The good earth: The mineral-rich content of this rocky and rain-starved region has changed Bellary's fortunes

15°16'N 76°26'e: Hospet, a small, dry, dusty town 353 km northwest of Bangalore, in Karnataka's Bellary district. A few thousand people do look up the co-ordinates on the map every year; Hospet is eight km away from the ruins of Hampi, all that remain of the Vijayanagar Empire that flourished in this part of the world between the 14th and the 16th centuries ad, the nearest outpost of civilisation for tourists keen to get a whiff of history. Yet, tourism has nothing to do with the boom currently on in Hospet (literally, new town); the reddish dust that falls off the perilously overloaded trucks that negotiate the town's lunar landscape, and which is eagerly scooped up in pans by the populace, does. The dust is a mixture of sand, rocks, and fine iron ore and is the closest you can get to panning for gold in Hospet. In 2005-06, iron ore exports from the Bellary district totalled 35 million tonnes; India's total exports of the commodity, 80 million tonnes. The lone branch of the State Bank of India in Hospet handled foreign-exchange transactions worth some Rs 1,400 crore (almost all of it, inflows) in the same period. For a town with a population of around 150,000, that's a bit. The rich of Hospet and Bellary, the eponymous town that's the largest in the district, mining magnates mostly, have it all: mansions, cars, aircraft, even political currency-the buzz in the two towns and in Bangalore is that the ruling government in Karnataka, the H.D. Kumaraaswaamy-led alliance of the JD(S) and the BJP, is propped up by the mining lobby. That roster of achievements is no mean feat for a district that is among the most backward in the state.

In the fitness of things: KMMI's Wahab showcases his ultra-modern home gym, but won't talk about numbers

Bellary isn't exactly the most salubrious place on earth. In summer, the thermometer can touch 46 degrees (Celsius) in the shade. Rainfall is scanty. The land is rocky and not suited for agriculture. What the district lacks in terms of these, however, it makes up with an abundance of mineral resources, both metallic (think: iron ore, manganese ore, red oxide, copper, lead, even gold) and non-metallic (quartz, limestone, granite and the like).

Iron ore isn't a rare mineral in India; it is also available in states like Orissa, Goa, and Jharkhand. If Bellary's ore has anything going for it (and it has), it is the grade, or the proportion, by weight, of ferrous content. This number is between 35 per cent and 50 per cent for ore available in most parts of India; it is 67 per cent for that in Bellary. "The haematite ore (chemical composition: Fe2O3) available here is ideally suited to making steel as opposed to the magnetite (Fe3O4) ore common elsewhere," explains Meda Venkatiah, President, Mining Engineers Association of India. It is also easier and less expensive to remove the impurities in higher-grade ore and convert it to steel. Hospet's boom, however, wouldn't have been if several things hadn't happened.

The first was China. Although the country had been importing iron ore for some years, it was only in 2002, spurred by a booming economy's near-insatiable appetite for steel, that it really started buying in some volume. In the four years since, China's steel-making capacity has grown from 130 million tonnes a year to 350 million tonnes.

One of 14: And the newest too, the VW Beetle is the favourite of Bellary Iron Ore's Modi

The second was the preference the Chinese had for fine ore (termed Fines in industry lingo). Japan, which along with South Korea, was a large importer of iron ore before China emerged on the scene, preferred lumps (rocks or ore between 40 mm and 200 mm in diameter). The third was the spurt in ore prices, engendered, in large part, by the first factor, China's hunger for the commodity: from around $16 (Rs 752) a tonne in 2001, ore prices touched a high of $95 (Rs 4,275) in February 2004 and currently move between $45 (Rs 2,070) and $52 (Rs 2,392).

The last was the government's decision, in 1986 to allow companies to directly export ore without routing it through the state-owned MMTC (formerly Minerals and Metals Trading Corporation), one influenced by years of lobbying by Abheraj Baldota, a now-deceased businessman originally from Pune. "Some of the strictures imposed on us while permitting us to export-not being allowed to export to countries with whom MMTC was already doing business-turned out to be a blessing," says Narendra Kumar Baldota, Abheraj's son and now the Chairman and Managing Director of MSPL (formerly Mineral Sales Private Ltd). And so, in 1997, MSPL bagged its first order, a small one, from China.

Dressed for the IPO: MSPL's (from left) Shrenik, Narendra Kumar and Rahul Baldota have filed a Red Herring prospectus

It doesn't take much to mine iron ore. Anyone wishing to do so would require mining licences, still sometimes granted as a favour by the political establishment, some mechanised earth digging equipment, and a logistics network that can ship the ore to the nearest port. Demand (from China) and soaring prices ensure success. For instance, in 2005-06, MSPL exported 6 million tonnes of ore and earned a net profit of Rs 450 crore on a turnover of Rs 1,100 crore.

