Obulapuram Mining Company
Obulapuram Mining Company also known as OMC or OMCPL is an iron ore mining company located in Karnataka and Andhra Pradesh in India. The company is owned by the brothers, G. Karunakara Reddy, G. Janardhana Reddy and G. Somashekara Reddy, who were ministers in the Government of Karnataka. The company has been fighting charges of illegal mining in forest lands on the Karnataka-Andhra Pradesh border. OMCPL holds iron ore mining leases in 134 hectares in Anantapur District of Andhra Pradesh and iron ore reserves in these leases are estimated to be around 100 million tonnes. OMCPL is also the promoter of a Bramhani Industries Limited, an iron and steel producer. JSW steel is said to be in talks for partial ownership of OMC.
Investigation by Income Tax Department
Income tax sleuths unearthed under-invoicing and tax evasion of around Rs 86 crore by the Obulapuram Mining Company (OMC), run by Karnataka's Reddy brothers and also their trusted confidante and state health minister B Sriramulu. The scam, that can embarrass Karnataka's BJP government further, is said to have alarmed the top guns in the state. The CBI is investigating illegal mining transactions in Andhra Pradesh. Ministers G Janardhana Reddy, G Karunakar Reddy and Sriramulu have mining business in AP.. The company had evaded Rs 86,42,88,802 during 2007-08.
The team of officers under the Directorate General of Income Tax Investigation after getting clues to tax evasion by OMC B N Mohan(Deputy Commissioner), Sibichen K Mathew IRS (Additional Commissioner) and G M Belagali (Commissioner) of Bangalore (Commissionerate) Central circle were assigned to work on the case. They found that the OMC had entered into a MoU with a one-dollar company of Singapore to camouflage the company's income suppression.This report was recorded in the book Let us Share by the Finance Ministry. Officials found that the one-dollar company, GLA Trading International (GLATI), was established on November 30, 2007, with Janardhana Reddy as one of its directors. GLA, presumed to be named after Janardhana Reddy's wife Gali Laxmi Aruna, has offices in Singapore, Dubai and the British Virgin Islands, which is a `tax haven'. "OMC's transactions through the MoU with GLATI are convoluted and devised to evade tax payment in India," assessing officers said in the report. A comparative study of shipping bills for export with other companies, which are exporting the same grade material, confirmed the malpractice by OMC. According to the report, OMC signed the MoU with GLATI to sell iron ore only to evade tax payment in India. For the similar grade of iron ore or ferrous content (FE), OMC had under-invoiced. The per tonne rate of iron ore exported to GLATI ranged between $76.14 and $98.24 as compared to per tonne rate of $144 to $165.22 of other export sales of ore. When officials sought explanation from OMC, the Reddys claimed it suppressed sales for developing stronger relationship worldwide with global buyers through GLATI for financial stability against price fluctuations.
This explanation was considered inept by the investigating agency. According to investigators, it's difficult to believe a business house like the Reddys would enter into such an MoU with an offshore company to secure financial stability against price fluctuations from a one dollar company of Singapore and that too without any knowledge of its business, its board of directors and its standing in the line of business.
Implication in Lokayukta Report of July 2011
The Lokayukta Report on illegal mining in Karnataka  details the methods in which miners, government officials and ministers colluded to defraud the government of mining revenues. The report details the complete breakdown of democratic governance in the bellary area  and uncovers the "zero risk system", a protection and extortion racket, masterminded by G. Janardhana Reddy. The report describes the illegal money transfers to foreign companies and tax shelters by mining entities such as Obulapuram Mining Company, Associated Mining Company, GLA Trading and GJR Holdings owned by the Reddy Brothers.
Investigation by CBI
Janardhana Reddy along with his brother-in-law, B. V. Srinivas Reddy was arrested on 5 September 2011 by the CBI, taken to Hyderabad, the Capital of the neighboring Andhra Pradesh and remanded to judicial custody in Chanchalguda Jail. He is accused of being involved in the illegal mining and export of iron ore in Bellary and Anantapur. This investigation is the culmination of a recommendation to CBI by the former Andhra Pradesh chief minister Rosaiah and not directly related to the findings of Lok Ayukta Santosh Hegde on illegal mining in Karnataka. The CBI submitted a charge-sheet in the ongoing investigation. The CBI also arrested senior officers of the IAS, V. D. Rajagopal and Y. Srilakshmi, as third and fourth accused respectively. V. D. Rajagopal, the former Andhra Pradesh Director of Mines, Vice-Chairman and Managing Director of AP Mineral Development Corporation is accused of preferential treatment to Obulapuram and denying mining licenses to other applicants. The permission for mining in Anantapur was for captive mining, i.e. the ore mined in that region is to be used in the local steel plant and not to be exported. Y. Srilakshmi former Andhra Pradesh Secretary Industries, is accused of dropping the term "captive mining" in the final order approving a mining license to Obulapuram. Srilakshmi claimed that this was done at the insistence of the former Minister of Mines and current Andhra Pradesh Home minister Sabitha Indra Reddy. However the CBI defended the Home minister, who is a senior local politician of the ruling Congress party.
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