Part I: Bellary And The Reign Of Reddys

For close to 10 years, the Reddy Brothers ran an elaborate system that bled the iron-ore rich district dry. How did they succeed?

Part I: Bellary And The Reign Of Reddys
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For the second part of this story, click here.

It’s 2007, Manmohan Singh is the Prime Minister of India, but far away from Delhi, in northern Karnataka, a forest officer has disguised himself as a labourer to investigate illegal mining in the iron-ore rich district of Bellary. UV Singh, the youngest of seven siblings and the son of a small-time farmer in Rajasthan, was technically not a ‘local’. But stripping himself of the privileges that came with his job in the Karnataka administration and posing as a labourer, he managed to blend in. “I wanted to have first-hand information without informing (local) officers and lessees,” Singh told Newslaundry matter-of-factly.

Going incognito had been essential because by then, there were murmurs all over Bellary about how the district was under the thumb of Gali Janardhan Reddy and his legion. Those who belonged to Reddy’s inner circle say Reddy believed he was a reincarnation of the 16th century king Krishnadevaraya, hailed as one of the greatest rulers of the Vijaynagara empire. Reddy, who actually had his own golden throne and is rumoured to have had himself ‘crowned’ at a secret ceremony in Hampi, had no idea that his kingdom was about to crumble – because of a Rajasthani farmer’s son.

The red earth of Bellary has always been known for its mineral riches. Mining in this region began way back in the colonial era, but illegal mining is a recent phenomenon. The introduction of amendments in 1994 to the Mines and Minerals (Development and Regulation) Amendment Act, 1957, opened up mining to private investment, priming Bellary for the ‘China boom’ of 2002.

Prepping for the 2008 Olympics in Beijing meant a sharp spike in construction, which in turn meant a dramatic increase in the production of steel, and that meant a massive demand for iron ore. In 2000, the price of iron ore had been approximately Rs 1,200 per tonne. Over the next three years, the rates would shoot up to Rs 5,000 per tonne. Among those who struck while the iron was hot was Reddy. Between 2001 and 2006, iron ore production increased by 237 per cent in Bellary.

Yet, according to the 2011 census, 33 per cent of families in the district lived Below the Poverty Line (BPL). Bellary was one of eight districts in Karnataka with less than 60 per cent female literacy. It also had the second lowest number of institutional childbirths in the state at 45 per cent. The Karnataka Human Development Report of 2005, ranked Bellary 18 out of 27 districts on the human development index (HDI). Mining also wreaked havoc on Bellary’s forest cover. The recorded forest area in Bellary used to stand at 1,38,000 hectares in its better days but by 2009 it had dropped to 77,200 hectares. Even while it prospered, Bellary – which also had the highest concentration of privately owned aircraft for any district in India – was being systematically ravaged.

The Republic of Reddy

According to the Ministry of Corporate Affairs’ records, in 2002, one Gali Janardhan Reddy incorporated the Obulapuram Mining Company (OMC) with a mining lease in a village called Obulapuram, in Andhra Pradesh’s Anantapur District. Anantapur shares a border with Bellary. This was Reddy’s first mine and the beginning of a small empire. In Bellary, he gradually took over a mining lease in Ramgad, controlled by Associated Mining Company (AMC).

Source: Lokayukta Report, July 27, 2011

AMC’s company records show that Reddy and his wife Gali Lakshmi Aruna became two of four partners in the firm on July 31, 2009. Twenty-four hours later, the two were the only partners in AMC.

AMC, a small mine of a little over 10 hectares, is now defunct and an unsettling sight. Once this area had been a hillock with a church on top, but the blasting and mining has left behind only a cavernous, red hole in the ground.

The defunct AMC mine today

The other Reddy mine, OMC, was shut down by the Supreme Court in 2010, after a Central Bureau of Investigation (CBI) probe was initiated against Reddy in 2009 for illegal mining. AMC suffered a similar fate in 2011, when the SC ordered that it be closed.

On paper, Reddy owned only OMC and AMC, but their influence coiled its way around practically every mine in the area. With his two brothers, Reddy established a nexus of transport and mining mafia, and bureaucrats on the Reddys’ payroll, which UV Singh’s investigations for the 2011 Lokayukta Report would reveal. Through employees and henchmen like V Anjaneya (who would eventually turn into an approver against the Reddys in a CBI investigation) and Mehfouz Ali Khan, the Reddy brothers ran an elaborate but tightly-controlled system that ensured a large number of the mines turned over their yield to the Reddys. Few objected because the Reddys were invincible. Irrespective of political leanings, zilla panchayat and gram panchayat leaders are said to have been paid Rs 10,000 every month, for their silence and cooperation. Those who didn’t tow the Reddys’ line were often kidnapped or beaten up or both. As one former employee would tell the CBI, years later, “The government belongs to GJR [Gali Janardhan Reddy].”

