» Business » Why Bellary is to bleed again

Why Bellary is to bleed again

By Sugandh Juneja
May 29, 2013 15:11 IST
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BellaryIt’s sleepless nights again for the residents of Kamtur village. Located on the fringes of the Kumaraswamy forest range, one of the six iron ore-bearing mountaintops in Karnataka’s Bellary district, Kamtur is surrounded by seven mines.

On April 18, the Supreme Court eased ban on mining in Bellary, which used to be the nerve-centre of India’s illegal iron ore mining till two years ago.

Kamtur residents say they have lost almost everything to the frenzied mining -- their fields, crops, grazing land, streams and even a large portion of their common burial ground.

“Mines were encroaching upon us from all sides,” says N H Malleswaram, a member of the gram sabha.

Most people sold their land to mine owners under threat.

Those who managed to retain their land could not grow anything as piles of red iron dust rendered their fields barren.

“We want to live without iron dust in our lungs,” says 70-year-old Thimmappa.

Like many others in the village, he also suffers from breathing difficulty.

The primary health centre in the village is a small, unfinished building where cattle take refuge from searing heat.

The Supreme Court ban in July 2011 had offered them some relief.

During the ban, only the National Mineral Development Corporation, India’s largest public sector mining company, was operating in their neighbourhood.

On April 18, the court lifted the ban on 90 iron mines with certain conditions.

With this, 108 of the 166 mines in Bellary, Chitradurga and Tumkur may soon be back in business. Eight of the 18 mines that received the court’s approval in September last year, are operating.

The court’s judgement is based on the recommendation of its forest advisory wing, the Central Empowered Committee, which probed illegal mining in Bellary and the two other districts.

The court had ordered the investigation after Samaj Parivartana Samudaya, a non-profit in Dharwad, filed a public interest petition in 2009 against the state government for not curbing illegal mining in the region.

While Kamtur and several other villages in the hinterlands of the three iron ore mining districts are worried, mine owners and ore-starved steel industries rejoice over the judgement.

“Since the ban we have been operating at 60-70 per cent capacity due to ore crunch,” says P K Murugan, vice-president of JSW Steel. JSW, one of the largest integrated steel companies in India, requires 60,000 tonnes a day for its plant at Toranagallu in the heart of high-grade iron ore belt of Bellary-Hospet.

“We want mining to come back in full swing,” hesays. Srinivasa Rao of Karnataka Sponge Iron Manufacturers Association, says the ban has rendered half of the 70 sponge iron plants sick.

Byword for plunder

What attracts these mining and steel companies to Bellary is its rich deposit of reddish-brown haematite iron ore, a high-quality ore with iron content up to 65 per cent.

A 2005 estimate by the Indian Bureau of Mines puts the reserves in Bellary at 1,148 million tonnes. Before the ban, Karnataka produced about 40 million tonnes per annum, one-fifth of the country’s annual iron ore production. Eighty per cent of this came from Bellary.

But this was just the official figure.

The actual production of iron ore through illegal mining was much more and so was illegal export (see table ‘Illegal export of iron ore from Karnataka’).

The sudden spurt in iron ore and steel prices in the international market following China’s demand was showing its impact. Bellary had become the byword for plunder.

“The government took no corrective measure even after the Lokayukta, the state’s Ombudsman, filed a detailed report in 2008 on illegal mining,” says S R Hiremath, president of SPS.

The report brought to light chilling stories of illegalities, irregularities and crimes by the mining mafia in connivance with politicians and bureaucrats.

Bellary was transformed into a republic of lawlessness by mining baron Gali Janardhan Reddy, his brothers Karunakara Reddy, Somasekhara Reddy, and their close associate B Sriramulu.

In 2008, they became part of the BJP-led state government. Janardhan Reddy became tourism minister and miniter in-charge of Bellary, Karunakara Reddy the revenue minister, B Sriramulu the health minister and Somasekhara Reddy headed the state milk development corporation.

There was tremendous political pressure on the mines department to issue new leases.

Even when the state’s requirement was 20-25 MTPA, IBM gave permission for 82 MTPA of iron ore.

The Union Ministry of Environment and Forests sanctioned clearances.

