New Delhi: The Supreme court has allowed 18 mines to resume iron ore mining in Karnataka state after a suspension of more than a year on environment concerns, a supreme court judge said on Monday, opening up about 5 million tonnes a year of production again.

But the potential increase in output from Karnataka is unlikely to affect flagging global iron ore prices unless the state allows exporters to ship the raw material overseas.

India used to produce about 200 million tonnes a year of iron ore and exported about half of that, but a clamp down on illegal mining and New Delhi's desire to keep supplies for domestic steel mills has slashed that figure.

The output from the re-started mines will be in addition to state-run NMDC's 1 million tonnes per month, which was cleared by the Supreme Court for production from Aug. 6, 2011.

The Supreme Court last year also banned iron ore mining in Bellary, Chitradurga and Tumkur districts of Karnataka citing environmental violations, and asked a federal government body to carry out an environmental impact assessment.

"It is a positive order ... other category mines will also start opening slowly," said R.K. Sharma, secretary general of the Federation of Indian Mineral Industries.

But the order is unlikely to mean further exports as the steel making ingredient is in short supply domestically and a 30 percent export tax and excessive freight rates mean shipments ar not viable.    

"I don't expect exports to resume at all now because domestic consumption is at 30 million tonnes," said Sharma, adding the upper cap for output fixed by the top court is a similar quantity.

India used to export half its iron ore output -- about 100 million tonnes a year -- making it the third-largest exporter in the world. But its overseas sales have slumped as New Delhi and state governments clamp down on illegal mining.

At USD 89.40 per tonne on Friday, spot iron ore has fallen by 40 percent from this year's peak as a slowdown in China cuts demand from its biggest importer.

The absence of exports from Karnataka, which accounted for about a quarter of India's total iron ore shipments, helped diminish the impact of Indian supplies on spot iron ore prices, with the gap filled by top exporters Australia and Brazil as well as emerging suppliers like South Africa and Indonesia.

(Agencies)

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