The Hell Diggers

THE SCALE OF CORRUPTION IN MINING IS A NATIONAL CALAMITY. NO ONE EPITOMISES THIS BETTER THAN THE BELLARY BROTHERS. KIDNAPPINGS, POLITICAL CLOUT, MUSCLE POWER. VIJAY SIMHA HAS THE WHOLE STORY. PHOTOGRAPHS BY SHAILENDRA PANDEY

OPEN WOUNDS A typical open cast mine in Bellary. Once scavenged, the area turns into a wasteland Photo: SHAILENDRA PANDEY

ON A pleasant morning some weeks ago, a senior mining executive stood gaping at the spot where his office was until the previous night. He had worked for four years in the office, kept the records, and had eaten, joked and rested there. Now, it was gone without a trace. The case of the missing office set in motion a chain of events, leading to the first full eyewitness account of happenings inside a powerful mining company in the iron ore belt of Andhra Pradesh and Karnataka. This account exposed how they play with life and law, much like in Bihar’s badlands between the 1960s and the 1980s, except that the new iron ore dons of south India have gotten smarter and bigger — and this may have far bigger consequences for India and her people.

V Anjaneya, the deputy general manager now without an office, worked for the Obalapuram Mining Company (OMC), a controversial group run by Karnataka Tourism Minister Janardhana Reddy — the mightiest of the infamous “Bellary brothers” trio. (On March 23, the Supreme Court stayed the group’s mining operations on complaints of encroaching into another mine.) Reddy began the OMC sometime around 2001-2002 when he was not yet a minister. He has since acquired a reputation as India’s most feared mining don, which is in serious contrast to his mostly anonymous work as tourism minister. Anjaneya’s presence made things legal for Reddy’s OMC because Anjaneya had a first class Mines Manager certificate, the highest qualification in mining given by the Union Labour Ministry and the Director-General of Mines Safety.

India’s mining laws say a permit to operate a mine will not be granted to anyone with machines and a high production target unless they employ a first class mines manager. This means that you could take a pickaxe and emerge with a few kilos of ore, but you cannot run a full operation without qualified professionals handling it for you. Since Reddy was not in it for a couple of kilos, he hired Anjaneya in 2006. Anjaneya was in-charge of the OMC’s Antara Gangamma Konda (AGK) mine near the border between Andhra Pradesh and Karnataka, in the middle of a rich iron ore belt. He reported to a managing director, who in turn reported to Reddy.

Things were fine until December 9, 2009. Suddenly, news came that the CBI (Central Bureau of Investigation) was planning a raid on OMC offices. The OMC had become very big and was accused of a host of illegal mining practices. Reddy had almost brought down the government of Karnataka after Chief Minister BS Yeddyurappa took him on, and forced a humiliating compromise on the chief minister. A CBI raid was, therefore, plausible. The OMC management alerted each of its officers that the sleuths were coming.

IN A FREE STATE Like termites, thousands of trucks cart away the ore illegally, eating into the crust

a typical stockyard, many of which are illegal

a mine worker — wealth and despair is rampant in the region. Air, water and the human body is covered in red dust here

Ajaneya’s office was at the bottom of a hillock where the mining was done. It was a makeshift office, held up by nuts, bolts and sheets. In there were the records of the AGK mine. Anjaneya sat there with an assistant, Lakshmi Prasad, (who pops up later in the story at key points). All Anjaneya found on December 9, 2009, were a couple of security guards. No office. The previous night, on orders from an OMC managing director, a group of men arrived in a black Scorpio (a SUV often favoured by the mining dons), broke open the lock and took away the records. Furniture in the office was loaded onto a few trucks and carted away. Finally, an excavator came from the top of the hillock and demolished Anjaneya’s office.

Anjaneya drove to the office of the managing director, BV Sreenivas Reddy, 35 km away in Bellary. An argument ensued. Curiously, Anjaneya’s assistant, Lakshmi Prasad, was outside Reddy’s room. Anjaneya asked Reddy where the records were and why the office was demolished. Reddy told him the records were in his custody and that Anjaneya must not worry. Anjaneya, a heart patient, worried that he couldn’t face the CBI without the records. Reddy told Anjaneya that his assistant manager would deal with the CBI and that he could go home.