According to a statement by former chief minister B S Yeddyurappa in the Assembly in 2010, between 2003-2010, 30.5 million tonnes of iron ore worth Rs 15,245 crore (Rs 152.45 billion) was plundered from Bellary.

The Lokayukta’s final report in July 2011 estimated the state’s loss due to illegal mining was more than Rs 16,000 crore (Rs 160 billion).

Yeddyurappa had to step down from the chief minister’s post since he was also indicted in the report. Janardhan Reddy has been behind the bars since September 2011.

Large-scale mining in Bellary led to severe damage to its environment, reveals an environmental impact assessment by the Indian Council for Forestry Research and Education, Dehradun.

ICFRE did the study in 2011 on behalf of the state government as directed by the Supreme Court.

It found 9,500 ha of forests have been cleared for mining in Bellary alone. Air has been severely polluted and groundwater contaminated with iron, manganese and fluorides.

A Comptroller and Auditor General report released last year reveals increased incidence of tuberculosis, respiratory disorders and decreased livestock population in the region.

In the interim report submitted in April 2011, CEC had expressed shock and concern over the magnitude of legal violations.

All mining scams in the country become insignificant in front of Bellary, it observed. In its final reports, CEC changed stance and suggested the court should allow mining.

“CEC seems to be acting as an engine for resuming mining rather than protecting the forest and the environment,” alleges Hiremath.

Conditions apply

For restarting mining, CEC classified mines into A, B and C categories, taking encroachment as the criterion for determining whether their operations were legal or illegal.

Forty-five mines which did not encroach or encroached in small ways outside their sanctioned area come under category A.

Category B mine are those which encroached an area up to 10 per cent of the lease area through mining pits and up to 15 per cent by way of waste dumping. This category includes seven mines along the inter-state boundary destroyed by Gali’s mines in Andhra Pradesh.

The court has allowed all category A and 63 out of 72 category B mines to resume operations.

It has suspended the seven leases till the boundary is fixed by the Surveyor General of India. Category C mines are those where the leaseholder has encroached on more than 10 per cent of the lease area through mining pits and over 15 per cent by dumping waste.

The court ordered cancelling 51 leases, including all 49 category C leases.

“The category C leases are cancelled because they were involved in flagrant violation of the Forest Conservation Act or mining in others’ lease areas,” the court observed in the judgement.

The cancelled leases will be auctioned through international tenders.

“This categorisation is faulty,” says Hiremath.

It takes encroachment as the only criterion for determining whether operations were legal or illegal.

It is arbitrary to measure the extent of encroachment as percentage of the sanctioned lease area, instead of the actual encroached area, points out P Vishnu Kamath, co-petitioner in the case.

Kamath says there should be only legal and illegal categories, decided on the basis of encroachment, the quantity of ore extracted by leaseholders and other illegalities like mining without clearances, evading royalty and subletting leases.

In fact, the Supreme Court in its order of September 28, 2012 had asked CEC to constitute a committee and assess within three months the actual quantity of ore illegally extracted by each leaseholder.

“CEC has not constituted the committee so far,” says Hiremath.

Moreover, category A leaseholders are not holy cows, Kamath says. Many of them have leases in other two categories.

Minerals Enterprises Ltd, the first company that resumed operation after the ban, has two leases in category B. State-owned Mysore Minerals Ltd, which has been named in Lokayukta reports, has one mine in category A, but two in category B and one in category C.

“This is as if you murder somebody in Andhra Pradesh and claim to be innocent in Karnataka,” says Kamath.

Quite naturally, category A leaseholders are happy. Category B leaseholders heave a sigh of relief and prefer not to comment on categorisation.

Those who come under category C are crestfallen.

They argue that the Mines and Minerals (Development and Regulation) Act has not fixed any percentage for assessing encroachment, and hence such categorisation violates the Act.

Anil Lad, owner of VSL Mining Company and the newly elected MLA from Bellary, says he will file a review petition against putting his mine in category C.

Tapal Ganesh, a small-time mine owner, the only one who resisted Gali’s diktats, sounds depressed. His mine falls among the seven suspended by the court.

“I do not think I will be able to start my family business in near future,” says he.

He was physically attacked by Gali’s goons when in 2010 he tried to give statements to CEC.

