- Export prices of iron ore have plunged; export to main buyer China has stopped
- Bellary's economy is in turmoil; domino effect trips transporters, traders, migrants
- Mining lobby powers Karnataka polls. The Reddy brothers (left) back BJP's campaign.
- Nov-Dec bypolls to eight seats, crucial to BJP, may see expenses scaled down
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Janardhana & Karunakara Reddy
Here's what happened. It was huge demand from China that had inflated the price of Bellary ore. But post-Olympics and with global recession, China's demands have dropped. The UK-based trade magazine Metal Bulletin reports that India had practically stopped export to China. Iron ore "dropped 43 per cent" from $65 to $37 per tonne in April. Rahul Baldota, president of the mine owners association, points out: "We exported nearly 80 million tonnes of iron ore a year to China, but now exports are almost nil. We have no internal market. Externally, we have no big customer other than China."
Mining may not be the only source of political funding in Karnataka, but it has been the most significant one in recent years. Some big miners from Bellary, like the Reddy brothers (BJP) and the Lad brothers (Congress), had become the new political class.
The sudden loss of liquidity is going to affect spending during the byelections as well as the general elections next year. M.P. Prakash, former deputy chief minister and Congress leader from Bellary, confirms the gloom: "Lorry owners who transported the ore to various ports are in big trouble. They had borrowed, and now their lorries are being confiscated. Migrant labourers and traders have gone back. Sixty sponge iron factories in my district are in great difficulty." Asked how this would affect Karnataka politics, Prakash says, "The spirit of some of the big names is down. If they intended to spend Rs 10 crore on the polls, they may now spend only
Rs 2 crore. This will curtail their political ambitions and circumscribe their influence." Says a BJP leader: "There is a lot expected from Karnataka and Gujarat in the general elections. Therefore, we may be forced to rethink our strategy if the crisis in Bellary deepens."
The Lad and Reddy brothers were unavailable for their comment.
