Bloomberg News

BJP Seeks Karnataka Leader as Chief to Quit Over Graft Report

July 29, 2011

July 29 (Bloomberg) -- Leaders of India’s Bharatiya Janata Party searched for a replacement for the chief minister of Karnataka who said he’ll quit after being indicted in a report on illegal mining in the state.

B.S. Yeddyurappa, named along with more than 100 companies and 600 officials in an investigation by the southern state’s anti-corruption agency, will resign on July 31 and a new leader will be chosen by “consensus,” Dhananjaya Kumar, a BJP spokesman, said in an interview today. Yeddyurappa denies any wrongdoing, Kumar said.

The BJP, India’s main federal opposition, yesterday had withdrawn support for Yeddyurappa as his continuance in office threatened to blunt the party’s campaign to target Prime Minister Manmohan Singh’s government over corruption that has led to the jailing of a former telecommunications minister and officials who organized last year’s Commonwealth Games.

Karnataka’s anti-graft ombudsman Santosh Hegde said in a televised press conference July 27 that there had been “large- scale involvement of officials, powerful people, administrators as well as people working in the government” in “rampant” mining without licenses in the state.

The scandal in a state that is home to offices of Intel Corp., General Electric Co. and International Business Machines Corp. may have cost the government 160 billion rupees ($3.6 billion) in lost revenue. Winning power in Karnataka was a breakthrough for the BJP, whose administrations have traditionally been restricted to northern and central states.

Hedge said his report has been sent to Karnataka’s governor and India’s Supreme Court for further action to be taken against named officials. He said a mining company made a 100 million rupee donation to a trust controlled by Yeddyurappa in order to gain favors and in a separate deal another mining company paid more than 10 times the market value for a property owned by the chief minister’s family.

Karnataka, the country’s second largest iron-ore producing region, has been plagued by allegations that companies have been mining illegally for the last decade. Companies are accused of extracting the minerals and selling them without a license, depriving the state of taxes.

--Editors: Mark Williams, Sam Nagarajan

To contact the reporters on this story: Andrew Macaskill in New Delhi at amacaskill@bloomberg.net; Jay Shankar in Bangalore at jshankar1@bloomberg.net

To contact the editor responsible for this story: Peter Hirschberg at phirschberg@bloomberg.net


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