Industry needs protection

To meet the state’s requirement, the court has capped the amount that can be extracted from the region -- 25 MTPA from Bellary and 5 MTPA from Chitradurga and Tukmur.

It says the ore produced should be used only by the steel and other industries in Karnataka and neighbouring areas.

The judgement does not ban export, but says only those ore rejected by the domestic industries can be exported. It has also lifted the embargo on issuing new mining leases.

To avoid illegalities, the court has asked the leaseholders who have been allowed to operate to get all clearances afresh. Besides, they will have to implement reclamation and rehabilitation plan in a time-bound manner.

The main thrust of R&R plan is afforestation, developing safety zone, green belt, soil conservation through controlling surface runoff by building retaining walls, check dams, rock-fill dams and stabilisation of accumulated waste dumps.

ICFRE is preparing R&R plan for each mine and has done it for 70 leases.

Category A mines can start mining after initiating R&R plan and after the monitoring committee, set up by the Supreme Court in 2011 to carry out e-auction of the ore, certifies its progress.

Category B mines will have to complete R&R plan before resuming work.

Though leases of category C mines have been cancelled, they will also have to implement R&R plan. “Nobody can escape from implementing R&R,” says Dipak Sarmah, additional principal chief conservator of forests and chairperson of the monitoring committee.

Expenses of implementing R&R will vary from plan to plan and will be between Rs 5 crore (Rs 50 million) and Rs 20 crore (Rs 200 million).

Besides implementing R&R plan, the court asked category B and C leaseholders to pay penalties: Rs 5 crore (Rs 50 million) for each ha encroached by way of mine pits and Rs 1 crore (Rs 10 million) for each ha encroached for dumping overburden initially.

Kamath says it is paltry compared to the 500-600 per cent profit margin in the business (see ‘Economy of mining. . .’).

The court has asked the monitoring committee to retain 10 per cent of the sales proceeds of old stock of A and B leaseholders and the entire sales proceeds of the old stock of C leaseholders.

The sales proceeds, together with the penalties and the amount received through auctioning category C mines, will go to a special purpose vehicle, called Karnataka Mineral Rich Region Development Corporation.

It will implement an environment management plan of Rs 30,000 crore (Rs 300 billion) for 30 years for mining-affected zones.

The projects include health, education, water supply, employment and biodiversity conservation ‘for ensuring inclusive growth of the area surrounding the mining leases’.

Ironically, the fund will also be spent on setting up facilities like conveyor belts, railway sidings and widening of roads, which can be used for transporting iron ore.

“We have apprehensions about SPV,” says Hiremath.

“It seems its special purpose is to take mining forward rather than compensating for the environmental devastation.”

Besides, at a production rate of 25 MTPA, the iron ore deposits of Bellary will be exhausted within 40 to 50 years.

The nation will not be able to pass on its rich resources to the next generation.

“This is against the principle of intergenerational equity,” says Hiremath.

In fact, In 2010, while illegal mining was at its peak, the state government was signing MoUs with steel companies, including Tata Metaliks, Arcelor Mittal India, JSW Steel, Posco India.

The industries have promised to invest Rs 1.2 lakh crore (Rs 1.2 trillion).

Sagar Dhara, director of Hyderabad non-profit Cerena Foundation, says ICFRE and CEC should have quantified the environmental damage in monetary terms before recommending resumption of mining.

Cerena Foundation did a study in Sandur taluk of Bellary on behalf of the petitioners and estimated a loss of Rs 200 crore (Rs 2 billion) a year in agriculture alone.

A moratorium on mining should have been declared for a few years till the physical and biological reclamation got completed, he says.

A Bellary without mining

Amlan Aditya Biswas, deputy commissioner of Bellary, says the ban did not affect the district’s economy much. Bellary has been an agrarian economy.

At the time of the ban, some 10,300 people were employed in 70 active mines in the district.

After companies retrenched workers, local residents who had joined the mining force returned to their traditional livelihoods (see box:‘Onion v ore’).

The state also did not incur any revenue loss during the ban.

“Instead, revenue increased even when production came down,” says H R Srinivas, director of the states mines department in Bengaluru.

Before the ban, IBM decided the price of iron ore and it used be around Rs 1,300 a tonne, he says. Since the ban, sale is done through e-auction by the monitoring committee and the rate was fixed by NMDC.

