India's iron ore exports will recover from this year's depressed levels but will not rise above 100 million tonnes, the country's mining secretary said, as a crackdown on illegal sales pays off.

Vishwapati Trivedi said stricter controls of mining were helping determine the "natural level" of export - his euphemism for legal sales - in the long run from the world's third biggest supplier, whose major customer is China.

Traders have already slashed forecasts for 2011/12 exports from India to around 50 million tonnes, about half last year's figure, dropping it below South Africa in the export rankings.

The fall will come after the Supreme Court banned mining in some areas and the government hiked export taxes to crush illegal sales.

"Natural export level is actually an outcome of all this. There will be an export level which ... will be between where we were last year and where we are this year," Trivedi told Reuters in an interview.

In 2010/11, India exported 97 million tonnes of iron ore and has exported about 100 million tonnes a year for several years, mainly to China. But Trivedi said those figures may have included illegal ores.

"Natural export level would be over a set of several years when you have got everything going fine, no illegal exports, then you assess the natural levels," he said.

Illegal mining in India is widespread and usually entails removing resources outside permitted zones. An ongoing case in Karnataka state, which used to account for about 25 percent of India's exports, found a "mafia-type" nexus between politicians and miners behind an alleged $3.6 billion exports scandal.

The government has proposed a mining bill that will create an independent regulator and impose profit and royalty sharing arrangements with villagers as well as opening up the sector to foreign investment.

While the government has shown an inclination to conserve resources, it says it does not support a blanket ban on exports and wants just to bring in transparency in the sector.

In addition, Indian steelmakers lack the technology currently to use the ore fines which the country mostly produces and exports to China.

"Our policy is somewhere in between, we do need the foreign exchange, we do need the exports but we do need the resources also in the long run," Trivedi said.

"If we develop the processing capacity and we don't have the ore then that will not be a very good idea."

Source: moneycontrol.com