Red Earth: How illegal mining devastated Bellary, Ananthapur

By Paranjoy Guha Thakurta

How did the illegal mining of iron ore in Karnataka’s Bellary district and neighbouring Ananthapur district in Andhra Pradesh impact the people involved?

The big beneficiaries were the Gali Reddy brothers, one of whom - Janardhana Reddy - was arrested on Monday by the Central Bureau of Investigation. Before their luck ran out , the Reddy brothers, and others involved in illegal mining, extracted huge profits from their brazen endeavours. But there has not been any substantial improvement in the lives of the ordinary people who live in the area.

In the first decade of the new millennium, extraction of iron ore in Bellary and Ananthapur became perhaps even more lucrative than mining for gold or diamonds anywhere in the world.

Bellary contributes roughly a fifth of the entire iron ore that is extracted in India. In recent years, there has been a tremendous surge in mining activities in the region on account of growing demand for iron ore from China and also from within India.

Earlier, only iron ore lumps were used, but with the advancement of technology, the demand for iron ore “fines” from India grew exponentially. The prices of iron ore more than trebled between 2000 and 2008 in the world market before declining somewhat. Iron ore prices soared from around Rs 1,200 per tonne in 2002 to around Rs 6,000 per tonne in 2006-07.

India emerged as a large exporter of iron ore after the government opened the mining sector to private investment in 1993. The government subsequently allowed 100 per cent foreign direct investment in the mining of iron ore. At present, India is the third largest exporter of iron ore in the world, of which, one-fifth comes from the mines of Bellary.

The countdown to the August 2008 Beijing Olympics witnessed the commissioning of huge infrastructure projects in China. This led to a hunger for steel in China. The iron ore found in Bellary is of a superior quality, one of the finest in the world, with an iron (Fe) content of 60-65 per cent. It is known as 64Fe. This ore is exported in its raw form to not only China but also to countries like Japan and South Korea where it is converted into pig iron and then finished steel.

The district of Bellary accounts for around 80 percent of the total iron ore reserves in Karnataka. According to official records, the district has 99 iron ore mines, of which 58 are functioning.

However, the ground reality is quite different - there have been as many as 12,000 cases of alleged illegal mining since 2000. According to the Union Ministry of Mines in New Delhi, of the 95 iron ore mines in the Bellary-Hospet area, the Indian Bureau of Mines (IBM) inspected 93 mines (there are legal disputes relating to two mines) and found that there were violations of rules in as many as 89 mines.

The Bureau - with the assistance of multi-disciplinary teams from the Indian Space Research Organisation, the National Remote Sensing agency and the Geological Survey of India – recommended that mining be suspended in 30 mines while show-cause notices were served on the other 63 mines.

According to data available for the year 2005 and 2006, the government earned a relatively small sum of Rs 80 crore as royalty from the sale of iron ore in those two years. While the state government earned a measly sum of royalty to the tune of Rs 27 for each tonne of iron ore mined, mining leaseholders made huge profits by exporting the same tonne of ore at prices upwards of Rs 6,000 per tonne.

On 16 July 2010, the then Chief Minister of Karnataka, BS Yeddyurappa, acknowledged in the state assembly that over 30 million tonnes of iron ore had been illegally exported from Karnataka over a seven-year period between April 2003 and March 2010. The total worth of this huge quantity of iron ore would be at least $1.5 billion, or Rs 7,500 crore (assuming very conservatively that each tonne of iron ore was worth $50 in the international market).

The then Chief Minister contended that out of the 30 million tonnes illegally exported, only around 10.5 million tonnes of iron ore had been illegally exported out of the state during the first two years of his term.

As per the calculations of the former Lokayukta (Santosh Hegde), the cost of excavating a tonne of iron ore is about Rs150 per tonne. Transporting it to a seaport costs another Rs 150 per tonne at the most. These two components are legitimate expenses which add up to around Rs 300 a tonne. While transporting iron ore to a port, trucks are invariably overloaded. A single rear-axle truck with a loadable capacity of 15 tonnes often carries a load of up to 25 tonnes, while a double rear-axle vehicle with a loadable capacity of 25 tonnes is often overloaded and carries twice as much.

Trips from the mines to the ports are made rapidly to transfer as much of the ore as possible in as little time as possible. While making several trips to the port and back to the mines, each truck traverses a distance of around 600 km in less than 24 hours.

In order to bypass laws and rules, it is estimated that around Rs 200 is paid as bribe per truck to officials of the state government (from the Transport Department) and the customs department (of the Union or federal government). Thus, according to the Lokayukta’s calculations, the total expenses incurred on every truckload of iron ore varies between Rs 500 and Rs 600 a tonne.

Thus, on an investment of Rs 500-600 for extracting and transporting one metric tonne of iron ore, mine-owners have been earning windfall profits of between Rs 5,500 and Rs 6,500 a tonne. Keeping these calculations in mind, it has been estimated that with more than 10,000 trucks making the rounds every day, mine-owners in Bellary, legally and illegally, had been raking in an amount varying between Rs 12 crore and Rs 20 crore each day!

