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Illegal mining caused Rs 15K cr loss: CAG

Belgaum: Dec 13, 2012 DH News Service

Report endorses Lokayukta findings on loss to the State exchequer

The Comptroller and Auditor General of India (CAG) has almost endorsed the Karnataka Lokayukta report on illegal iron ore mining and pegged the total loss due to illegal exports of ore at Rs 15,245 crore from 2003 to 2010.

Besides, the CAG has estimated Rs 3414.45 crore loss to the State Exchequer due to “compliance deficiencies.” However, unlike the Lokayukta report, the supreme audit institution of India has not directly indicted any public servant.

In its report on ‘Controls and Systems for Sustainable Mining in Karnataka,’ tabled in the Legislative Assembly on Wednesday, the CAG stated that delay in framing the Karnataka Minerals (Regulation of Transport) Rules till April 2011 resulted in the absence of controls on transportation, leading to illegal mining and export. This caused huge revenue loss to the exchequer, the report stated.

“This is evidenced from the statement made by the chief minister on the floor of the Assembly on July 9, 2010, wherein it was stated that as against the permitted quantity of 470.43 lakh metric tonnes (MT) of iron ore, a quantity of 775.34 lakh MT was exported. This resulted in as much as 304.91 lakh metric tonnes (MT) of iron ore valued at Rs 15,245 crore (at Rs 5,000 per MT) being exported without valid permits from 2003-04 to 2009-10,” the report stated.


The then Lokayukta Justice Santosh Hegde, in his report on illegal mining submitted to the State government in 2010, had estimated the total loss at Rs 16,085 crore between 2006-07 and 2009-10. He had indicted the then chief minister B S Yeddyurappa and the then ministers from Bellary.

While the Lokayukta investigated issues related to illegal mining of iron ore, the CAG has conducted the performance appraisal of the controls and systems in the mining sector. This apart, the CAG has estimated that the loss caused through damages to the State highways, major district roads and bridges due to transportation of iron ore at Rs 1,709 crore. It has also found considerable reduction in the growth rate of population of cattle , as per the 18th census of livestock in Bellary.

Lapses in production


The CAG has found serious lapses on the part of the Department of Mines and Geology (DMG), the Forest department, the road transport authorities and the Indian Bureau of Mines (IBM). The report has revealed a number of system and compliance deficiencies in assessment, collection and accounting of revenue, involving a monetary implication of Rs 3414.45 crore. Out of this, the government has accepted audit observations involving Rs 1212.12 crore and recovered Rs 7.22 crore. For instance, the CAG has come across large-scale discrepancies in ore production figures reported by the lessees. There is a huge difference between the ore production figures recorded by the DMG and those by the IBM, it says.

The production reported to the IBM during the period from 2006-07 and 2009-10 in respect of 34 lessees was 282.25 lakh MT, while the production reported by the DMG in the same period was 347.94 MT – an excess of 65.69 lakh MT valued at Rs 698.30 crore. “The possibility of the differential production being obtained from outside the mines through illegal means cannot be ruled out. The source of excess ore needs to be investigated,” the auditor recommended.

After conducting a check of 73 mining leases in Hospet, Chitradurga and Tumkur districts, the CAG noticed rampant violations of rules in 14 cases, resulting in illegal extraction and dispatch of minerals. Of this, the CAG has named 10 mining companies which are alleged to have illegally extracted excess ore. Matha Minerals, Tumkur, which is now owned by the family members of Housing Minister V Somanna, is one of these companies.

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