The Bellary Minefield

Image: Gireesh G V for Forbes India

Rahul Baldota grew up in a dusty old mining town, but in privilege. He is the elder son of Narendrakumar Baldota, the Marwari owner of MSPL, Karnataka’s Bellary district’s largest iron ore mining company. After completing his schooling, Baldota got an engineering degree. He later moved to the US and studied at the University of Illinois, Chicago, to get a management degree. By the time the 28-year-old Baldota returned home in 1993, MSPL was getting ready for the biggest boom in the global iron ore industry.

While Baldota was busy cramming engineering formulae, a young man two years older than him was learning the tough ways of a mining town. The locals knew him as Janardhan, son of a local CRPF constable. He wasn’t very good at studies. Soon he started a hotel, which did not work. He started a tabloid and that didn’t work either. He then started Ennoble India Savings and Investment Company, a chit fund. It too went bust and left his family with debts that ran in crores. It seemed Janardhan would remain just another man in a dusty town.

In 1999, he took a punt on politics. He went campaigning around the streets of Bellary on a scooter for Bharatiya Janata Party’s Sushma Swaraj in the 1999 Parliamentary elections. That changed his luck.

A couple of years later, he entered the iron ore industry and found a way to make money; enough to buy helicopters and to maintain a private army. The world now knows him as Gali Janardhan Reddy, a mining magnate in Bellary. And he doesn’t care for old money.

Reddy now holds sway over mining in the district. And that has brought about a face off between Baldota and him, with accusations and counter-accusations of attempts to forcefully gain control over the district’s mining sector.

Baldota insists that Janardhan Reddy, the man he never heard of while growing up, now has him in his cross-hairs. “Reddy already has almost all the miners in Bellary paying a ‘tax’ to him through something called as a raising contract,” he says. A raising contract is an illegal agreement through which a mine owner gives permission to a third party to run his business and take a share of the profits, or “lift” a certain amount of iron ore from his mines. According to Tapal Ganesh, another iron ore miner in the region, Reddy’s share of profit can range from 15 percent to over 50 percent.

Now Reddy wants a similar contract with MSPL, the erstwhile king of trade in that area. Baldota says he has managed to resist the overtures but has suffered financially in doing that. As of now, he is the last man standing against the might of Reddy.

The first move from Reddy came in 2008. Only a few months earlier, he had led BJP to an almost clean sweep in the district for elections to the state assembly. “Reddy sent a message that he wanted to meet Rahul,” says a senior official at MSPL. Baldota instead sent two of his senior executives. Reddy was not amused. He asked again for the Baldota scion. He was turned down again.

According to Baldota, the meeting was to decide the terms of the raising contract.

“We are among the oldest miners of Bellary. For 50 years, we have worked hard and are passionate about mining. How can I give it off just like that? If I had given in to the pressure once, he would keep coming back for more,” says Baldota.

It has not been easy to resist Reddy in Bellary, even for someone like Baldota. Reddy has built his clout over time. In the early part of this decade, Reddy got his foot into the mining business by buying a mine in Obulapuram village in Andhra Pradesh. The village lay on the border of Karnataka and Reddy’s mine bordered that of others, including that of Tapal Ganesh. Some of the miners admit the move was a “brilliant case of foresight and understanding”.

“With the mines in Andhra Pradesh, Reddy readily enjoyed [Congress leader and two-time Andhra Pradesh chief minister] Y.S.R. Reddy’s patronage,” says Ganesh. Perhaps giving an insight into Reddy’s working style, the 2009 report by the Supreme Court’s Central Empowered Committee noted that the boundaries of the mining leases owned by Reddy’s Obulapuram Mining Company (OMC) are “inconsistent”. Moreover, the location of the leases have been fixed in such a way that “unallotted forest areas lying between the above three mining leases as well as part of the approved mining lease of M/s BIOP [owned by another miner S.K. Modi] is included and shown to fall within the approved mining lease of M/s OMC”. Janardhan Reddy, alleges Ganesh, used the location to trespass across the border too, where there were 11 mining leases, including that of Ganesh’s Tumti Mines.

Image: Gireesh G V for Forbes India

LAST MAN STANDING It is not easy to resist Reddy, even for someone like Rahul Baldota

In 2008, Reddy won the Assembly elections and went on to become the state tourism minister. His associates also won seats from Bellary region and became ministers. “In Bellary district, there would be about 50 officials from across the departments who are responsible for the iron ore trade,” says miner Anil Lad. “When Reddy came into power, he changed each one of them. Most of the miners are small and will easily fall prey. And who wants to swim against the tide?” Reddy already had the muscle power. The political power made him unassailable. “The whole local administration, from the police to the mining department, was under his control,” says Ganesh. Most miners keeled over.

Reddy then went after the biggest fish, MSPL. A raising contract with MSPL has the potential of being highly lucrative. The company holds five mining leases in the district, running over hundreds of acres. At an annual production of 5 million tonnes of iron ore, it is the largest miner in Bellary. In 2007, MSPL had clocked revenues of nearly Rs. 3,000 crore and about 80 percent of it came from the iron ore business. MSPL also has interests in wind energy, industrial gases and chemicals.

Two years later, Baldota reiterates that “except for one or two instances of crossing each other during social functions, I have never met [Reddy]”.  The rebuttal was successful and Reddy no longer pursued Baldota, at least directly. But the results of the siege have not been pretty for MSPL.

