Seeking his custody for nine more days, the CBI said Reddy’s associates had sold iron ore for a pittance to their overseas benami companies which resold it for higher stakes and the extra  revenue was routed back as investment in Brahmani Steels.

“We need to know how much ore was mined and sold to whom? Who are the officials who supported them in giving transport permits, etc?,” the CBI counsel and deputy legal adviser B Ravindranath and public prosecutor T V Ramana said.

Describing the Obulapuram Mining Company (OMC) scam as the biggest scandal in the abuse of natural resources, the CBI counsels told the court that several senior Andhra Pradesh officials had supported the illegal activities of the mining baron in transportation, false accounting and mining.

It appears that former additional director general of the mining department, R Linga Reddy, and four other officials had openly colluded with the lease of the Antargangamma Konda mines.

“Officials gave permits for the mines and the ore was excavated elsewhere and shown as that extracted from this mine,” the counsels said.

As many as eight of his supporters who had colluded with him in the illegal activities had vanished into thin air now. CBI now plans to question Reddy’s wife Lakshmi Aruna about her lockers and involvement with benami companies.

Meanwhile, the CBI says it has proof that the entire Brahmani Steels was a fictitious steel plant aided by former Andhra Pradesh chief minister Y S Rajasekhara Reddy (YSR). “The plant never took shape, but both Reddy and YSR had colluded in granting the mines, land for factory and airport, which were mortgaged with banks to raise funds for mining activity and permission was granted to export iron ore violating all forest regulations.
Reddy was allotted 10,760 acres of government land by the YSR government in 2007 for setting up a Rs 20,000-crore captive steel plant. Named Brahmani Steels, the plant at Jammalamadugu in Andhra Pradesh's Kadapa district was inaugurated with much fanfare with YSR arriving in a chopper.

Also in attendance were the chief minister's son Jaganmohan Reddy and several of his cabinet colleagues. The largesse by the YSR government did not end there. It gave another 4,000 acres of land to Reddy for developing an airport with the promise of generating 10,000 direct jobs and one lakh indirect jobs via the two projects.
"We will also make a big airport here. Like Hyderabad, Chennai and Bangalore, aircraft will land right here,” Reddy had proclaimed that day.

Four years on, there's no sign yet of the steel plant. Reddy, however, managed to raise Rs 350 crore by using the land that he had procured for just Rs 18 crore from the YSR government.

He also reportedly exported 54 lakh tonnes of iron ore that was meant to be used by the steel plant.

The State government has now distanced itself from the matter, terming it a decision by YSR. “The decision on allotment of iron ore, that is captive mining, to OMC, Anantapur Mining Company and four other companies was taken by YSR, not the Cabinet. For the concessions to Brahmani Industries, the Cabinet is collectively responsible,” state minister D L Ravindra Reddy has said.

The Opposition, meanwhile, attacked the government for helping the mining magnate manipulate the process. “While finalising the contract, they eliminated competition in the name of Brahmani captive unit. Later, they issued a government order to sell iron ore anywhere as they like,” former chief minister and Telugu Desam Party president N Chandrababu Naidu said.

Jagan, who broke away from the Congress last year to form his own party after YSR's death, is already under the scanner for his links with the Reddys - more precisely for getting a stake in Brahmani Steels in return for his father’s favours.

The phantom steel plant
 Former minister and mining baron Janardhana Reddy had also tried to start a mega steel plant in his home district Bellary. The Brahmani Steel integrated steel plant in Sandur and Hospet in Bellary literally stole the thunder at Global Investors Meet held in Bangalore during June 2010, as it was the highest investment proposal for a single project.

The proposed mega steel plant with a capacity of six million tonnes per annum, at a cost of Rs 36,000 crore, bigger than those by established firms like ArcelorMittal and Posco of Korea. Lakshmi Aruna, Managing Director of the company, had signed the memorandum of understanding on behalf of the company.

Reddy had then claimed that work on the Bellary plant would begin in three months.
Interestingly, the State government had not disclosed Reddy’s investment plans despite the State High Level Clearance Committee clearing the project in May that year. However, the steel plant failed to take off.