The Central Bureau of Investigation, which is probing in to the illegal mining activities of Obulapuram Mining Company ownwed by Gali Janardhan Reddy, says that he also ran a parallel 'mamool raj' along with illegal mining. It was revealed by Janardhan Reddy while in their custody last week, say the CBI sources.

The CBI sources allege that Gali Janardhan Reddy has made more than Rs. 1000 crore 'private royalty' from fellow miners through this mamool raj in the past three years. This is in addition to the illegal mining he had done in the region. According to the sources, there were roughly 300 such miners who have been paying mamool to Gali's Obulapuram Mining Company.

As per CBI sources, Gali would browbeat the miners by telling them that he could get things done through the governments not just in Karnataka and AP, but in New Delhi as well. Thus, he would force them to sell him 70% of their iron ore at Rs 700 a ton while the market price was Rs 5,000 per ton. The remaining 30%, the miners could sell it in the open market at the prevailing rate. This was known as the 70-30 method, the sources said.

Basing on this information, the CBI has concluded that Gali had collected 'mamool' for 28 lakh tonnes which should have fetched him more than Rs 1,000 crore between 2007 and 2010. He was exporting the ore thus collected to China and other countries along with the ore he mined illegally at Rs 5,000 per ton. He too was selling the ore to certain foreign players at the same rate he bought’ from the fellow miners as a matter of strategy and the foreign players were asked to pay the balance amount in the form of investment in his firms mainly Brahmani Steels, the CBI sources said.

It was this re-routing of money that has now formed the crux of the money laundering probe launched by the Enforcement Directorate (ED) at Bangalore and the CBI sleuths. Whether CBI's contention can stand in a court of law remains to be seen. Several aggrieved miners who were made to sell their ore to OMC at a low rate unsuccessfully tried to get relief by complaining to the top political bosses about Galis 'mamool raj' are now turning witnesses for the CBI, it is learnt.