Saturday, December 29, 2012

Mining Scam : Illegal mining-losses between Rs 20k to 30k crore

Illegal mining in Karnataka is a matter that is being investigated by many agencies and the losses that each of these agencies have estimated is shocking in number. The latest is a report by the Comptroller and Auditor General (CAG) of India which has estimated the loss caused due to illegal mining at Rs 3414 crore and ironically the state government has been able to recover just Rs 7.22 crore. However according to Anita Pattanayak, Principal Accountant General (Audit) of the CAG, Karnataka, “ if one goes by the current value of ore then the loss can be at an estimated Rs 25000 crore. The current market value of iron ore is at Rs 4800 per metric tonne.

The report of the CAG between the years 2006 and 2011 was put out before the Karnataka legislative assembly. The losses which are mentioned in the report are as per the market value of iron ore in those respective years. However if one takes into account the value of ore today, then the loss is at Rs 25000 crore.

The CAG in its report has made the estimation based on the amount of Rs 750 per metric tonne of iron ore. Today the market value is seven times higher and hence the figure of Rs 25000 crore could be arrived at. However the government of Karnataka which had claimed that it had acted against illegal mining managed to recover just Rs 7.22 crore and that is once again as per the estimated value of Rs 750 per mt tonne.
Photo Courtesy - Codrington, Stephen. Planet Geography 3rd Edition (2005)

Former Lokayukta of Karnataka, Justice Santhosh Hegde who had put out the first report on illegal mining had estimated the loss to be at around Rs 16085 crore. This was a figure arrived at based on the market value of the year in question and the report was based on the mining losses between the years 2000 and 2011.

The report by the CAG would only go on to show the sudden rise in illegal mining between the years 2006 and 2011. It has been considered to be the peak time for mining and the demand for ore has shot up during the China Olympics. This has led to a lot of illegal mining and hence the losses too were at a record high.

In the report by the CAG it states that the department of mines and geology had accepted audit observations of Rs 1212.12 crore and had recovered just Rs 7.22 crore. The report also came down on the Karnataka government for not having drawn up any plan to monitor the Karnataka Mineral policy.

Justice Hegde, says that the valuation done by the CAG is very much in tandem with the report put out by him when he was the Lokayukta of Karnataka. The CAG agrees with the valuation done by us. We had done the valuation for the years 2000 to 2011 and we estimated the losses as per the market value of iron ore of each year. As per our estimates it was at Rs 16085 crore. The CAG has estimated as per the value of Rs 750 per metric tonne and hence finds the loss at Rs 3414 crore. However the loss is much higher if taken at the current market value of Rs 4800 crore per metric tonne.

The Central Bureau of Investigation is also looking into the case and puts the loss at Rs 15000 crore. However in specific to the Obulapuram Mining Company run by Janardhan Reddy it says that the loss caused by this company alone is Rs 5100 crore.

The Central Empowerment Committee which was appointed by the Supreme Court to look into illegal mining in Karnataka is yet to put out a complete report on the issue. But it had told the Supreme Court that it would estimate the loss at around Rs 30000 crore as per the current market value of iron ore.

The Goa scenario: 
The scene is equally bad in Goa too. The matter which was first probed by the Justice MB Shah Commission says that the total loss caused to the exchequer of the state due to illegal mining is Rs 35000 crore as per the current market value of iron ore. This is around Rs 10000 crore more than Karnataka. The CEC too in its report which was submitted recently had estimated the loss at around the same amount. The CEC had submitted an interim report and would put up a final one in the next couple of months which would give a better picture of the loss due to illegal mining.

Photo Courtesy - Tagebau Garzweiler Panorama 2005 - Copy Right - Raimond Spekking
Modus operandi:
The modus operandi in both the states which have been badly affected due to this issue remains the same. In both the cases it has been found that illegal mining took place with the blessings of the government. In Karnataka it was the BJP, JD(S) and the Congress which facilitated illegal mining whereas in Goa the entire blame has fallen on the Digambar Kamath led Congress government.

Thanks to the involvement of politicians in illegal mining in both states they found it easy to flout the norms and mine illegally. In both the states the bulk of the mining was found in restricted areas such as forests which shook up the ecology of the region badly. Further it was also found that ore more than the permissible level was ferried out of the region. This had led to the loss to the state’s exchequer and in both states it was found that the recovery was a negligible amount.
December 13, 2012


  1. Thank you for using my image with fine crediting of my name.


    But I ask you to add the license information too. This is important to show all readers that this image is available under a free Creative Commons license from Wikipedia/Wikimedia Commons. Please use this credit line:

    © Raimond Spekking / CC-BY-SA-3.0 (via Wikimedia Commons)

    Thank you very much.