Times 2

India opposition in damage control over $3.6 bln mining scandal

By James Pomfret

NEW DELHI, July 28 (Reuters) - India's main opposition party has called on a key leader to resign over a $3.6 billion illegal mining scandal, trying to regain the initiative as it seeks to tap public anger against widespread graft that could undermine economic growth.

The Bharatiya Janata Party (BJP) “advised” B.S. Yediyurappa, the chief minister of southern Karnataka state, to resign, a party spokesman said, after it came under attack from the ruling Congress party for what it called hypocrisy over graft charges.

“We unanimously decided that there has to be a change in the leadership of the BJP in the state of Karnataka,” spokesman Ravi Shankar Prasad told reporters at the end of a crisis meeting. An independent inquiry into mining graft in Karnataka accused its chief minister and other key officials of causing at least 160 billion rupees ($3.6 billion) in lost state revenues between 2006 and 2010 from illegal mining and a litany of abuses.

Litmus test
The party's decision over a popular leader is a sign of lesser tolerance for corruption in public life, after several large scale protests across the country during the summer.

“It is their worst nightmare,” said Mahesh Rangarajan, a political analyst. “This is a very serious litmus test on their fight against corruption ... their voice will become a very meek one in speaking out against the Congress party's abuses.”

The BJP has in recent months worn away the political authority of Prime Minister Manmohan Singh for a series of corruption cases involving government and party officials, and has plans to continue its campaign in the parliament session that begins on Monday.

Yediyurappa has so far refused to quit saying he did nothing wrong, potentially wounding the BJP's credibility, and more critically, its ability to mobilise broader swathes of Indian society against public sector graft.

India is currently in a relative state of regulatory flux as it strives to overhaul outdated laws to match its 8.5 percent growth rate in 2010/11. One fallout has been scandals like that over the issue of mobile phone licences, involving former minister A. Raja and several businessmen and which may have lost the country $39 billion in revenues -- a sum equivalent to the defence budget.

India's economic growth, second in pace only to China's, may be undermined by such widespread corruption, according to global consultancy firm KPMG.

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