Outside Reddy’s office, Anjaneya spotted Lakshmi Prasad and told him he was angry at how Prasad was upstaging him. He was also upset that the Reddys had shifted the records without informing him. He said he might have to tell the CBI everything to save himself. It was a mistake, as he realised later. Prasad instantly told the managing director. They wondered if Anjaneya had kept copies of the office records.

Bellary, where this scene was playing out, is a small district of Karnataka, close to its border with Andhra Pradesh. It’s small enough for 18 Bellarys to fit inside Delhi and still have land to spare. One of the most backward areas of Karnataka, the Bengaluru-driven IT revolution had passed it by. In 2005, a Karnataka Human Development Report said Bellary was 18th in the Human Development Index, among the bottom-10 districts of the state. Bellary, though, is crucial for its iron ore mining. A little over half of Bellary is what is known as the mining belt. And even here, the actual iron ore deposits are in a third of the area. For instance, a mine may have, say, 30 hectares. Only 10 hectares may have the ore. It is this treasure, and the covetousness of those driving the mining industry surrounding it, that has converted Bellary into the proverbial valley of fear.

Estimates in 2008 said Bellary had close to 1,000 million tonnes of iron ore reserves of all grades. When mined at a pace legalised by the Indian Bureau of Mines — the Nagpur-based body that controls mining in India — it should take about 30 years to be done with. The trouble, however, is that a mad rush to mine has created a parallel universe where law flows from the barrel of the gun. Profit is the only rule in this world, which Janardhana Reddy is alleged to be lording over.

ABOUT 60 percent of Bellary’s iron ore reserves are what is described as “fines”, a high-quality grade of iron ore in powder form, which is commercially in big demand. The 600 million tonnes of Bellary “fines” has become a prized commodity after China began buying the stuff a decade ago. The frenzy to feed China, and make as much money as possible before the rates fell, has triggered a host of illegal practices. Karnataka authorities say all the iron ore in Bellary could be taken out in six years if things continue the way they are now.

This, though, was not on anyone’s mind as Anjaneya left the office of his managing director after the argument. Anjaneya worried that the CBI would nab him for his role in the shady practices in Janardhana Reddy’s Obalapuram Mining Company. The managing director and the man who worked as Anjaneya’s assistant worried, in turn, that Anjaneya would take them down with him.

WAR GAMES A mine the Reddys have encroached upon. The ore lies beneath the water

armed guards — dust, muscle and corruption abound in the mines

boy spies — the Reddys’ clout has distorted the psyche of Bellary’s youth

Janardhana Reddy, the man they all worked for, is an interesting character. He is only 43 and is feared for his razor sharp thinking. Being raised in a head constable’s house — his father Chenga Reddy was with the Bellary City police station — appears to have taught him two things: that money is a critical component on the path to power, and that the law is not something you worry about, you simply find a way to keep it busy as you do your thing. From pretty early on in his life, Reddy worked at improving his financial reputation. He formed a chit fund company that soon spread to 46 branches across Karnataka, before charges of cheating surfaced.

He moved into hospitality, setting up a small hotel. When that bored him, he started a four-page Kannada tabloid. From his experience with the tabloid, he lost the fear of media that bothers average businessmen. By now, Reddy had gotten over two fearsome social forces: the law and the media. This made him think big. Another striking trait in Janardhana Reddy is loyalty to family. Though he has the biggest profile in the family, he has so far kept his brothers close. Karunakara Reddy, the eldest, is the Karnataka Revenue Minister and Somasekhara Reddy, the other brother, is chairman of the Karnataka Milk Federation. All of them are spoken of as one unit in public — it is always the Reddys. Janardhana Reddy places such value on friends and family that B Sriramulu, the current state health minister, who he has known for barely 10 years, is considered the fourth brother.

Janardhana Reddy believes he can read people. He thus has strong likes and dislikes. Those he likes, he cherishes. Like the family of former Andhra Pradesh chief minister YS Rajasekhara Reddy. YSR and Janardhana Reddy were closer than Janardhana has been with any Bharatiya Janata Party (BJP) senior. YSR helped Janardhana Reddy when his Obalapuram Mining Company was born. After YSR died, Reddy planned and funded a campaign to make YSR’s son, Jagan Mohan, the chief minister of Andhra Pradesh. So strong was the campaign that only a resistant Congress high command in Delhi could halt it.

