Illegal Mining in Karnataka : CAG Report, Huge Rs.3500 Crore Loss

huge-3500-crore-lossThe illegal mining committed during 2006-11 in three districts of Karnataka has resulted in the State losing a revenue of Rs. 3414.45 crore and the Government could recover only Rs. 7.22 crore, a report by the Comptroller and Auditor General (CAG) of India tabled recently in the Karnataka Assembly said. In Chitradurga, Tumkur and Hospet divisions four lessees had extracted 14.68 lakh MT of iron ore valued at Rs. 150.59 crore without the consent of Karnataka State Pollution Control Board (KSPCB), the CAG report said.
Mining of iron ore and stone quarrying in Karnataka was selected for the audit as they were two major contributors of revenue to the State in major and minor minerals.Though the report does not audit specific instances of illegal mining of iron ore already conducted by the Lokayukta and under investigation by CBI, the cases relate to six year period during 2006-11 and cases in 2011-12 which was not reported in the first report. Former Karnataka Lokayukta Justice Santhosh Hegde, who had put out the first report on illegal mining in the State, had estimated the loss to be at around Rs. 16,085 crore. This was a figure arrived based on the market value between 2000 and 2011. The CAG report shows the sudden rise in illegal mining between 2006 and 2011. This was around the time the demand for ore shot up during the China Olympics.
Iron ore of 9.95 lakh MT valued at Rs. 107.40 crore was extracted beyond the permissible limit prescribed in the mining plan, the CAG report said. “The cost of the mineral though recoverable, was not recovered,” it added. Out of these, the Department accepted audit observations involving Rs. 1,212.12 crore and recovered Rs. 7.22 crore, said the second CAG report of 2012. The report said despite the accelerated growth in turnover of the mining companies from 2003-2004 onwards, there was no upsurge in revenue from royalty.
“This indicates failure of the Government to recognise the revenue mobilisation opportunity in an industrial sector which was showing an exponential growth,” the report added. It also said incorrect application of sale prices of iron ore published by the India Bureau of Mines in 36 cases in three divisions resulted in short levy of royalty amounting to Rs. 13.11 crore.
The report said the lack of coordination between work executing departments responsible for deduction of royalty at source and Department of Mines and Geology resulted in non or short collection and remittance of royalty to the extent of Rs. 23.75 crore to the Government. The report said though there was a provision for levy of processing fee for minor minerals, no such fee was prescribed for major minerals. “This resulted in potential foregoing of revenue of Rs. 37.85 crore to the State exchequer for the period from 2007-2008 to 2009-2010,” it added.
The report on ‘Controls and Systems for sustainable mining in Karnataka’ submitted in the Legislative Assembly said although the State is empowered to frame rules for preventing illegal mining and transportation and storage of minerals, they were not framed until April 2011. This resulted in illegal mining and transportation and loss of revenue to the State exchequer. The CAG obtained turnover particulars of three prominent companies including Obalapuram Mining company owned by the jailed mining baron G Janardhana Reddy, and VS Lad & Sons Company, owned by the family of Congress politicians Anil Lad and Santosh Lad, to verify whether growth in revenue from royalty was commensurate with the growth in the companies engaged in the mining of iron ore.
Matha Minerals Company owned by the family of the Minister for Housing V Somanna was indulging in excess mining along with dozens of other companies, the report said.
The report suggested to the Government put a system in place for monitoring the implementation of the Karnataka Mineral Policy (KMP) in a time-bound manner so that the desired objectives are achieved within a time frame. It also suggested that the Government may, in line with the suggestions made in the Five Year Plan 2007-12, consider the creation of a mineral development fund to undertake the task of building infrastructure in mining and make efforts to get the railway lines commissioned to improve transport facilities in mining areas.
The report pointed out that no format was prescribed under the rules for maintaining the vehicle check register of vehicles inspected. Details such as the names and addresses of drivers and vehicles owners were not recorded in the register. Verification of quantity dispatched by railways was not done by the Department.
The report recommended that the Government may take up the matter for framing the guidelines/standards for controlling air, noise and water pollution in respect of minor mineral quarries.

 Audit Objectives And Methodology

The main objectives of the audit were to ascertain whether effective controls and systems were in place for:

  •  Monitoring and implementation of mining policies of the Government.
  •  Levy and collection of fees, rent, royalty, penalty, etc.
  •  Grant and renewal of mining and quarrying leases for prevention of illegal excavation of minerals.
  •  Estimation of mineral resources and for fixing targets of production.
  •  Ensuring that environmental and ecological concerns were addressed.
  •  Addressing the socio-economic concerns of people affected by mining.
  •  Checking methodology.

To achieve these objectives, CAG checked the 2011-12 records of the Department of mining and geology in selected districts, records at the Secretariat of Commerce and Industries Department, Environment and Ecology Department, Indian Bureau of Mines, Karnataka State Pollution Control Board and two divisional forest offices (Chitradurga and Bellary) from 2006-07 to 2010-11.


