Newsmaker: The Reddy brothers

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The case over the legality of their mining operations has proved the first check to the rise of the brothers’ ore empire.

Last week, the Supreme Court asked Gali Janardhana and Gali Karunakara Reddy, brothers, ministers of tourism and infrastructure and revenue respectively in the Karnataka government and owners of the Obulapuram Mining Company (OMC), to stop iron ore mining on the Andhra Pradesh-Karnataka border.

April 6 is the day the Survey of India is supposed to tell the Supreme Court whether OMC’s owners encroached on a reserve forest to gouge out vast reserves of iron ore.
The matter reached the Supreme Court after the Andhra Pradesh High Court gave OMC conditional clearance to continue mining in response to a complaint that they had not just encroached on land that was not legally theirs, but had also altered the Andhra Pradesh-Karnataka border to extend their jurisdiction to the neighbouring state.

The complainant’s contention was that the ruling party in Andhra Pradesh — the Congress led by former Chief Minister, the late Y S Rajashekhar Reddy — was in cahoots with the Reddy brothers in Karnataka to allow illegal mines to flourish.

This is a long way from the Reddy brothers’ first steps in business. Till some years ago, the Reddy brothers’ preferred form of transport was the scooter, on which they used to roam villages and towns of Bellary to raise money for their non-banking financial company which ultimately had to be liquidated.

Today, a Union minister told Business Standard some months ago, the Reddy brothers use a helicopter from their place of work to go home to have lunch so that they can avoid the dust from the mines.

And in 2009, Janardhana Reddy was reported as having said to Telugu newspapers, quite frankly, “The net worth of myself and my wife is Rs 115 crores. I own a helicopter that I bought for Rs 15 crore, a deluxe bus for Rs 4 crore and cars worth Rs 5 crore. My group’s turnover in 2006-07 was Rs 2,008 crore for which I have filed IT returns. Out of this, OMC, which is in the iron ore business, had a turnover of Rs 1,200 crore.”

He is 44. His brother, Karunakara Reddy is 46. In the declaration before the Election Commission they have reported assets that add up to much less, around Rs 200 crore.

How did the Reddy family make so much money? Families that owned land in Bellary would mine iron ore and earn a modest profit. But engineering in the west soon created machines that modernised mining operations, making available with relative ease better quality iron ore that could be found deeper down. This, and the demand from China coinciding with the Olympics, sent demand for ore spiralling and the Reddy family’s cash tills ringing non-stop.

Much of this money was invested in Brahmani Steels, a company that was floated without any credit from banks to process ore from the mines. Although opposition politicians in Andhra Pradesh, including Chandrababu Naidu of the Telugu Desam Party (TDP), charge that Rajashekhar Reddy and his son Jaganmohan had a stake in Brahmani Steels, the Reddy brothers say this is untrue.

Meanwhile, the Andhra Pradesh government, in the parallel, is wondering what to do about complaints that Brahmani Steels diverted water from the Gandikota reservoir illegally to Brahmani steel.

For the Supreme Court the issue is simple: Did the Reddy brothers dig mines on land where this is prohibited? Or are they, as they allege, victims of political vendetta?

Hard to say, but if it is indeed political vendetta, it has little to do with party politics. In Karnataka, the Bharatiya Janata Party (BJP) government led by B S Yeddyurappa is defending the Reddy brothers for now.

Their association with the Congress government in Andhra Pradesh when it was led by Rajashekhar Reddy (whom they describe as a “father to us”) was fruitful for both and neither saw any contradiction in their association.

When they became ministers after having bankrolled substantially the BJP’s Assembly election campaign in 2009, they were irritated to find BS Yeddyurappa not sufficiently deferential to them. They had a powerful patron in Sushma Swaraj, who contested the Bellary Lok Sabha seat against Sonia Gandhi. But they wanted their power acknowledged in Karnataka.

So, they launched a Rs 25-crore drinking water supply project in their mother’s name. A Rs 500-crore private project was launched to build 54,000 houses for flood-hit villages in six districts, bypassing the state government, which of course, was having none of it. During a heated exchange in the Karnataka Assembly, Janardhana Reddy said: “People say we are worth Rs 100 crore. I want to correct it — we are worth Rs 1,000 crore,”

The dénouement came with their bid to topple the BJP government in Karnatka last year, a venture that was prevented by the chief minister who sacrificed one of his most trusted civil servants to save his government.

With that abortive coup, the brothers have established that they can do that and more next time. Right now they appear to be in the rest and recreation mode. Telugu and Kannada film magazines report that Janardhana Reddy has now embraced another profession — the film industry. His first venture was Buddhimanthudu, a Telugu version of the Kannada film that was launched last year on Telugu new year.