The Central Bureau of Investigation (CBI) arrested G. Janardhana Reddy, a powerful opposition politician and mining baron in India's mineral-rich Karnataka, on Monday over illegal iron-ore production, the latest high profile arrest as a beleaguered government seeks to dig out deep rooted corruption.
The CBI agents took Reddy from his home early on Monday, raided his properties and also arrested his cousin Srinivasa Reddy, who is the managing director of the family-owned Obulapuram Mining Company (OMC).
"Charges are conspiracy, cheating and irregularities under the mining act," said a CBI spokeswoman in New Delhi.
She declined to provide further details.
The national opposition party Bharatiya Janata Party (BJP), which rules Karnataka, said the arrests were "vindictive action" by the ruling centre-left coalition led by Prime Minister Manmohan Singh.
Parliament has been almost totally absorbed by the issue of corruption since last year as opposition parties see the chance of weakening the government.
A near-two week hunger strike in August by 74-year-old social activist Anna Hazare brought the nation to a standstill until parliament agreed to tougher anti-corruption legislation. The legislation has still to be passed by parliament.
That paralysis may now be hurting the USD 1.6 trillion economy, with investor confidence dipping as much needed reforms in retail, land and taxes are put on hold.
Singh in particular has been under increasing criticism for failing to deal with multi-billion dollar scandals in telecommunications, sports and mining that have helped trigger the biggest protests in decades and paralysed his government.
Topping the scandals is a charge former telecoms minister A Raja rigged the 2007/08 issuance of lucrative telecoms licences, at a cost of USD 39 billion to state coffers. Raja, since fired, is in prison along with several executives pending trial.
The mining scandal hits in the only state run by the opposition BJP in southern India, and it may deal a blow to the party's election prospects in a state once seen as a springboard for its electoral growth across the populous south.
Mafia-type operation?The CBI said Monday's arrests were related to allegations of illegal mining in Andhra Pradesh where Reddy's company Obulapuram also operates.
Obulapuram did not respond to requests for comments.
G. Janardhana Reddy was among those implicated in a July probe by the Karnataka Lokayukta, an independent anti-corruption ombudsman, that exposed an alleged USD 3.6 billion scam affecting iron ore exports from Karnataka, which is also home to India's outsourcing and IT hub, Bangalore.
Links between Karnataka politicians and mining were described by the ombudsman as a "mafia-type of operation," and the arrest is seen by some as striking a blow at provinces' traditional power structures.
"It is significant in the sense that a well known political personality has been caught for alleged corruption, it gives the impression that the government is now very serious," said D.H. Pai Panandiker, head of Delhi think-tank the RPG foundation.
The Reddy family are major figures in mining in India and have for years also held high government offices in Karnataka, the second largest producer of iron ore in the country.
Karnataka chief minister B.S. Yediyurappa, also implicated in the report, was forced to resign in July.
Karnataka accounts for about a quarter of iron ore shipments from India, the world's No. 3 supplier of the steelmaking raw material after Australia and Brazil. The political crisis is seen delaying exports, much of which go to China, and could put further upward pressure on global prices.
The case is embarrassing for the BJP, which has aggressively gone after the federal government on corruption issues.
"Naturally, the party is worried. We only hope and pray that Mr. Reddy will come out clean and he would be in position to convince the court that he has not committed anything wrong," Dhananjay Kumar, a senior BJP leader told a television news channel.