Withdraw cases against anti-mining activists: Goa church

In October, the Goa church demanded that the Government withdraw all the criminal cases filed against anti-illegal mining activists across these years as their stand is vindicated after the tabling of the Justice M. B. Shah Commission report. The Council for Social Justice and Peace, a wing of Goa Church, has also expressed its worry about the people dependent on mining who are facing huge financial debts and the threat of losing everything due to the current crisis impending over the trade.
The Supreme Court in its recent verdict halted transportation and extraction of iron ore in Goa, pending report from the centrally empowered committee which will probe into the illegal mining scenario in the State following the Shah Commission’s findings.
CSJP executive secretary Fr Savio Fernandes said that being sympathetic to the cause of innocent victims of mining crisis, the Council is concerned over the number of criminal cases by the Government and the mining lobby — pending in various courts — in a bid to silence innocent locals who dared protest against the violation of their human rights by the mining industry.
“While the Government considers proposals for compensating those who have lost their livelihoods due to the ban on mining, the Council demands that all pending criminal cases against anti-mining activists be withdrawn as their stand against the excesses and illegalities in mining is now established by the Shah Commission report and found reasonable. This is reflected in the ban imposed by the Supreme Court,” he added.


The Shah panel report on diversion of forest land for mining in Goa is an indictment of both Centre and State administrations.
The report of the Justice M.B. Shah Commission of inquiry on illegal mining of iron ore and manganese in Goa, made public in September this year, indicted two former Congress Chief Ministers of the State, Digambar Kamat and Pratapsinh Rane. The Shah Commission bluntly observes that “inaction, delayed action and mild actions had created a fearless atmosphere, abuse of law and regulations in the Goa State”.
The Commission noted that the production from 1950 to 2000 of iron ore is less than the production in one year, that is, 2010-11, in Goa. Such a sudden burst in output has led to “degradation of environment, loss of bio-diversity, adverse effect on agriculture, horticulture, ground water table level, pollution of air and water and eco-system as a whole of the area”. Iron ore is likely to deplete in Goa in 20 years, the report says.
Tracing the genesis of the reckless exploitation, the Commission recalls that the National Board for Wild Life (NBWL) had decided way back on January 21, 2000, under the chairmanship of the then Prime Minister A.B. Vajpayee to notify areas within 10 km from the boundaries of national parks and sanctuaries as eco-sensitive zones. The decision had been communicated to all the States and Union Territories. But in Goa, the distance of mining leases from the nearest wildlife sanctuary is logged wrongly in almost all cases.
Environmental clearance has been given for 165 mining leases by the Ministry of Environment & Forests (MoEF). The report observes that approvals were granted in many cases under the Forest (Conservation) Act 1980 for diversion of forest land for iron ore mining leases in eco-sensitive zones, without placing the project proposals before the Standing Committee of NBWL. This, the Commission has chastised, “as one of the serious lapses on the part of MoEF”, causing “an irreversible and irreparable damage to bio-diversity, wildlife, environment and ecosystems as a whole in the eco-sensitive zone of the Western Ghats of the State of Goa”. This has led to the sudden spurt in iron ore output in recent years.
Observing that there is no power/authority vested with the Chief Wild Life Warden (CWLW) under the Wild Life (Protection) Act 1972 to accord approval of mining in an eco-sensitive zone, the Commission has observed that, “the CWLW has overstepped and extended undue favour to lessees by approving mining in the eco-sensitive zone wherein he has not been authorised by the MoEF”. It further observes that “most of the approvals given by CWLW is cut and paste irrespective of distance, ecosystem and other physical and biological factors”. Besides, “approvals of CWLW are only for name sake. They are seemed to be ‘decorative gems’ on paper”, the Commission says sarcastically.
It contends that the MoEF (Environment Wing), while according environmental clearances under relevant provisions of the Environment Impact Assessment notifications of 1994 or 2006, has stipulated a specific condition — taking prior approval of the CWLW in 31 mining projects (49 leases) in Goa. While stipulating that such a condition is beyond the provisions of the Wild Life (Protection) Act 1972 and it is deemed an “undue favour extended to the lessees by choosing a soft non-competent authority”, the Commission has urged the MoEF to identify such officers, including the Minister concerned, responsible for stipulating such condition and initiate action against them.
It has suggested the immediate cessation of all mining activities, including transport, for all mining leases where there is no approval or clearance of the Standing Committee of NBWL, including those which fall within 10 km of eco-sensitive buffer zone. Arraigning a range of agencies such as Department of Mines and Geology, Department of Environment, Goa State Pollution Control Board, Forest Department (all State Government departments), Indian Bureau of Mines, Regional Office of MoEF (Bangalore) and Biological Diversity Board (all Central Government departments), it says they have failed “collectively and individually to implement the conditions stipulated” in a plethora of environment-related laws and rules. It also castigates the MoEF for its “total lack of coordination” among its three wings, that is, Environmental Clearance Section, Forest Conservation Section and Wildlife Section. The Commission has pulled up the authorities for having sought unwarranted ‘legal opinion’ even on clear provisions of law in the various Acts. It says the Indian Bureau of Mines and the MoEF have increased production “without a proper justification purely on commercial grounds ignoring the impact of mining on protected areas, environment and eco-systems”.
The Shah Commission has expressed shock that in a public hearing arranged by the State Government for making representations regarding illegal mining before the Commission, most petitioners pleaded for continuing illegal mining or regularisation of illegal mining.The presence of hired persons brought by the mine-owners in the public meeting is a signal that democracy is being misused, the Commission observes, saying: “If illegal mining are to be legalised, then what is the use of law?”
It assails the concerned departments of the State and Indian Bureau of Mines for their failure to control “illegal mining for the reasons best known to them” which, it surmised, “may be due to corruption”. The Inquiry Commission warns aptly towards the end: “Commercial objectives of a few lease holders to earn more profits at the cost of society and natural resources should not be encouraged.”


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