For the past 15 months, the company has had to face a complete stop in its production and export, save for a temporary relief for a month this year, when it was able to export one lakh tonnes of the mineral. This is because the local administration has refused MSPL almost all the numerous permits that are required at the different stages of mining. Company officials say that almost 2.5 million tonnes of iron ore, equal to half a year’s production, is lying in heaps at the mines. “During the monsoon, almost 15 percent of the ore in fines [almost powder] form, gets washed off,” says Meda Venkataiah, MSPL’s executive director of mining. Left with no revenues to show, the company is yet to account its financial results for 2009 and is mulling an 18-month accounting year to show some numbers.

While Reddy’s office declined multiple requests from Forbes India to meet the minister-cum-miner, OMC’s legal adviser, Rajasekhar Dasari, denied MSPL’s allegations. “Reddy has not approached Baldota at any time for a raising contract. In fact, the only time OMC approached MSPL was for the help of other miners who were being harassed by Baldota’s men,” he says.

Dasari alleges that MSPL had trespassed into the neighbouring mines belonging to SB Minerals and another Bellary resident Shantalakshmi Jayaram. “These two had approached us for help against MSPL and we thus intervened. Since then Baldota has been against us,” says Dasari. “Baldota is the biggest illegal miner in Bellary and has more than 50 cases pending against him,” he adds. Janardhan Reddy, in the past, has called Baldota a “mines Veerappan”, after the infamous sandalwood smuggler.

When asked about these allegations, MSPL’s corporate communication department wrote back that the “allegation was totally false. With regard to SB Minerals and Shantalakshmi Jayaram, there are SC and HC verdicts restraining them to work in our territories. Despite that they continue to work. In the recent orders from IBM [Indian Bureau of Mines] they have suspended SB Minerals operations but they continue to work despite this order. OMC is carrying out operations in this area as raising contractors and continue to dodge both the local officials and the Govt.” Baldota reiterates that SB Minerals has “trespassed into our mines”. Dasari counters that by saying that OMC is only giving “moral help” to SB Minerals and Shantalakshmi Jayaram.

The circumstantial evidence does point to an unfriendly local administration from MSPL’s point of view. MSPL officials recount an incident when officials of the mines and geology department had come to the company’s Vyasanakere mine to conduct a survey. “Their machine was kept in such a manner that the official said that his view is being obstructed by the branches of a tree. He asked those branches to be cut off and we did. Two days later, we got a notice from the forest department saying we have committed a Forest Offence Case by cutting trees without permission!” says Venkataiah of MSPL. Many of these officials, claims Baldota, have asked him openly to “come to an understanding with Reddy”.

Though the reasons might be disputed, for MSPL more such notices followed. “They even dug up old cases where MSPL had given clarifications and were [resolved], and came back with more questions,” says Venkataiah. The MSPL veteran particularly faced tough times and even went through a “kidnap attempt”. This attempt was a day after an interview of his was aired by a channel as part of a show on illegal mining in Bellary. The show also focussed on Janardhan Reddy. “The men, including some policemen, started banging on my door at midnight. I called my office colleague who came with another set of policemen. Though I was eventually taken to the police station, I am sure they initially wanted me to take to an isolated place and scare me off,” says Venkataiah.

Infographic: Sameer Pawar

Baldota says he has not faced any threats till now; ironically, a case was filed against him for giving a supari (a contract to kill) against B.V. Sreenivasa Reddy, OMC’s managing director. “It was dismissed by the court,” he shrugs it off.

But Dasari says, “Baldota has managed [to influence] whichever government comes to power. It is doing so again. But its work has been stalled because of non-payment of penalties of more than Rs. 200 crore and thus he is frustrated. And I don’t know what he means by a raising contract. We don’t do such stuff.”

That doesn’t sound logical when you consider the evidence. Backed by the local administration, Reddy also “easily” got permits to move “unheard amounts” of iron ore from his mines, which were not known to have huge reserves, says V. Anjaneya, Reddy’s former general manager who turned whistleblower. Then, asks another iron ore miner, Anil Lad, “How did OMC, which has just over 150 acres of mining area, get a permit to dispatch 5 million tonnes of iron ore a year? On the other hand, the state-run NMDC has a permit to transport 5 million tonnes of iron ore from an area of over 2,000 acres!” This is supplemented by documents belonging to Andhra Pradesh’s Forest Department that show that OMC’s despatch increased from 2 million tonnes in 2005 to more than 4 million tonnes in 2008.

So where did the extra iron ore come from? “Through raising contracts,” say Ganesh and Lad. Dasari disputes this. “Our mines have reserves of 100 million tonnes and we produce more than six lakh tonnes of iron ore every month,” he says.

Thankfully for Baldota, while he was initially on his own, other miners are now opening up. The big contributing factor, local commentators say, “is the cracks that have developed — for the first time — in Janardhan Reddy’s political might”.

Baldota believes that things started changing after Y.S.R. Reddy’s death in September 2009. The change is now definite with the success of the recent padyatra of the Congress (I) party, main competitor to Reddy’s BJP. This saw 4 lakh people participating from adjoining areas. “Earlier, over 40 small- and medium-scale miners had been compelled to join hands with OMC. At least a dozen of them no longer have a raising contract with OMC,” says Baldota. While the numbers could not be verified, other miners in Bellary agreed that the wave is shifting.

Ironically, OMC also has been out of business since November last year. The Andhra Pradesh government, under the new Chief Minister Konijeti Rosaiah, has objected on the lease areas operated by OMC. Despite getting a reprieve from the Supreme Court, which allowed it to mine in undisputed areas, the company was again blocked by the local government.

This might look like poetic justice for other miners who complain of similar problems in “Reddy’s kingdom”. But the fate of illegal mining in the area might be decided by the winner of the Baldota-Reddy standoff.