The unstoppable and straight-speaking Karnataka Lokayukta (now retired) has done his bit for the sustenance of the legitimate mining industry. While exposing the biggest mining scam to date, his observations on mining policy and practice should perhaps be heard and considered carefully. Justice Santosh Hegde in conversation with Shashidhar Nanjundaiah.How did the Bellary mafia operate?The Reddy Brothers started a system called no-risk transmission. In Bellary, Mr Janardhana Reddy was the minister in charge of the district. He handpicked every officer-from police officer to the collector and every other official-all of whom danced to his tune. He ensured that any transport permits were only given with his permission. Two major, age-old companies have filed a suit in the High Court questioning why they were not given transport permits.Then Mr Reddy would spread the word urging mining companies to make use of his systems whereby the companies do not risk transport, 40-45 per cent of the produce is underwritten or cash is pooled in, which is export value. They guarantee to show the location of the mineral, transport, export and get it delivered to any place of choice. Hence all the risk was theirs.You have supported the exports of minerals. Why should it be banned?Conversion of minerals into value added products adds to the risk of illegal mining. This means only people who consume the minerals are allowed to mine and take it to their factory. No mining should be allowed for the purpose of trading. If you implement this, illegal mining will completely go out the window because the mining companies cannot mine more than what they can consume. Therefore, there will be a sustained mining project.So the trick would be to thwart any extra interest in mining?Yes, because then there would be no market-including the international market. Secondly, it could be financially lucrative to the central government in the form of a huge amount of central excise (because value is added), as would the state governments through Value Added Tax (VAT).More importantly, such sustained mining is necessary because the mineral is not a renewable product. In the first part of my [Lokayukta] report [on illegal mining on the Andhra-Karnataka border, compiled in 2008], I have specifically stated, citing expert opinion, that iron ore in Karnataka will last only 30-35 years if the current trend in mining continued. But between 2008 and 2011, despite our report, the situation took a turn for the worse as systematic illegal mining flourished, including transportation and illegal export.So, my second report has stated that the mineral will not even last for 15-20 years. We do not have statesmen-we only have politicians, and because of that problem, there is nobody to think 100 years ahead.Prospecting tells the investor how much returns he can extract depending on the availability and quality of the ore. Prospecting has become a thing of the past. Today it appears that one applies for a mining licence, uses one's influence with local legislators and the mines department in Delhi and gets a mining lease.But in real terms, surely the idea of banning exports would be a hard nut to crack-given that politicians may not see the virtue in it, and because it may curb economic activity?From what I read in the papers, the Centre is not thinking of curbing or even controlling ore exports. I do not know what they have in mind. In Karnataka, until my first report was submitted in 2008, the best quality iron ore, the 64 Fe, would fetch only Rs 27 per mt to the government. Today, that very product is sold for as much as Rs 5,000-6,000 per mt. The exchequer has a lot to lose: Legal mining is only a third of the exported quantity; the rest is illegal. This is why Mysore Minerals Limited (MML), which is 100 per cent state-owned, right through the period from 2000-2011 when all others have become billionaires it has become pauper. And that is why mining should be in the hands of the states.Why is that? Is it that they have been clean?No, they have not been clean. There is a system which is not recognised by an Act called the Raising Contract. There is a prohibition against subcontracting. Raising contracting is nothing but sub-contracting. Because this form of contracting is not recognised by the Mines and Minerals (Development and Regulation) Act, the state does not practise Raising Contract.When Mr Janardhana Reddy got into the mining business, MML was already in existence and they are one of the best mine heads. Today, the state has lost all the money while Mr Reddy today has Rs 30,000 crore.One of the other things is the R&R and people's habitats. Because of the illegal mining, these, too, find no accountability?The Bellary area was a predominantly agricultural area. The 10-11 years of illegal mining in the area has changed the lifestyle of the people there. They have given up their travel and agriculture and they have taken up illegal mining. The generation between ages of 15 and 25 have stopped going to schools and colleges. They are all given motorbikes and cell phones. Their only business to monitor movement of any government agency vehicles that may be arriving for inspection, and warn the mining companies so that they can make 'arrangements'. These people do not have much work, so with the kind of money, mobility and lifestyle they acquire, they take to alcohol and gambling.Many things are happening there. Floating ore, which flows down the hills with monsoon rains, is gathered in the villages and sold to middlemen, who then deliver it to some stock yard. The middlemen, the stock yard collection and the transportation of such ore is all illegal.Would you like to comment on the Supreme Court ruling to stop all mining in Karnataka?For the time being, that is the right thing to do. I shall tell you why. There has been a continuous violation of the ecosystem, pollution of environment and roads damaged very badly and the entire collection from royalties is not maintained under one roof. It will take a minimum of 6-8 months to show that they have at least planted trees.Will the Supreme Court then take a decision?Maybe, at that point in time, it will also consider the reports and inputs that is given by others to say what will the regulation in future.Apart from iron, what other ores are the worst affected by illegal mining? Have you had a chance to explore those as well?Although manganese and granite are also suffering the same fate, we have not had the time to dwell on them. Our four offices worked continuously, with not a single day's leave, for a whole year, collated 40 lakh bank accounts to connect one with the other to see how the money has been routed out.An IT solution to illegal mining called (n)Code, developed in Gujarat, has found the favour of an increasing number of mining states. This method monitors and documents load weights at the mine-gate and terminal. Do you believe this will help?There are ways of cheating wherever manual input is required. The most automated methods still require manual intervention.