`Raising contracts’ hoodwink mineral rule book in Bellary

By Shivakumar G Malagi

Bellary, Aug 2/2009: Though the title `Mineral Raising Contract Agreement’ is termed illegal in the mineral rule book, it has become an unwritten rule came into effect of late in multi-billion worth Bellary iron ore mining business.
Highly placed industry sources told Deccan Chronicle that mining operation in as many as 44 mining leases of the 78 running mines in Bellary-Sandur-Hospet sector is being carried out under the raising contract agreement entered into with `powerful’ mine lords of Bellary.
Raising Contract is an agreement permitting a third person to carry out mining activity on behalf of the mining lease holder which is in violation of Rule 37, 37A and 46 of the Mineral Concession Rules, 1960 and contrary to the covenant of clause 17 and 18 of Part VII of the Mining Lease deed.

Despite of this, industry sources say that 44 mine lease holders have agreed for raising contract, in addition to this, eight lease holders are in negotiation stage to draw modalities of agreement.
“Of late, accepting Bellary mine lords raising contract offer has become unavoidable for mine owners in district, if I deny the offer, it is sure that I will not get permits from mines and geology department to transport ore and face a many departmental hurdles to operate mines. Instead of leaving mines abandoned, I thought it is better to give them on contract”, remarked a Sandur mine owner who accepted 40-60 agreement offer with Bellary mine lords.
Industry sources say that contract agreements have entered into either with profit sharing or ore purchasing (by mine lords only) module. However, powerful mine lords often insist for profit sharing module where actual lease holder has to agree for meagre 30 or 40 per cent, while mine lord will get lion share of 60 or 70 per cent. Of late, nearly 60 pe cent of the Bellary mining field has come under the controll of powerful Bellary mine lords.
In actual terms, it was not an agreement registered on record with Sub-Registrar Office and does not hold legal sanctity. It is a faith-based understanding entered into between two parties-mine lease holder and contractor. There fore, it is `practically difficult' for law enforcing agencies to initiate action against lease holder for violating Mineral Concession Rules, 1960.
Despite this, Lokayukta in its report had referred 39 cases of “raising contracts” used for illegal mining including that of state-owned Mysore Minerals Ltd in region. Even, Senior IFS officer Dr. U.V. Singh, in his annexure to the Lokayukta report remarked that Obulapuram Mining Company (OMC) owned by Karnataka ministers’ Mr Janardhana Reddy, Mr Karunakar Reddy and Mr Sriramulu has a mining lease in Andhra Pradesh, bordering Bellary district, has allegedly encroached into Karnataka by entering into a raising contract agreement with Hind Traders, a mining lessee on the Karnataka side.
Acting on the Lokayukta report, a senior officer of the Department of Mines and Geology, Bangalore said that department has issued show-cause notices to mining leases allegedly operating under raising contract, but could not take action due to the `absence of registered sub-lease documents'.

“Bellary mine lords explore an average of 1.50 lakh tonne iron ore valuing around Rs. 38 crores per day from the around 44 raising contract leases. Minus expenditure, tax, duty charges and lease holder share, they will get around Rs 15 crore profit income per day. Government must immediately find ways to act on mining leases operating under raising contract, since it nothing less than a multi-crore scam”, remarks a mine owner whose mine shut down for not accepting the Bellary mine lords offer.