THOSE HE hates, he crushes. Like Yeddyurappa, who tried to change a few things in the corrupt Bellary administration. It triggered such wrath in Reddy that he got together about 40 MLAs, took them to Hyderabad and threatened to install another person as chief minister. It took all the negotiating skills of the BJP leadership in Delhi to save the Yeddyurappa government. The chief minister was forced to sack his favourite people and was so crushed that he wept on television at the turn of events.

Thus, Reddy can set goals and stick to them with striking clarity. He has a problem, though. He has spent much time with political toughies who can bludgeon their way through. This makes him think like a streetfighter. He is able to scare people. He is able to buy people. For instance, he employs a battery of high profile lawyers in Delhi, who would cost anybody a fortune. But Reddy has a problem when he has to deal with people who have known money and ambition. He is uncomfortable with people who prefer subtlety. He cannot massage egos gently. This makes him a misfit in Delhi. All the lawyers in the world can’t give him the image he so seeks. He, therefore, is an unknown in Delhi. The Rashtriya Swayamsevak Sangh (RSS), which runs the BJP, doesn’t like Reddy. And he has made no impression on Congress president Sonia Gandhi either. In Bellary, he can get away. In Delhi, he can’t.

THE BROTHERS GRIN Janardhana, Karunakara and Somasekhara, inseparable in work and wealth

Janardhana getting into his private chopper Photo: GAGANDEEP

the beginnings of Janardhana’s 60-room Xanadu

In Bellary, Reddy is constructing a palatial bungalow at the foot of a hillock. There’s a lane leading to his house and the whole 500 metre approach is monitored on CCTV. One part of his house is shaped like a cottage. The newer part, which is being constructed, is spread over almost an acre. Apparently, there will be more than 60 rooms in the new portion alone. Even on days when Reddy is not in Bellary, his house is guarded by at least a score of gunmen who look like they have spent much time in the gym. There are rows of spanking vehicles, but almost all of them are SUVs. There is a helipad right across the road, but Reddy is apparently getting one done in his house as well. His confidant Sriramulu is also constructing a house, with 60 rooms, adjacent to Reddy’s structure. Both will be connected by a passage. There are bomb-proof shelters. The driveway from the gate of Sriramulu’s house leads to a helipad on the rooftop. Reddy likes helicopters. He owns two, one for the day and one for the night. Word is that he is buying a dozen or so helicopters to get into tourism big-time.

When Reddy got into mining, China was hungry for iron ore to construct a new China in time for the 2008 Beijing Olympics. Chinese steel production is still in a gallop after the Olympics. For instance, China produced 48.7 million tonnes of steel in January 2010. (India managed 5.4 million tonnes.) Reddy calculated he didn’t have to pay much for the ore, which he could export to China. According to the Mines and Minerals (Development and Regulation) Act of 1957, the presiding Act on mining in India, the best quality iron ore “fines” — with 65 percent or more iron (Fe) — had a royalty of Rs 19 a tonne.

For “fines” with iron content between 62 and 65 percent, the royalty fell to Rs 11 a tonne, and for ore with less than 62 percent iron, the royalty was Rs 8 a tonne. The state was virtually giving it away for free. This astonishing fact has little logic. The only reason appears to be that iron ore was never in demand in the past, and the government didn’t think it would ever be. Till 2005, a lorry of iron ore cost less than a lorry of sand or building material. Iron ore went as low as Rs 1,200 a lorry while sand came at Rs 2,000 a lorry and building material even higher, up to Rs 6,000 a lorry. When Reddy was making his move, he had an open field. All he had to do was organise his end of it. The state wanted nothing. (In August 2009, the Centre increased the royalty to 10 percent of the sale price on ad valorem basis.)