In a little less than a decade, the Reddys amassed an incredible fortune while their parallel ‘republic’ in Bellary bled the district dry. Their name was synonymous with helicopters and gold- a throne made of solid gold, shirts with golden thread woven into them, a gold-plated Blackberry, cutlery and bathroom fittings made of gold – it was almost as though Reddy was a modern-day Midas. With the wealth came paranoia: Reddy had a bomb shelter built in his house, which is ironic since he was the only one responsible for explosions in the area.

There were some who did complain. On the AP side, there were accusations of encroachment against OMC by neighbouring lessees as well as allegations that the state border was being disturbed by mining activities. This was later confirmed by Anjaneya, who admitted, “Before inspection from the Karnataka side, we blasted the boundary to suit our needs.” In the course of his investigation, Singh also found that the rock markings that demarcated the border had been disturbed. With reference to the state borders this is what the Lokayukta investigating officer says, “These [rock markings] were the symbols that the boundary goes like this,” Singh told Newslaundry. “Because mining was going on, all this was destroyed.”

Turning Bellary into their private fiefdom proved to be a double-edged sword for the Reddy brothers. There was the wealth and power the Reddys accumulated, but at the same time, when the investigations began, every road led to the Reddys. From the Supreme Court-appointed Central Empowered Committee, to the Karnataka Lokayukta, and the CBI, everyone pointed fingers at them. The CEC’s report, submitted in April 2011, led to mining operations being stopped in Bellary by the order of the Supreme Court. Three months later, the second part of the Lokayukta Report, compiled after three years of research, was submitted.

Singh’s investigations for the first Lokayukta report made him realise just how sprawling the Reddys’ illegal operations were. He said he faced “two-three [death] threats which were slightly serious”. The first one, he remembered, occurred in Chitradurga district in 2009, when an earth-mover almost killed him. “I put my vehicle in front of one and these people just smashed the vehicle,” he recounted, without a flicker of drama in his retelling. “It was a fraction of second in which I pushed the driver to one side and I came out of the other side.”

THE LOKAYUKTA REPORTS

The Lokayukta Reports of 2008 and 2011 make up an exhaustive dossier on the Reddys’ activities in Bellary. Led by Karnataka Lokayukta (Ombudsman) and retired Supreme Court judge, Justice Santosh Hegde, the report’s findings are widely credited to Singh. “Practically, he (Singh) was doing the investigation,” Hegde told Newslaundry. The first report named nine government officials, one Indian Administrative Service (IAS) officer and a chief minister as involved in the Reddy operation. The second report exposed “more than 700 government officials, three chief ministers and seven other ministers (in the Karnataka government),” said Hegde. 

Singh discovered that the Reddys identified mines in the region whose operations they would proceed to take over surreptitiously. Front companies controlled by Reddy’s close confidantes (including his brother-in-law BV Srinivas Reddy) would manage these mines by proxy. This was known as “raising contracts” and is illegal. The ore produced by the identified mines would then be transported and exported by the Reddys, who would pocket the profit made from selling and exporting it. Government officials were bribed or intimidated into ignoring irregularities.

The report also revealed that that in Goa, “iron ore of Karnataka origin is blended with iron ore of Goa origin, to improve its Fe content before it is exported”. Disguised as ‘Goa ore’, which is inferior in quality to Bellary’s iron ore, it was possible to export lakhs of tonnes of illegally mined Bellary ore as Goa ore to overcome the restrictions on the former. “Without their (Reddys’) consent, without their knowledge, nobody was able to do anything,” Singh said.  

The Lokayukta report was like an earthquake in Karnataka’s politics and the first casualty was Chief Minister BS Yeddyurappa. He resigned five days after the report was submitted. Sushma Swaraj distanced herself from the Reddys. Just about a month later, Reddy was arrested by the CBI. Though Reddy’s arrest was not a direct consequence of the Lokayukta Report, Singh had exposed Reddy the way no one else had been able to before.

Read the first NL Sena story here.

This story is part of the NL Sena project. It was made possible thanks to Arnab Chatterjee, Rahul Pandey, Narasimha M, Vikas Singh, Subhash Subramanya, S Chattopadhyay, Ameya Apte and other members of the NL Sena. We want to do more such stories and you can help. Be a part of the NL Sena and do your bit to keep news independent and unafraid. Click here. 

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