July 28, 2011 3:57 pm

Corruption scandal claims Indian state minister

One of India’s state chief ministers resigned on Thursday after accusations that his government allegedly favoured companies in issuing licences for mining iron ore, in the latest of a series of corruption scandals.

The allegations, detailed in a report by the state ombudsman, have thrown the government of the southern state of Karnataka, home of India’s IT hub, Bangalore, into turmoil. It is also a huge embarrassment for India’s main opposition, the Bharatiya Janata Party because the chief minister, Bookanakere Siddalingappa Yeddyurappa, is a member of the party.

More

On this story

IN India

The ombudsman’s report alleges that an iron ore company, Southwest Mining, bought an acre of land from the Yeddyurappa family for $4.5m, about 15 times the government’s valuation. The former Supreme Court justice who led the investigation, alleged that the sale was “abnormal” and related to applications that the company had made to the state government for permission to mine.

The BJP’s leadership in New Delhi asked Mr Yeddyurappa to resign on Thursday morning, but he did not resign till the end of the day while speculation intensified that he would break away from the party.

The Congress-led national government of Prime Minister Manmohan Singh during recent months has been beset by corruption scandals, in particular in the telecommunications sector. This is the first time in recent months the focus has shifted to the BJP, the main opposition party.

The report alleges that between 2006 and 2010, the state exchequer in aggregate lost $3.6bn in royalties and other taxes due to the state as a result of the alleged illegal mining, but does not allege that the chief minister is responsible for those losses. Mr Yeddyurappa had been chief minister since May 2008.

Sugata Srinivasaraju, associate editor for south India for the Indian weekly newspaper Outlook, said that the complex caste politics of the state would make the choice of a successor “a tricky one” for the BJP.

Allegations of illegal mining have long plagued the southern state’s politics since 2000 when demand from China for iron ore soared. Santosh Hegde said that the alleged illegal mining activity also involved iron ore mined from areas reserved as forests by government decree and mining iron ore over the limits set by the government’s extraction quotas

In addition, four other ministers in the Karnataka government are being investigated, as well as a Congress MP. “Everyone had their fingers in the till,” Mr Hegde, the retired Supreme Court judge, alleged.

Additional reporting by Girija Shivakumar

Copyright The Financial Times Limited 2014. You may share using our article tools.
Please don't cut articles from FT.com and redistribute by email or post to the web.

NEWS BY EMAIL

Sign up for email briefings to stay up to date on topics you are interested in