Mining scams in India (colloquially known as the Indian mining scam) refer to a series of alleged widespread scams in various ore-rich states of India, which have generated controversy. Problems caused by the alleged scams include encroachment of forest areas, underpayment of government royalties, and conflict with tribals regarding land rights. The spill-over of the effects of legal mining into issues such as Naxalism, and the distortion of the Indian political system by mixed politics and mining interests, has gained international attention.
The latest scam that has come out is the coal mining scam in which the government has had a presumable conservative loss of Rs 1.86 trillion (short scale), due to the delayed implementation of a competitive bidding process for allotment of coal blocks, according to the Comptroller and Auditor General of India (CAG).
Illegal iron ore mining in Karnataka Rising global iron-ore prices driven by Chinese demand brought focus to the iron ore-rich Bellary region of Karnataka. This iron ore is alleged to have been illegally mined after paying a minuscule royalty to the government. The major irregularities involve mines in Bellary, including mines belonging to the Obulapuram Mining Company owned by G. Karunakara Reddy and G. Janardhana Reddy Sajjala Diwakar who were ministers in the Government of Karnataka and Andhra Pradesh at the time.
Investigation by Income Tax Department Income tax sleuths unearthed under-invoicing and tax evasion of around Rs 86 crore by the Obulapuram Mining Company (OMC), run by Karnataka's Reddy brothers and also their trusted confidante and state health minister B Sriramulu. A team headed by the Additional Commissioner of Income Tax, consisting of around 150 Income tax Investigation officials and companies of Central Reserve Police Force conducted raids on the premises of over 10 people. Income tax officials described it as one of the biggest IT raids in the recent history. The investigation found massive tax evasion and money laundering which prompted mass panic amongst the then-BJP government in Karnataka. Officials found that the one-dollar company, GLA Trading International (GLATI), was established on 30 November 2007, with Janardhana Reddy as one of its directors. GLA, presumed to be named after Janardhana Reddy's wife Gali Laxmi Aruna, has offices in Singapore, Dubai and the British Virgin Islands, which is a 'tax haven'. The investigation report stated that "OMC's transactions through the MoU with GLATI are convoluted and devised to evade tax payment in India," A comparative study of shipping bills for export with other companies, which are exporting the same grade material, confirmed the malpractice by OMC. According to the report, OMC signed the MoU with GLATI to sell iron ore only to evade tax payment in India. When the Commissioner summoned Janardhana Reddy and sought an explanation from OMC, the Reddys claimed it suppressed sales in order to develop stronger relationship worldwide with global buyers through GLATI for the sake of financial stability against price fluctuations. This report was billed as the best investigation of the year and recorded in the book Let us Share by the Finance Ministry. This report was the basis of the Central Bureau of Investigation investigation and the Santhosh Hegde Report.
Interim Lokayukta report of December 2008
A report published by the Lok Ayukta uncovered major violations and systemic corruption 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. Justice N. Santosh Hegde resigned from the Lokayukta position on 23 June 2010, citing the inability to be effective in his anti-corruption mandate owing to the non-cooperative Government of Karnataka. In January 2010, Mr Kharge questioned the government about transfer of Dileep Kumar, the PCCF who refused to sign the report, but Government instead brought in S Nagaraja as PCCF who signed the report.
Collusion of officials and politicians in permitting illegal mining
Environment Ministry officials state that the 49.97 lakh tonnes of sand mining reported in the Indian Bureau of Mines Year Book for 2011 is a gross underestimate. The guidelines under the Central and the state enactments call for a sketch of the mining area when a mining lease is applied for. It was found by the Lokayukta that sometimes the actual mining areas are not related to the sketch given with the applications, without officials crosschecking them. Furthermore, mining applicants falsely claim a prohibited forest area as a revenue area. Finally, the actual area of the mine is much bigger than the claimed area. The Indian Bureau of Mines rules, which control the type of mining, allow a maximum mining depth six metres to prevent environmental degradation, but miners have flouted this rule to over-extract iron-ore. For example, if they are allowed to take 100 metric tonnes, mines take 1,000 metric tonnes. Officials at road check posts reportedly collude in a massive under-counting of lorries and trucks transporting the iron-ore from the Bellary mines to the ports. News reports suggest that only 200 trucks are reported instead of 4000 passing through every day.
Underpayment of royalties to state
There is a huge difference in the market price of the ore and the royalty specified by the government as well as faulty measurement mechanisms of amount of ore extracted. It was found that 3.5 million tonnes of ore were illegally exported without paying a rupee of royalty to the exchequer, resulting in a loss of about Rs 160.85 billion. With ore prices of US$100–120 per ton, 3.5 million tonnes adds up to about 350–420 million USD. There are proposals to link the royalties to the market price of iron-ore. There is also a proposal by the ministry of Environment and Forests to levy a tax.