“Average price rose to Rs 2,500 a tonne,” explains Srinivasa, who is also the convener of the committee.

Transport was the sector severely hit by the ban.

Many had bought tipper trucks on credit during the boom to transport ore to ports in other states. “Every tipper truck employed at least three people,” says B Badewali, president of Hospet Truckers Association.

With the ban about 3,000 tipper trucks are now lying idle. Repaying has become difficult the owners and banks have started loan recovery procedures.

In the last 20 months, in the absence of reckless mining, forests and streams have started showing healthy signs.

“We have spotted a few sloth bears and a rare species of snake that was seen in India only once before,” says S Manikandan, deputy conservator of forests.

Despite the court’s approval, it will not be easy for many companies to resume mining since they are fighting criminal cases in lower courts among themselves.

The CBI is also investigating a few cases related to illegal mining.

The court has clearly said its judgement will not affect the ongoing investigations.

The petitioners also plan to approach the court again to review the judgement.

They had asked for legal actions against all those involved in illegal mining, including those named in Lokayukta’s reports, and had prayed for two independent committees, one with powers to prosecute and the other with expertise to monitor R&R plan and SPV.

“The judgment has not addressed many of our concerns,” says Kamath.


2003: China boom begins
2003: Karnataka de-reserves 1,162,000 ha for private mining
2004: Report of the National Environmental Engineering Research Institute on planning and management of scientific mining in Karnataka. Report gathers dust
2005-10 Demand peaks. Reckless mining and export begins. Loss to state: Rs 16,085 crore (rs 160.85 billion)
2006 State government appointed Justice U L Bhatt Commission to probe illegal mining. No significant result
2007 Investigation goes to the Lokayukta
2008 Lokayukta Justice Santosh Hegde submits first report on mining irregularities. Indicts B S Yeddyurappa and many senior officials and companies. Government ignores the report
2009 Non-profit Samaj Parivartana Samudaya files petition in Supreme Court
2010 Supreme Court asks CEC to investigate.
Karnataka bans export of iron ore
2011 CEC submits interim report. Lokayukta submits its second report. Then chief minister Yeddyurappa quits. Supreme Court imposes ban on mining, first in Bellary, then extends it to Chitradurga and Tumkur. NMDC exempted. CBI arrests Gali Janardhan Reddy for illegal mining
2012 Supreme Court allows 18 mines to resume operation
April 18, 2013 Allows 90 mines to operate. Cancels 51 leases. Suspends 7. Caps production at 30 million tonnes per annum

Economy of mining in Karnataka

• Net Present Value Rs 800,000-100,00,00/ha of forest land diverted for non-forest purpose. This is a one-time payment
• Afforestation cost: Rs 125,000 /ha. For this mine owner identifies revenue land equal to lease area. The forest department does afforestation
• Safety zone: Rs 125,000 lakh/ha. Miners have to develop a 7.5-metre green belt along the boundary of the lease inside the lease area
• Royalty: 10 per cent of the net sales value. This was abysmally small till 2008 at Rs 19 per tonne of fines and Rs 27 per tonne of lumps 
• Forest Development Tax: 12 per cent of net sales value. The tax was introduced in 2008. Mining companies moved the high court, which ordered to pay 6 per cent tax till the case is finalised. Case pending.
• Value added tax: 2 per cent of net sales value
• Production cost/tonne: Rs 300
• Average price of iron ore/tonne: Rs 2,500
• Profit calculated:500-600%
• After starting e-auction in 2011, royalty, FDT and VAT have been transferred to buyers

Onion v ore

In Bhujanganagar village in Sandur valley, farmer Bharmappa got a bumper harvest of onion despite this year’s severe drought.

“I harvested 44 tonnes of onion from one hectare,” he says, standing tall amid his farm hands.

“When mining was in full swing, yield had gone down to 24 tonnes,” says he.

Besides, it was difficult to get farm hands then.

The fertile valley is known for its vegetables and onions.

But following the mining boom many had leased out their farms for stocking iron ore and for mining.

For the rest, it was difficult to grow crops due to iron dust. Since the ban, residents have returned to growing onions, maize and millets.

Photograph: M Suchitra

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