BUT IT wasn’t just Reddy who was getting ready. There was a mad rush to get a mining lease when the boom hit in 2002. The rush was such that people didn’t even know where they were seeking a lease for. Karnataka Lokayukta Santosh Hegde remembers: “They would produce a map of Hospet taluk or of Sandur taluk, and give the government the name of a village with some boundaries for grant of lease. This would go to the Central Government, which was as careless as the state government. There was no cross-checking of facts, no counter-checking, and no sending of a team of surveyors and of the mining department to find out if there was a place of such a description. And, they started granting leases.”

Leases were a problem for Reddy. Indian mining laws state that a lease, once granted and not annulled for any reason, runs for 20 years before it comes up for renewal. By the time the Obalapuram Mining Company became active, 100 leases were given out in Bellary and about 60 leases were granted in neighbouring districts of Chitradurga and Tumkur. So, Reddy went to good friend YSR. In 2007, the Obalapuram Mining Corporation Pvt Ltd Bellary (its full name) was granted leases to mine iron ore in Anantapur district of Andhra Pradesh, an area close to the state’s border with Karnataka. OMC has two leases that will come up for renewal in June 2027, if not cancelled earlier. One lease is over 68.5 hectares, the other over 38.5 hectares.

Companies considered friendly to Reddy, or influenced by him, also got iron ore leases in Anantapur. Bellary Iron Ores Pvt Ltd has a lease for 44.52 hectares that lasts until the year 2016, Y Mahabaleshwarappa and Sons has a lease for 60.7 hectares until 2018, Sai Balaji Minerals has a lease for 4.04 hectares until 2027, and a lease in the name of ‘Murli Mohan Reddy’ is listed for 4.7 hectares until 2028. These are the only leases granted for iron ore mining in Anantapur.

Reddy began mining legally in the area he was allowed to. However, the quality of iron ore in Anantapur was poor, with barely 35 percent Fe. This was not what he got into mining for. This was never going to make him a big player. By then, however, Reddy had built a crafty team of advisors who have today built a reputation for almost always thinking ahead. One of those advisors, who spent years as an advocate in Andhra Pradesh, apparently put it into Reddy’s head that he must mine in Karnataka and show the mining as done in his Andhra Pradesh mines. That would get him the high quality ore. But, the leases were already given out in Karnataka and Reddy would have to wait 20 years when the leases would be looked at anew.

SUCH WAS the madness in Bellary that everyone, even those who couldn’t afford to buy expensive machinery and were using pickaxes and shovels, were at it in any bit of open land. It was like gold rush. Says Hegde: “You could also find many illegal mineral storage plots there. Storing mineral is again controlled by law. But no law is followed here and in the process, we found huge illegal mining.” Thus, there were two problems now. Reddy couldn’t get a lease in Karnataka for 20 years and he couldn’t be like the others, desperately chancing luck in every bit of open land.

So, Reddy began looking for mine owners who had leases but didn’t have the expensive machinery and men to do the mining. He also put his men to scout for disputes between mine owners. Indian law states that a mining lease can lapse if mining is not done for two years after a lease is granted. Mine owners with no money to mine were likely to lose the lease. Also, owners with disputes would get hit because courts rarely deliver a verdict in two years. Such mine owners were easy pickings for Reddy. Reddy offered to resolve disputes.

IT WAS a typical street manoeuvre. Both sides prefer to pay a man with muscle and get on, instead of trusting the state to deliver. Reddy is believed to have begun mining in Karnataka on leases where the owners had no men or machines to do so, and where the owners had disputes. Reddy’s rivals accuse him of doing this in the form of a ‘raising contract’, a sort of a rent agreement where Reddy agrees to do the work for a cost. According to an estimate 48 of the 65 mine owners working in Bellary have ‘raising contracts’ with Reddy, where he pays the paltry royalty for the ore he transports.

HEAVY HITTERS Anjaneya, a former Reddy employee, has become a whistleblower Photo: SB SATISH

Janardhana Reddy with Karnataka BJP leaders

and with LK Advani and Sushma Swaraj, his key backer

Getting the ore from the mines to the port is a huge process. To do so, you need two permits: a Mineral Dispatch Permit, given by the Mines and Geology Department, and a Forest Way Permit, given by the Forests Department. In addition, the trucks have to be loaded correctly. A single rear-axle vehicle, which has four wheels at the back and two wheels in the front, has loadable capacity of 15 MT (metric tonnes). A double rear axle vehicle has a legal capacity of 25 MT. To drive them, you need drivers with proper licences. And there is only so much ore that each mine is allowed to send out a day, which the Indian Bureau of Mines calculates individually for each mine based on height, area, etc.

