India's top court allowed on Friday limited resumption of iron ore mining in a southern state that was suspended a week ago following revelations of a $3.6-billion mining fraud.
While activities of private mining companies remain suspended in Bellary in Karnataka state, India's largest iron ore miner, state-run NMDC, will be allowed to operate two mines in the district, the Supreme Court said.
However, extraction will be limited to "100 million tonnes a month," none of which can be exported, the court said in a written order.
On July 29, the court had suspended all mining activity in Bellary where companies have been accused of conniving with government officials to mine ore illegally.
A corruption ombudsman said the fraud had cost the Karnataka state and federal exchequers 160.8 billion rupees ($3.6 billion) from 2006 to 2010 and recommended that the state chief minister B.S. Yeddyurappa be prosecuted.
Yeddyurappa, whom the ombudsman also accused of accepting $2 million in illicit payments from a mining company and selling a piece of land at an inflated price, resigned last Sunday.
Iron ore is used in steel-making and much of the mineral illicitly mined in Bellary is thought to have been shipped to China and other east Asian countries.
According to the Indian Bureau of Mines, Karnataka has 1.14 billion tonnes of iron ore deposits, of which 80 percent is in the Bellary region.
There are 266 iron ore mines in Karnataka, 148 of them in Bellary, an earlier Supreme Court panel found, warning that the reserves may not last 25 years because of massive extraction.
The sector directly or indirectly employs some 100,000 people, according to the Federation of Indian Mineral Industries national trade lobby.
The mining scam has become a political battlefield between the national ruling party Congress and the main opposition Bharatiya Janata Party (BJP).
Karnataka is governed by the BJP, which has been backing an anti-graft campaign against India's scandal-ridden government in New Delhi.