Mining scam: Is raising contracts the root cause?

The job of any investigating agency that will be looking into the multi crore illegal mining scam in Karnataka will not be an easy job. The interesting part is that every party has come out in the open and blamed each other for this scam which has made every citizen wonder who is responsible for the multi crore scam.

The various documents which have been trickling in since the past couple of days when read with the probe by the Lokayukta, Justice N Santosh Hegde go on to reveal that it is the issue of raising contract which makes it hard to probe such a case. Advocate General of Karnataka, Ashok Harnahalli in an interview with rediff.com on Tuesday too had pointed out that raising contracts are the biggest hindrance to this probe and there is a need to ban it immediately.

Documents would go on to reveal that out of the 80 odd mining leases in the Bellary region, at least 45 are raising contracts.


What is a Raising Contract?

Raising contract is basically an agreement between a mine owner and a third party. Once a person is issued a mining contract he is approached by a third person who in turn offers to carry out the mining activity on his behalf


Though the title `Mineral Raising Contract Agreement’ is termed illegal in the mineral rule book, it has become an unwritten rule came into effect of late in multi-billion worth Bellary iron ore mining business. The irony however is that the raising contractor manages to get a major share of the profit which amounts up to 80 per cent where as the actual owner is left with the remaining amount.
Lokayukta Justice N Santhosh Hegde says that this is an unwritten rule mainly in the Bellary area. The rule book clearly mentions that raising contracts are violative of Rule 37, 37A and 46 of the Mineral Concession Rules and contrary to the covenant of clause 17 and 18 of Part VII of the Mining Lease deed.

The statements that have been obtained from some of the mine owners which are part of the ongoing investigation into illegal mining go on to reveal that third parties or the mining lords force them to enter into such a contract. On most occasions they are threatened to hand over the lease. One such mine owner who has handed over his contract told rediff.com that he was forced to hand over the lease. I am too afraid to take names but they had said that they will ensure that there will be many hurdles if I undertook mining operations by myself.

Justice Hegde says that the living conditions in Bellary are extreme thanks to the weather. Most of them don’t want to live over there and cannot operate the mines and hence they part with their leases.

Officials say that raising contract is an unwritten rule and there is no documentation to this. Even though this is illegal it is very difficult to proceed against them since there is no documentation to this.

The Lokayukta report states that there are nearly 40 such contracts. There is an interesting annexure to this report by Dr U V Singh, a senior Forest officer in which he mentions that the Obulapuram Mining Company which is incidentally owned by the Reddy brothers, Janardhan Reddy and Karunakar Reddy has allegedly encroached Karnataka land. The annexure says that the OMC has allegedly entered into an agreement with Hind Traders through a raising contract and in the bargain has altered the border.

Investigations show that the profit alone made by the raising contractors per day is Rs 17 crore. When one calculates the amount that is being mined from the 45 mines (1.80 lakh tonnes per day) which are handled by raising contractors it shows that they earn Rs 39 crore per day. After exclusion of the duty, taxes and other expenditure the raising contractor is left with Rs 17 crore per day of which he parts with 20 percent to the mining owner. While this is what they earn legally, there is also the added money that is being earned through illegal mining which preliminary reports suggest could be twice the amount. The money earned from illegal mining goes directly to their pockets and there is only the expense of labour and transport is what they have to shell out.

It may seem like an impossible situation to investigate. The Reddy brothers have openly challenged both the Congress and the Governor to show that they own even an inch of mining land in Karnataka. Justice Hegde however says that it is not an impossible situation. Maybe there are no documents to show that people have entered into a raising contract. The start of such a probe may be difficult, but then we have the power to interrogate. We are aware that almost 90 per cent are raising contracts in the Bellary area and we are getting to the bottom of it. We have seized several fake permits and we have to put two and two together and join the dots. Under no circumstance will anyone get away scot free. I have also been watching the developments over the past few days where all the parties are making allegations against each other on this issue. This is a good sign and we will summon for documents from each one of them and will use it as a lead to the investigation, Justice Hegde also pointed out.