One of the arrested persons was identified as Subala Choudhury, a resident of Chhattisgarh.
Choudhury lodged a complaint in Koraput Town police station on September 16 saying that his SUV had been stolen.
During search, the vehicle was found with the explosive in a forested area near Tota Ambaguda village yesterday, police said.
"Choudhury had bought the explosive from Semiliguda and was taking it to Jagdalpur in Chhattisgarh. While he was on his way to Jagdalpur on September 16 a few youths intercepted his vehicle near Koraput, assaulted him and fled with the vehicle," said Inspector In-Charge of Koraput town police station, B N Korkora.
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Choudhury was arrested yesterday and during interrogation he admitted to have taken the explosive from Semiliguda. He works for a vernacular daily in Chhattisgarh.
"Choudhury said he was taking the explosive to Jagdalpur to sell it to some traders to be used in mining activities. However, investigation is on to find out whether there is any Maoist link," Korkora said.
Police also arrested the person, who sold the explosive to Choudhury.