India's Central Bureau of Investigation has arrested a powerful politician and a businessman in connection with illegal iron ore mining in mineral-rich Karnataka state.

Indian officials said federal agents raided the home of former minister in Karnataka state, G. Janardhana Reddy, early Monday and also arrested his cousin, managing director of the family-run Obulapuram mining company, Srinivas Reddy.

The two were charged with conspiracy, cheating and violation of India's mining laws. They have denied any wrongdoing.

Janardhana Reddy is among those implicated in a recent probe into India's mining industry, which showed that illegal mining cost the government $3 billion in lost revenue between 2006 and 2010. The report also found a connection between owners of mining companies and politicians. It said the owners became powerful by paying bribes to politicians and then joining politics themselves.

The opposition Bharatiya Janata Party, which rules Karnataka, called the arrests “vindictive action” by the ruling Congress party.

The New Delhi government is under mounting public pressure to crack down on graft following a series of multi-billion-dollar scandals in telecommunications, sports and mining.

The scandals triggered massive protests, including a 13-day “fast-to-death” hunger strike by 74-year-old social activist Anna Hazare, that brought India to a standstill last month and forced parliament to agree to tougher anti-corruption legislation.