The chief minister of a southern Indian state who is accused of being at the centre of a $3.6-billion mining fraud will resign on Sunday, he said Saturday.

B.S. Yeddyurappa, 68, head of the Hindu nationalist Bharatiya Janata Party (BJP) government in Karnataka state, announced he would quit in an official statement after national party chiefs demanded he step down.

"As per the decision taken by the senior leaders of the party and the parliamentary board in New Delhi, I will resign from the chief minister's post," Yeddyurappa said in the statement.

A report into corrupt mining practices by the Karnataka state ombudsman named him in the scandal.

Judge Santosh Hegde accused the chief minister of enabling illicit mining of iron ore in the state, which cost the public exchequer 160.8 billion rupees ($3.6 billion) between 2006 and 2010.

Hegde said his probe uncovered "involvement of some 100 mining companies, about 600 officials, powerful politicians including the chief minister".

The report said the federal and state governments lost money due in the form of royalties, central excise duties, value-added taxes and other levies.

The report also said Yeddyurappa?s family, including one who is a BJP member of the national parliament, benefited from the fraud.

Yeddyurappa also faces allegations of selling government land at below market value to family members.

The mining graft is the latest in a slew of corruption scandals in India, which is still reeling from the allegedly fraudulent sale of telecom licences in 2008 estimated to have cost the country up to $40 billion.

The ombudsman's explosive findings have cast a shadow on the BJP, which has been leading an anti-graft campaign nationally against the Congress-led government of Premier Manmohan Singh.

On Friday, India's top court halted the extraction of iron ore in Karnataka after the mining fraud revelations.