Transporting the ore legally was a drag for the OMC. It reeked of conformity and had nothing to do with ambition. To go where he wants to, Reddy needs money fast. So, his men overload vehicles and order them to make the trip from the mines to the ports and back rapidly. This means doing more than 600 km in less than 24 hours, day after day, from the nearest port. A 15 MT truck is often loaded with 24 MT or more, while a 25 MT truck can have up to 50 MT. You can’t see the material in a properly loaded truck, because it will be below eye level when the back of a truck is clasped shut. An overloaded truck will have material than can be seen, because it goes above the sides of a truck when the back is shut. It’s easy to spot. Yet, between 30 percent and 50 percent of the trucks are overloaded and no one stops them. On a good day, the Reddys make about Rs 20 crore with close to 10,000 trucks doing the rounds. On lean days, they still make about Rs 12 crore.

When TEHELKA hit the road, there wasn’t a single check post on the way. It was shocking. It’s a free run on the roads. Many trucks ply with false permits. Genuine permits are computer prints with a hologram. Fake permits are printed and come in gaudy colours. Till a few weeks ago, trucks sent by ‘the company’ had a small card with a swastika on it. The drivers simply waved the swastika and carried on. It was a code that those trucks were not to be touched. When the authorities got wind of it in Bengaluru, the swastika was discontinued. But, the fake permits change every few days. In late February-early March, the Lokayukta’s office raided the Bellikere port at dawn. They found virtually every truck carrying a fake permit, which they say comes from the Reddy group. The sleuths seized fake permits enough to fill two gunny bags.

SUCH RAIDS are rare and done with extreme caution. UV Singh, a key investigator, never sleeps at the same place more than one night while in Bellary. He always travels incognito, mostly at night. He wears a lungi and covers his face with a towel, just like the locals do. He travels with a driver in an unmarked car and checks the trucks at night. If spotted, he would be a dead duck. But he can’t travel with a posse in any case, because that would mean advertising his location. For the Bellikere raid, Singh and his men travelled by state roadways buses and spent hours stalking the port. They pretended to pray at a nearby temple and hit the port swiftly before anyone knew what was happening.

Such raids usually have two effects. The code word for the overloaded trucks is changed and more trucks are sent to the ports in frenzy. This is because they know that another raid could take weeks and months. Some time ago, nearly 10,000 lorries were leaving every day from Sandur and Hospet for the Bellikere and Goa ports. This caused a great demand for drivers. They couldn’t find that many drivers with licences, and so the cleaners were asked to drive on the way back from the ports while the driver slept after taking the truck to the port from the mine.

There are always thousands of trucks on the roads at night. It can get nightmarish some nights as the trucks zip by endlessly. At times, it can take 30 minutes before there is a break in the line of trucks. Plus, when cleaners drive trucks, the chances of an accident increase. Also, the roads in Karnataka are not built to handle 10,000 trucks one way and 10,000 trucks the other way. Most roads now resemble craters.

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 for about Rs 5,500 currently, when there is a recession. More than a year ago, a tonne sold at over Rs 7,000. Such incredible profit margins meant that Reddy’s profile changed drastically. He got richer by the day, while Bellary continued to languish. The beauty of such an arrangement is that barely anything can be proven in court. There’s nothing on paper in Karnataka to link the Reddys to anything illegal. It’s only when the investigators get a break, like with the hundreds of fake permits at the Bellikere port, that they can even begin to try to get their man.

Mining illegally also means you need a place to store the stuff you shouldn’t have taken out in the first place. So, some investigators in the Lokayukta’s team found huge areas of forests used for dumping the material. Says Hegde: “The encroachment was such that no person with the desire to maintain the ecology or the environment would ever get in.” Then, there is the pollution. The iron ore is often carried in open body vehicles. The dust flies and en route, all water bodies, plants, and houses, everything, turns red.

