India top court bans iron ore mining after fraud

India's top court on Friday halted iron ore extraction in a southern state home to some of the country's biggest deposits after revelations about a $3.6-billion mining fraud. "We are of the view that mining operations in Bellary have to be suspended," a Supreme Court special bench led by Chief Justice S.H. Kapadia said in an order, referring to an area in the state of Karnataka. The bench also sought details from the environment ministry about damage in Bellary, where companies have been accused of conniving with government officials to mine ore illegally. A corruption ombudsman said Wednesday that the fraud had cost the public exchequer 160.8 billion rupees ($3.6 billion) from 2006 to 2010 and recommended that the state chief minister B.S. Yeddyurappa be prosecuted. Yeddyurappa, whom the ombudsman accused of accepting $2 million in illicit payments from a mining company and selling a piece of land at an inflated price, has since offered to resign. Lawyer Prashant Bhushan, appearing at the court on behalf of an anti-mining petitioner, said the special bench made stinging comments, besides seeking data on iron ore exports and its consumption by India's steel industry. "They said that it is absolutely clear that the manner mining has gone on in Bellary is clearly environmentally unsustainable," Prashant told reporters. The bench said it would not allow fresh extraction until Bellary's environment had been "restored to its original position", Bhushan said. The court also banned the transportation of ore from Bellary and ordered a survey of mining in two other districts of Karnataka, he added. Iron ore is used in steel-making and much of the mineral illicitly mined in Bellary is thought to have been shipped to China and other east Asian countries. According to the Indian Bureau of Mines, Karnataka has 1.14 billion tonnes of iron ore deposits, of which 80 percent is in the Bellary region. There are 266 iron ore mines in Karnataka, 148 of them in Bellary, an earlier Supreme Court panel concluded, warning that the reserves may not last 25 years because of massive extraction. The sector directly or indirectly employs some 100,000 people, according to the Federation of Indian Mineral Industries national trade lobby. The mining scam has become a political battlefield between the national ruling party Congress and the main opposition Bharatiya Janata Party (BJP). Karnataka is governed by the BJP, which has been backing an anti-graft campaign against India's scandal-ridden government in New Delhi. The Congress on Friday attacked the BJP saying the scandal-tainted chief minister's apparent reluctance to step down immediately was "strange". "This is a strange situation. Is he waiting for an auspicious moment to step down or is he buying time to cover up his deeds before resigning?" asked party spokesman Abhishek Manu Singhvi. "Or is that the BJP has given him the permission to clear up the paper trail (leading to the scandal) before quitting?" Singhvi added.