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How to Fight Against Illegal Mining. The Indian Example

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Illegal mining in India has been an open secret for years, but the rising price of iron ore brought to light a massive underpayment of state royalties due to a distorted measurement of the extracted and exported ore.

India demonstrates once again the strength of its democracy by appointing the retired Supreme Court Judge N. Santosh Hedge as Lokayukta (Ombudsman) of Karnataka state on August 3rd, 2006. Hedge is known for being a tough independent judge and he immediately announced that he wants to “set an example” in a state which ranks fourth in India for corruption.

As already mentioned in a previous article, mineral resources are state property. “Mineral resources can therefore only be operated by a licensed operator along the laws and regulations set by the local government”. Ore exports are subjected to royalties and taxes. Potential corruption opportunities arise, inter alia, during the license attribution process or when exporting the ore (faulty undervaluation of exported quantities).

Hedge final report "mentions the name of the Chief Minister B. S. Yeddyurappa, the Reddy brothers (G. Janardhan Reddy and G. Karunakara Reddy), another Minister Sriramalu and former Chief Minister and Janata Dal (Secular) leader H. D. Kumaraswamy, among others. Besides, it has reportedly named more than 500 officials" (The Hindu, on July 27, 2011). The importance of the loss for the public finance and the massive environment consequences talk for themselves and legitimately outraged the crowd.

"He said the loss to the exchequer for the period 2006-2010 was estimated at Rs.16,085 crore" , wrote The Hindu. 3.3 billion dollars!

But surprisingly, this was not enough: the story was short of dramatic tension. Hedge is kind-hearted and also a cunning politician. He resigned from the Lokayukta position in June 2010, expressing inability to fulfill his anti-corruption mandate. "A cabinet minister wanted an officer to be suspended for having exposed attempts to export illegal iron ore from Belekeri port that was seized by our team on a raid on March 20. When the officer sought my help, I could not do anything (…) I was very disturbed and couldn’t sleep for two days. I told my wife and decided to resign", told Hedge during the press conference organized after tendering his resignation to Governor H R Bhardwaj.

After Karnataka Chief Minister finally admitted a large scale illegal iron-ore export racket, Judge Hedge accepted to reconsider his resignation. He finally retired in August 2011 as he was already anticipated a positive ending to the story.

Janardhan Reddy, one of the most prominent figures in India was finally arrested on September 5, 2011 and has been sent to jail for his involvement in a large scale iron ore illegal mining. Judge’s Hedge report is now in the hands of the Cabinet and will probably have further political, judicial and economic consequences.

Based on the Indian example, what are the determining factors for a successful fight against illegal mining?
  1. A charismatic leader to personify the fight
  2. Strong support from the civil society
  3. Digital and traditional media involvement for large scale awareness and increased pressure
  4. A political regime, democratic enough to bring practical consequences to the pinpointed facts

India score 3 out of 10 (1 being the worst situation) in the corruption ranking released by Behre Dolbear Group Inc. in the 2011 ranking of countries for mining investment. Let’s hope Judge Hedge’s crusade against illegal mining and corruption will be effectively continued by his successor Shivaraj Patil, unlocking what appear to be the last obstacles for India to rank amongst the most attractive mining countries for direct investment.

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