Environmental damage According to the Lok Ayukta Report, there have been severe ecological changes due to illegal mining. The entire system of rain has changed in the district of Bellary. It is reported that the entire area surrounding the mining area is denuded of greenery and has no agricultural activity. Certain species of animals, like the sloth bear, have disappeared in the Bellary region, and medicinal plants from the area do not grow any more.
Belekeri port scandal
Related is the Belekeri port scam, where illegally mined ore which had been seized was surreptitiously exported from the port. Karnataka Chief Minister Yeddyurappa admitted to an illegal iron-ore export racket at Belekeri Port involving 3,500,000 tonnes of iron ore.
Related road damage, accidents and loss of lives
The lack of effective regulation in the mining and transport of iron ore has adversely impacted road safety. Overloaded trucks carrying ore have caused hundreds of fatal accidents on the roadways leading to ports such as Belekeri and damaged national highways in the region.
Recommendation to ban iron-ore exports
The Indian government's Ministry of Steel and Ministry of Law & Justice are considering a ban on exports of iron ore and limiting mining only to captive iron and steel production units. This has been opposed by the mining ministry, citing massive loss of employment.
Lokayukta Report of July 2011 The Lokayukta Report on illegal mining in Karnataka details the methods in which miners, government officials and ministers colluded to defraud the government of mining revenues. The report details the complete breakdown of democratic governance in the bellary area and uncovers the "zero risk system", a protection and extortion racket masterminded by G. Janardhana Reddy. The report describes the illegal money transfers to foreign companies and tax shelters by mining entities such as Obulapuram Mining Company, Associated Mining Company, GLA Trading and GJR Holdings owned by the Reddy Brothers. The report also describes the illegal mining, bureaucrats-politicians-businessman nexus. Even banks and public sector companies also participated in the theft. There are more than 100 names involved in the illegal operation, including NMDC and JSW Steel. Charges against these companies include illegal movement of iron ore from mining yard without permits and without paying royalties, forest encroachment, mining lease violations, overloading of trucks and sandry violations. The iron ore was illegally exported to China through ports of southern India and payment is made through more than 4000 bank accounts. The damage to environment cannot be calculated.
Illegal mining in the Aravali Range Illegal mining activity has been reported in the Aravali Range.
Bauxite, iron ore, chromite and coal mining in Orissa
2011 witnessed first set of PIL's filed in Orissa High Court seeking explanation on why royalty had not been revised since 1948. During process of inquiry, by September 2011, Orissa High Court had come across multiple other breaches. Findings led to three inquiry sets (by centralized agencies, by CAG and proceedings on a set of PIL's filed at Supreme Court of India) which emerged after September 2011 findings by Orissa High Court. Despite multiple transfer of judges and chief justices from Orissa High Court during the ongoing hearings, the first set of hearing by Court was completed in record-time.
The quantity of ore that is to be extracted every year specified in the mining plan which is approved by IBM. Forest and environment laws have been violated installing screening plants without statutory clearance. No action has been taken by any of department state and center excess mining of the specified limit violating operating conditions, assessing impact on the local environment, grabbing unauthorised forest land. There have been four PILs in the Orissa HC demanding a CBI probe into the scam. Though the Union Mines Ministry has expressed its readiness for a CBI probe into the matter citing the report of Indian Bureau of Mines, the state government is vehemently opposing it. The Bureau had found considerable illegal mining of manganese and iron ore in Keonjhar district. The state government, which has appointed senior Supreme Court advocate Mukul Rohtagi to plead for it in the High Court, has been opposing the pleas made by several petitioners for CBI probe into the mining scam.
The state government has suspended 128 mining leases for various minerals, including iron ore, manganese, chromites, limestone, while 482 licenses granted for trading and storage of minerals have been cancelled to stop illegal mining. The Justice M B Shah Commission probing the state's mining scam will need to unearth more before it can bring out a report. Though it had been expected to submit its report by the end of December, complaints from miners over allegedly misleading evidence given by the state government have now delayed that. During a recent meeting with commission members, the miners alleged that steel and mines department officials had superimposed Google maps on the revenue map to determine lease area encroachment. Also, they said, differential global positioning system (DGPS) maps given by the Orissa Space Application Centre were erroneous. The commission has directed the state to form a committee for physical survey and lease area demarcation of mines. With so much to do, even Justice Shah has expressed doubt if the commission can meet its July deadline Coal mining has run into trouble as well in Angul district over land issues. Ninety-four of the 192 iron ore mining leases in Odisha do not have the mandatory environmental clearances. And of the 96 that have them, 75 have mined far beyond their permitted levels over the past several years, says the Justice M.B. Shah Commission report.