It isn't just the Baldotas of MSPL who are working the new alchemy of turning iron to gold to their advantage; in 2005-06, Santosh Kumar Modi's Bellary Iron Ores Pvt. Ltd and vg Mines Pvt Ltd exported 2.2 million tonnes of ore and earned a net profit of Rs 150 crore on revenues of Rs 560 crore. Sajjad Wahab's KMMI Group exported 3.2 million tonnes and registered revenues of Rs 1,500 crore (the man will not share information on profits). And PVG's Prasanna V. Ghotage has built a Rs 800-crore company (net profit in 2005-06: Rs 65 crore) around managing the logistics need of the mining firms; he commands a fleet of 3,000 trucks, two railway rakes (each with 58 wagons, and eight more rakes are on the way), and goes under the entirely understandable moniker of 'logistics king' in this part of the world. Bellary is landlocked, and the ore has to be transported to Mangalore, Goa, even Chennai, to be shipped out.

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There's visible sign of all that money in Hospet. The Baldotas have spent Rs 10 crore on a Cessna single-engine turbo-prop and ordered a Cessna Jet cj1 at double the price (they have also built an airstrip). "It is a business requirement, not a luxury," says Rahul Baldota, Executive Director, MSPL, and Abheraj's grandson. Bellary Iron Ore's Modi is an auto aficionado and boasts a garage of 14 cars, including a VW Beetle convertible that is the latest addition to the fleet and the current favourite. He travels around in a P68C, a six-seater twin-engine aircraft but on the day this reporter meets him, is finalising a deal to acquire a Beech King B2-100 twin-engine aircraft for Rs 23 crore. And KMMI's Wahab has a home gym that could be straight out of the pages of an international fitness publication.

Still, Bellary's mining magnates are uncomfortable talking about their wealth. KMMI's Wahab is unhappy with a report in some newspapers that the district's mine owners have ordered between 25 and 30 helicopters. "That is simply not true," he says. He shakes his head to express his feelings and adds, "This is a small place and it (such reports) can create problems."

Truckin' it in: PVG's Ghotage is the local 'logistics king' and commands a fleet of 3,000 trucks

One problem is extortion calls from the underworld. Modi, for instance, asked for and has been accorded 24X7 police protection for himself and his family. "There were some problems," he admits, hinting at the calls, "but everything has been sorted out now." "There has been plenty of trickle-down wealth," adds Srinivas Rao, Managing Partner, Sri Srinivasa Minerals Trading Company (2005-06 revenues: Rs 160 crore). "But there is a lot of poverty in this area."

Mineral wealth, like spectrum, is considered a national resource in India, which is why companies wishing to mine iron ore need to acquire mining licences from the government (the state government of Karnataka in this case). Most mining magnates are politically well connected. For instance, Santosh Lad, whose family runs V.S. Lad and Sons, a mining firm, is political secretary to H.D. Kumaraaswaamy, the current Chief Minister of Karnataka. His cousin Anil Lad, who also has interests in the mining business, is a member of the state's legislative assembly (an MLA; he belongs to the BJP). And the Member of Parliament (MP; also BJP) from Bellary, Karunakara Reddy, also comes from a family with interests in mining. Santosh Lad sees nothing strange in this and insists that his family entered mining first, politics later. "Mining is just a business," he says. "Politics is to serve the people."

Read my lips: Illegal mining activity will be checked, insists Karnataka's Deputy CM Yediurappa

Bellary is also high up in the list of preferred postings for a bureaucrat. The district is witness to rampant illegal mining on government land, and it pays to look the other way when such work is in progress. Most major mining companies attribute such activity to small-time buccaneers, but a senior bureaucrat insists that "illegal mining is rampant and several hundred crores of mineral wealth is being looted (every year)". He adds that the government itself has been propped up with money from the mining lobby. The state's Deputy Chief Minister B.S. Yediurappa pooh-poohs the allegations. "Illegal mining, wherever it is happening, will be stopped," he says. "We will take strict action against the offenders." In the past year, 242 cases of illegal mining were registered and a fine of Rs 1.42 crore levied. However, the state government is yet to take a call on increasing royalties being paid by the miners to it, Rs 27 a tonne for lumps and Rs 19 for fines (as compared to export market rates of $52 and $45, respectively.)

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In a bid to enter the corporate mainstream and earn some respect, Bellary's billionaires are pulling out all stops. The Baldotas are investing Rs 2,200 crore in an integrated speciality steel plant. MSPL has already filed a Red Herring prospectus with the Securities and Exchange Board of India and will launch a public offering to sell a 20 per cent stake "once the markets settle down", according to Narendra Kumar Baldota. The money, he adds, will also help the company acquire mines in other countries. Modi has already invested Rs 100 crore in a beneficiary plant, a pelletisation unit, and a sponge-iron facility. kmmi's Wahab owns a sponge iron plant and steel mills. And while some of the others are investing in steel plants, Srinivas Rao is planning to invest in a chain of hotels across the state.

Will the party continue? The mining magnates think so, unless the Chinese economy slows down. "Even then," says Wahab, "present prices will continue." And reports that India may ban the export of high-grade ore as it tries to increase steel-making capacity from 42 million tonnes a year now to 110 million tonnes by 2020, claims Rahul Baldota, are part of the "scare-mongering" tactics of a "powerful steel lobby that has its own vested interests". And when it comes to lobbies, Bellary's billionaires can probably hold their own.