TO DO all this and stay ahead of the system every day is a colossal task that Reddy appears to have managed superbly so far. But there was still one big thing. Even if he manages to grab a share of every mine in Bellary, which is not the case because a few owners are resisting him, he still needs to show that the stuff has come from his mines in Andhra Pradesh. The way to do this is to extend the area of the OMC from Anantapur into Karnataka. This is where the altering of the boundary between Andhra Pradesh and Karnataka comes in — and this is where Anjaneya, the deputy general manager who threatened to blow the whistle early on in the story, returns to the narrative.

In the AGK mines, where Anjaneya worked, they changed the inter-state boundary pillars (which are on the hilltop) frequently. Since the Andhra Pradesh government was friendly with Reddy, things went smoothly each time the Andhra side made an inspection. They would help the Reddys push the boundaries into Karnataka, and when the Karnataka side visited, the Reddys would put the boundary pillars back at the original spot.

Apparently, the boundaries were changed two to three times in a year. A trijunction point, which was a marker since the British times, was demolished and created confusion on where the base point was for any surveyor to identify. The trijunction point was a permanent mark, deeply chiselled, marked and written on rock. It was blasted and thrown away as waste. Anjaneya says he can pinpoint the tri-junction point that has been blasted if given protection and taken to the spot.

“It happened under my supervision. I sent people to do it. I had instructions from [BV] Sreenivas Reddy [a managing director of OMC who appears early in this story]. Sreenivas Reddy would get instructions from the top boss [Janardhana Reddy]. Sreenivas Reddy came one day and showed the tri-junction point to me. He said by this evening, it should not be there. I instructed a foreman and he did the job,” says Anjaneya.

By thus altering the boundaries and working in the Karnataka mines, the OMC is said to have exported 27 lakh tonnes of commercial grade iron ore in the name of the AGK mine. Early on, the ore was transported from Karnataka and stocked near the Kakinada and Krishnapatnam ports in Andhra Pradesh. But, after YSR’s death, the OMC has sensed that it is dangerous to risk Andhra now and has stuck largely to ports in Karnataka. To take the ore from Karnataka to Andhra, the OMC is understood to have constructed a spanking 4 km road through the forests. This is the subject of another investigation.

ACCORDING TO Anjaneya, a deputy GM with the OMC, PM Shiv Kumar, prepared the production reports, which were given to the Indian Bureau of Mines, the Department of Mines and Geology, the Department of Forests, and the Director-General of Mines Safety. “He would prepare monthly, quarterly, half-yearly and annual reports showing production in the AKG mine, call me to his office, and take my signature.”

Boundaries between mines were altered as well. “The pillars, made of cement and brick, are meant to show the point from where a neighbour mine has to be surveyed. The pillars would have the respective names of the mines and the mining lease numbers on either side. The law says there should be a pillar every 20 metres between mines. But they have converted these pillars into mobile units, which move at will. They have changed everything.”

Anjaneya recalls a specific instance of the OMC grabbing another mine. “One day in 2008, Sreenivas Reddy [the MD] instructed me to go and attack the workers in the neighbouring Tumti mine. I did not. Instead, I sent a message in the morning asking them to stop work in their mine. When I found the work going on, I sent another message at 4 pm saying our MD has asked them to stop working. They did not. Then, Sreenivas Reddy called me as I was leaving for the day. He asked if the work had stopped. I said I sent two messages but they did not stop. Reddy said I should have kicked them into submission and got them to stop. ‘You can’t do even this’, he said. So, I returned to the mine.

“Reddy came there with seven or eight people. They rode in Scorpios. Some goondas followed them and attacked a foreman of the Tumti mine. The foreman who was being attacked did not know who Sreenivas Reddy was or who the attackers were. He knew only me. He identified me and filed a case against me and 15 others. The case is going on in a Sandur court, listed as crime number 99 in Toranagallu police station.”

The Reddys thus have reason to keep Anjaneya quiet. In a series of brutal incidents, Anjaneya’s family was targeted, he attempted suicide and survived, he was kidnapped, his son-in-law was harassed and has also attempted suicide, and he is now in a Bengaluru house from where he doesn’t step out. Reddy, meanwhile, is believed to be working towards making Leader of the Opposition Sushma Swaraj the next prime minister. Sonia Gandhi has already been warned about this.

WRITER’S EMAIL
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