Lethal MINES

How far the lethal combination of money power and political shrewdness will take the Bellary Reddys is worth watching, especially, after the brothers lost their biggest patron, YS Rajasekhara Reddy

Girish Nikam Delhi/Bangalore

Lord Acton had said: power corrupts, and absolute power corrupts absolutely. This has been proved true repeatedly ever since he made this statement in a letter to Bishop Mandell Creighton about 12 decades ago. But Karnataka's Reddy brothers have proved they have the power to corrupt anyone that comes their way with their money power.

The three sons of a humble police constable have risen to heights not imaginable even 10 years back in a state which has by and large been perceived as peaceful and relatively less corrupt. Not only the clout they have acquired but also the way they have used it brazenly has left everyone baffled.

Just over a decade and half ago, they were struggling to make ends meet. Later, they faced charges of cheating and deception while running a finance company. The trio's fortunes changed only in the early part of this decade. A minister in Karnataka's BJP government, who has seen the phenomenal and exponential growth of the Reddys from close quarters, recalls how their fortunes changed.

For decades, the mines in and around Bellary were controlled by traditional families like the Sandur Ghorpades. After the 1970s, the mines had fallen into disuse. The minister recalls how the Ghorpades had surrendered around 2,000 acres of iron ore mines during this period claiming that they cannot pay the royalty - a meagre Rs 40 per acre.

During this period, iron ore fines, which were extracted from the upper portion of the mines before one could reach the bottom for good quality ores used to manufacture steel, had become a huge problem. Storing or disposing tons of iron ore fines was a major headache as the cost of transportation and finding land space to pile them was a costly affair. In fact, owners of barren land demanded regular rent to store it. The income from selling these ore fines would not even compensate the transportation and storing costs.

As a result, Ghorpades and other mine owners started getting out of the business. However, things changed in the late 1990s. A European invention, which made use of these iron ore fines to manufacture steel, changed everything. It was during this time in early 2000 that the Reddy brothers, reeling under losses in the finance company business, were lured into the mining business by an Andhra mine owner who was in distress.

The controversial Obalapuram Mining Company, on the borders of Andhra Pradesh and Karnataka, spanned Kadapa and Bellary districts. It came under the control of the Reddy brothers. The mountains of iron ore fines lying all around Bellary was exploited by them. It was this hitherto worthless by-product of mining ore, which suddenly became a gold mine for the Reddys and others like the Lad brothers in the region.

The demand in China grew exponentially for this "worthless" product as it was preparing for the Olympic Games and its appetite for steel became virtually insatiable.

In about a couple of years, the Reddy brothers suddenly found their coffers growing beyond imagination. "They were earning anywhere between Rs 10 crore to Rs 15 crore a day during this period, legally and illegally," the minister recalls.

Meanwhile, a friendly YS Rajasekhara Reddy came to power in Andhra Pradesh in 2004. The Reddy brothers, in spite of being in the BJP, developed extraordinary clout in the neighbouring Andhra, too. Reports of them shifting the boundaries on the two state borders to assist their mining activities started surfacing. This has been found to be true by a committee appointed by the Supreme Court recently.

In Karnataka, however, the clout of the Reddy brothers started growing. The split verdict in the Karnataka assembly election in 2004, leading to the formation of two coalition governments, helped the Reddys. They used their enormous money clout to good advantage. But, the then chief minister, HD Kumaraswamy, tried to put a brake on their growth. The Reddys suffered a temporary setback. When the JD (S)-BJP coalition government fell, the brothers recovered swiftly.

The 2008 assembly elections gave them a great opportunity to show off their strength. Desperate to wrest power in Karnataka on its own, the BJP leadership rolled out the red carpet for the Reddy brothers. That election saw an unprecedented flow of money. The Reddy brothers opened up their coffers pumping in money, earned both through legal and also illegal means. As a result, the BJP leadership, both at the Centre and state, went out of its way to accommodate the demands of the Reddy brothers while choosing candidates in Bellary, Raichur, Chitradurga and a couple of other districts.

Apart from generous funding of BJP's chief ministerial candidate, BS Yeddyurappa, the Reddy brothers also financed several other BJP candidates across the state.