Iron ore mined from Bellary and Ananthapur is exported not only through ports like Mangalore, Karwar and Belekeri (in Karnataka), but also through Krishnapatnam, Visakhapatnam and Kakinada (in Andhra Pradesh), Chennai (in Tamil Nadu) and Mormugao (in Goa).

Even as India intends increasing its domestic steel production substantially, many apprehend that much of the country’s good quality iron ore has already been sent out of the country. For years now, there have heated debates in India on whether exports of iron ore should be banned or whether a stiff duty should be levied on exports. In early- and mid-July 2010, as the Opposition in the Karnataka assembly mounted demands for the resignation of the Reddy brothers from their ministerial positions, the state government banned all exports of iron ore.

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According to the Lokayukta, had proper norms and procedures related to iron ore mining been followed and the guidelines laid down by the Indian Bureau of Mines (IBM) been adhered to in letter and spirit, iron ore reserves in the region would have lasted between 25 years and 30 years. However, since private mine-owners have violated all norms while extracting iron ore with the help of modern excavation equipment, geologists have claimed in 2010 that the entire iron ore reserves of the Bellary-Ananthapur region would get exhausted over the coming five to eight years.

The mining town of Bellary, which has a population of around two million, boasts of a per capita income which is in excess of Rs 47,000 and is well above the average per capita income of Karnataka (around Rs 41,000). However, the literacy rate of the town, at 57 percent, stands well below the average literacy rate of Karnataka (around 67 percent).

Large-scale illegal iron ore mining has resulted in sharp economic polarisation by concentrating wealth in the hands of a few while pauperising and impoverishing a large section of the local population, depriving them even of their basic human rights and contributing to the widespread pollution of their air and water.

Iron ore mining has resulted in the creation of a nouveau riche class in the region. This can be gauged from the fact that luxury carmaker Mercedes Benz sold at least 25 vehicles to mining tycoons in Bellary over 2008 and 2009. Its rival company BMW has plans for setting up a satellite dealership in the nearby town of Hospet while Honda Siel Cars India Ltd has expressed its intention to set up a showroom in Bellary.

According to one estimate, prior to 2007, Bellary was the emerging private aircraft capital of India because it accounted for almost 10 per cent of the all-India market for private flying machines. As many as eight private aircraft, including two Bell helicopters, are owned by residents of Bellary. Two more private aircraft and two choppers joined the fleet in 2007-08. Mine owners like the Lad brothers, the Reddy brothers, the Baldota family of MSPL and firms like Bellary Iron Ores and Hothur Iron Ore are some of the prized owners of private aircraft in Bellary.

Large sections of the people of the district, on the other hand, continue to live in abject poverty. According to the Karnataka Human Development Report of 2005, Bellary ranked 18th among 27 districts in the state. The report added that Bellary was placed the lowest among all the districts in the state in terms of social indicators such as literacy, health and access to drinking water.

The report pointed out that even though the district is 9th in terms of income among all the districts of Karnataka, “higher income does not automatically translate into an improved literacy and health status for the people if that income is not equally distributed”.

Mining has also had its impact on employment patterns. Earlier, agriculture used to be the primary occupation for the people, but many farmers have leased out their lands for mining of iron ore. Karnataka is among the states in India that engages women in large numbers in mining. Women are mainly involved in activities like loading, unloading and stone crushing. Women work for long hours in pitiable conditions (sometimes even when they are in advanced stages of pregnancy) and for wages that are far lower than those paid to men.

Children as young as three years of age are engaged in activities like hammering, crushing and filling boxes with iron ore, again at abysmally low wages, in clear violation of the laws of the land. Far from getting decent education and health facilities, these children are exposed to serious health hazards from inhaling air with high proportions of suspended particulate matter and are also prone to accidents.

Mining in Bellary has adversely affected the environment in the region. A study by the National Environmental Engineering Research Institute (Neeri) found that suspended air particles at many locations in the district were far above the national health standards. According to Neeri’s report, the dust hanging in the air of Bellary due to rampant mining is a serious health hazard.

The area has high incidence of lung infections, heart ailments and cancer. However, the Karnataka State Pollution Control Board (KSPCB) has been tardy in issuing notices to mine-owners under existing laws (including the Air Act, 1981 and the Water Act, 1974).

Mining has had adversely impacted the forest areas, including the ‘reserved’ forest areas, in Bellary and Vyasankere. Dumping of waste material has caused erosion of the topsoil of the region. Species of wildlife such as the as the Egyptian vulture, yellow throated bulbul, white backed vulture and four-horned antelopes have vanished due to depletion in the forest cover on account of mining.

Rainwater that used to earlier flow down hillocks and replenish underground aquifers now picks dust along the way, contaminating water and degrading soil, making farming difficult. Studies point towards a fast rate of siltation in the Tungabhadra reservoir due to the deposition of waste material generated from mining.

A 2005 study by the Jagratha Nayaka Balaga, an NGO based in Bellary, says the total capacity of the reservoir has come down from about 133 thousand million cubic metres (tmc) to 99 tmc in recent years. This depletion in the water level in the reservoir has threatened aquatic life and constrained irrigation for agriculture. The fact that some 7,500 trucks carrying heavy loads of iron ore (often far above the permissible limit of 15 tonnes per truck) move out of Bellary every day has damaged long stretches of roads and added to atmospheric pollution.