Karnataka government failed in curbing illegal mining, says CAG

The state government’s failure to implement proper audit practices caused huge losses in revenue from the mining sector, a report by the Comptroller and Auditor General (CAG) of India said. The report on ‘Controls and systems for sustainable mining in Karnataka’ submitted in the legislative assembly on Wednesday said a number of system and compliance deficiencies in the assessment, collection, and accounting of revenue resulted in losses to the tune of Rs3,414 crore.

Out this, the government accepted audit observations involving Rs1,212 crore and later recovered only Rs7.22 crore. 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.

Despite accelerated growth in turnover of the mining companies from 2003-04, there was no upsurge in revenue from royalty. The growth in turnover of mining companies was incongruous with the revenue increase in the state by way of royalty, the report said.

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 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 to 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’s objectives

• 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 at 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.