The money flow during this election was mind-boggling leaving the rival Congress and JD (S) leaders breathless. What was even more striking, however, was the large-scale corruption among the ordinary voter. The Karnataka voter never had it so good, especially, in districts where the Reddy brothers took keen interest. In these districts, each voter was promised and paid anywhere between Rs 1,000 to Rs 2,000 per vote. It raised the expectation of the voter. Many politicians who fought that election said that it has set the benchmark for the future, too.

After the results of the 2008 assembly election in Karnataka were out, the BJP was found to fall short of getting a majority by a handful of seats. The Reddy brothers immediately swung into action. Brazenly, they bought MLAs from the Congress and the JD (S) and made them ministers even as they resigned from their seats. Subsequently, the Reddys also bankrolled their by-elections. Due to the enormity of the fund flow, this was dubbed Operation Kamala. And, all this happened under the benign gaze and encouragement of the BJP leadership.

"That was the biggest mistake we made when we allowed them to use their money power unrestrained," a senior BJP leader admitted during the recent crisis in the Karnataka government. "They (Reddy brothers) are now demanding their pound of flesh and we are helpless," he admitted.

The Reddys used the clout acquired during the 2008 election by getting a band of loyalists elected when they discovered that Chief Minister Yeddyurappa was trying to wriggle out of their stranglehold. The Reddys launched the most brazen campaign using their band of loyalist MLAs. That left even the central leadership hopelessly divided.

"The central leadership looked so impotent because some of them have also received largesse from the Reddys," said a senior RSS leader as he watched the unseemly spectacle unfold in the nearly two-week crisis that paralysed the Karnataka government and the BJP, too.

The clout of the Reddy brothers was in full display during these two weeks as they refused to cow down to the BJP high command. Such was their clout that not a single MLA under their control strayed. Though they could not get rid of Chief Minister Yeddyurappa - their primary demand - they managed to bring him to his knees. In this, BJP leaders in Delhi close to the Reddys helped immensely. Yeddyurappa's close aide and the only woman minister, Shobha Karandlaje, and his principal secretary, VP Baligar, were minor goats sacrificed, according to aides of the Reddy brothers.

The way they held fort during the crisis has, in fact, earned them admiration from some of their detractors, too. "Janardhan Reddy (second of the Reddy brothers) is not just a businessman, he is a shrewd politician, too," said a Karnataka minister, who is one of those targeted by the Reddys. Janardhan has this ability to be frank and candid, and persuasive at the same time. "It is not just the money power. His shrewd political acumen is the reason behind his rapid growth. He has set his sights higher than what anyone can imagine," the minister added.

But how far this lethal combination of money power and political shrewdness will take him is worth watching, especially, after the Reddy brothers have lost their biggest patron, YS Rajasekhara Reddy. Apparently, the late Andhra CM had struck deals with them wherein his son, YS Jagan Reddy, would wield enormous power in the Obalapuram Mining Company and their other mega venture, Brahmani steel, but will not be directly involved financially. "Jagan decides who is employed there and how they run their business. But, officially, he has no role in these companies," a close associate of the Andhra Reddys of the YSR clan revealed.

With the death of YSR, the Congress high command and the new chief minister of Andhra Pradesh, K Rosaiah, has no love lost for the Bellary brothers. The recent report of the commission appointed by the Supreme Court indicted the Andhra government for allowing large-scale illegal mining, moving the borders of the state and encroaching into the forest lands in both Andhra and Karnataka. This has come in handy for Rosaiah to order a CBI enquiry.

Sceptics in Karnataka and Andhra Pradesh, however, wonder if all this action will be taken to its logical conclusion or would it be used only to keep the Reddy brothers on a leash. There is also speculation that the Reddy brothers, who don't have any ideological affinity of any kind, may find new ways to wriggle out of the crisis in business they are now embroiled in.

Meanwhile, Yeddyurappa, smarting under the humiliation by the Reddy brothers, will be watching how the Andhra government follows up the case. As a central BJP leader pointed out in frustration, "They (Reddy brothers) have so much money that they can do anything." According to his estimates, the Reddys have amassed around Rs 8,000 to Rs 10,000 crore. Moreover, they have an annual turnover of around Rs 4,000 to Rs 5,000 crore from their legitimate and illegitimate businesses.

In a polity where money makes the wheels turn, such a huge capital base is dangerous to the system. Like the Reddys, this money can be used to sabotage the system for personal gains. One wonders what the myriad law enforcing agencies and financial watchdogs are doing?

 

This story is from the print issue of Hardnews: DECEMBER 2009