Indian mining baron arrested in anti-graft crackdown

NEW DELHI, Sept 5 (Reuters) - Police arrested a powerful opposition politician and mining baron in India’s mineral-rich Karnataka state on Monday over illegal iron-ore production, the latest high profile arrest as a beleaguered government seeks to dig out deep rooted corruption.

Federal agents took G. Janardhana 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 Central Bureau of Investigation 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 center-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 $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 a telecoms minister rigged the 2007/08 issuance of lucrative telecoms licences, at a cost of $39 billion to state coffers. The minister, 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.

Police said Monday’s arrests were related to allegations of illegal mining in the state of 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 an independent anti-corruption ombudsman that exposed an alleged $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.