India mining scam 'cost govt $3.6 bn'

An Indian judge investigating corrupt mining practices in a resource-rich southern state said on Wednesday that illegal extraction had cost the public $3.6 billion.

He accused politicians in Karnataka, including the state's chief minister B.S.

Yeddyurappa, of causing the losses from 2006 to 2010 through the illicit mining of iron ore, much of which is thought to have been shipped to China.

Some 160.8 billion rupees ($3.6 billion) "has been lost to the exchequer between 2006 and 2010 due to the illegalities and irregularities linked to the grant of licences and the export of iron ore," Judge Santosh Hegde said in state capital Bangalore.

"In the illegal mining and irregularities committed in the export of iron ore, we have found the involvement of some 100 mining companies, about 600 officials, powerful politicians including the chief minister," Hegde said.

The report, totalling 25,228 pages, said the federal and state government exchequers had lost money in the form of royalties, central excise duties, value-added taxes and other levies.

"I have recommended in the voluminous report the prosecution of state chief minister B.S. Yeddyurappa as a public servant under the Prevention Corruption Act, 1961 for his direct involvement in the mining scam as the mining department comes under him," Hegde said.

The report also said that the chief minister?s family members, including one who is a member of the national parliament for the opposition Bharatiya Janata Party (BJP), had benefited from the mining fraud.

The report found massive illegalities committed by four members of the state cabinet including the revenue and infrastructure ministers, former chief minister H.D. Kumaraswamy, a national Congress parliamentarian and another BJP lawmaker.

Media reports have suggested rampant connivance in the scandal, highlighting one incident in March 2010 when investigators stumbled across 800,000 tonnes of ore stored for shipping at a local port without the necessary paperwork.

The Indian Express newspaper said the seized iron ore was worth 2.5 billion rupees.

According to Hegde, iron ore, used in steelmaking, was being mined in the state's Bellary district and then transported and shipped from three ports in Karnataka and from one in the nearby state of Andhra Pradesh.

His probe report also suggested China was the largest importer of Bellary ore while some of the illicit product, without any paperwork, was also being marketed in eastern Asian countries and in Brazil.

"We have recommended wherever illegalities have been committed... cancel their (mining) lease and recover four times the value of the stolen ore from them," the judge said.

"We have also recommended the export of ore should be stopped because it is not a regenerable commodity."

The mining scam is the latest in a series of corruption scandals in India, which is still reeling from the bungled sale of telecom licences in 2008 which is estimated to have cost the country up to $40 billion.

The former national telecom minister and 15 others including company executives and bureaucrats are currently on trial facing charges of manipulating the process to favour certain companies in exchange for kickbacks.

The ombudsman's explosive findings could trigger a collapse of the Karnataka BJP government, analysts have said.

The allegations contained in the report are seen as undermining the BJP, which has been spearheading the anti-graft campaign nationally against the Congress-led government of Prime Minister Manmohan Singh.

Karnataka, which accounts for a quarter of the country's iron ore exports, banned shipments in July 2010 to curb illegal mining.

Yeddyurappa said before the report was released he would consult cabinet colleagues and legal experts once he saw its contents.

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