permanently ban iron ore exports to conserve the raw material

Karnataka state aims to permanently ban iron ore exports to conserve the raw material for steel makers such as ArcelorMittal, which will be given land for a plant this month, Chief Minister B.S. Yeddyurappa told Reuters on Monday.

Karnataka, the second-largest iron ore producing state in India, banned exports of the commodity from 10 ports in the past month and said it would stop issuing permits to transport ore to other ports for exports.

 "So many important steel companies have come (to Karnataka) because they are going to get rich iron ore here," Yeddyurappa, told Reuters in an interview in New Delhi.

"They are going to value-add to the iron ore here. We are not in favour of permitting it for outside (exports)... Our aim is to impose a ban on exports and transport permits permanently," he said.

Yeddyurappa said land acquisition for the planned ArcelorMittal steel plant in the mineral-rich Bellary district of the state was almost complete and that other facilities and approvals would be expedited.

"They need not require even four years (to start production). It could be even earlier," the chief minister said.

In contrast, South Korean POSCO's $12 billion steel mill project in India's Orissa has been delayed for three years because of problems in land acquisition, government approvals and protests by local people who will be affected by the project.

Years of uncontrolled mining has pushed tribal people off their forest land, alienating them and fuelling insurgencies.

In India, two-thirds of the population makes a living from farming, and a growing Maoist rebellion has capitalised on farmers' resentment over the government's seizure of their land for industry.

India aims to raise steel production to 120 million tonnes by 2011/12 from an estimated 64.88 million tonnes in 2009/10, and there has been increasing pressure from political leaders and the steel lobby to conserve iron ore for local use.

Yeddyurappa said Karnataka, well-known for its software exports, aimed to raise its own steel output to 40 million tonnes in the next three to four years from the current 12 million tonnes.

However, the state's iron ore output this year is likely to fall to 35-40 million tonnes, the chief minister said, from 45 million in 2009, because of the ban on exports.

In June, ArcelorMittal, the world's largest steel maker, signed an initial agreement to spend 300 billion rupees ($6.5 billion) to build a 6-million-tonnes-a-year steel plant in the southern Karnataka state.

Other companies that signed memorandums of understanding with the state in June for steel plants include POSCO, Bhushan Steel Ltd and Surya Vijaynagar Steel & Power.

Yeddyurappa said the state is strengthening its control over iron ore production and transport to check illegal mining.

"Mining activities will have to be regulated," he said.

The southern region of Federation of Indian Mineral Industries said it would challenge the state's decision in court this week.