and road. Documents from the railway department clearly states that nearly 20 crores tonnes of iron ore was transported out of Bellary from six railway stations and 14 railway sidings between 2006 and 2010. Of this, nearly 19 crores tonnes of ore was marked only for export. The Commercial Taxes Department and the Central Bureau of Investigation from its various datas collected from different sources reveals that in a period of nine months from September 2009 to June 2010 nearly 14 crores tonnes of iron ore was transported out of Bellary only by road. During this period the Bellary brothers rose in opposition against the government of B. S Yeddyurappa.

But however this is supposed to be a just a ruse designed to disguise their real intentions or the illegal activities so as to intensify illegal mining. In this period of nine months from September 2009 to June 2010 an average of about at least 1,000 lorries left Bellary each day with an average load capacity of about 32 tonnes of iron ore per lorry. Therefore nearly 35 crores tonnes of iron ore was transported from Bellary in four years time by lorries and railway wagons. But however this figure was supposed to be too much to be handled from the ports nearby Bellary, according to the Officers in the Commercial Taxes Department and the Central Bureau of Investigation. Thus a report of Lokayukta seems to be more appropriate. There were raids made by the Income Tax department in the residences and offices of the Health Minister of Karnataka B. Sriramulu who is believed to have some involvement in the illegal mining. Income tax officials unearthed under-invoicing and tax evasion of around Rs 86,42,88,802 by the Obulapuram Mining Company (OMC), run by Karnataka's Reddy brothers and also their trusted confidante and state health minister B Sriramulu.

Raids were conducted in a number of premises of many political heads where a number of documents and bank accounts were seized and frozen respectively. The raids assume importance in the background of allegations from opposition parties that the ruling BJP is paying off MLAs from other parties to resign from their post. The raid was mainly targeted on number of houses, offices, business establishments, mining and construction firms of some of the close associates of the Reddy brothers.Thus the Bellary scam includes major infringement and relates to a system of fraudulent conduct in mining in Bellary, including in the allowed geography, encroachment of forest land, massive underpayment of state mining royalties relative to the market price of iron ore and systematic starvation of government mining entities. The Bellary scam is a clear evidence of how miners, government officials and ministers came to a secret understanding of plundering the government revenue.

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