Santosh Hegde, Karnataka and the Illegal Mining Machinery

In 2007, the Karnataka Lokayukta, established to investigate grievances with administrative actions, was asked by the state government to study rampant illegal mining in the state. Though this report, finalised as early as December, 2008, has been doing surreptitious rounds in government, legal and mining circles, it is yet to be made public. This document, a copy of which is with ET, shows how Mr Dharam Singh, during his tenure as Karnataka chief minister overruled objections of bureaucrats to permit illegal mining worth more than Rs 23 crore in the name of allowing small-scale farmers to ‘clear’ their land.

The Lokayukta report is important, this article goes on to say, because it goes beyond discussing the existence of illegal mining to detail the mechanics through which it functions. This story presents the report’s conclusions about the role played by then-Karnataka CM Dharam Singh. A second story, published later in the month, looks at the role played by the management of Mysore Minerals, a public sector undertaking.

Or take the agreement between MML and Jindal Vijayanagara Steels. In an MoU signed on the January 17, 1997 between the latter and the government of Karnataka, it was decided that a JV company called Vijayanagar Minerals Private (VMPL) would be set up to supply ore to the Jindal steel plant. As per the MoU, MML has a 30% equity share in VMPL. And, VMPL’s P&L indicates it earned a total net profit of Rs 8 crore between 2003 and 2007.

However, there is no indication that MML received its share of these profits. Perversely, it took on some of VMPL’s expenses. Under the MoU, VMPL had to pay royalty, taxes, levies, compensatory afforestation charges, etc. Again, the Lokayukta report found that while MML was not liable to pay these amounts, it nonetheless had.

Mining comes with heavy environmental and social externalities. One would think that the state could use its revenues to offset those negative impacts. But look at Karnataka. It…

“mines about 35 million tonnes of iron ore every year worth about Rs 6,500 crore, but earns a mere Rs 165 crore as royalties.”

words fail me. read the two articles for more joy.

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