By Tova Cohen
TEL AVIV, June 17 (Reuters) - Israel Chemicals, which has an exclusive permit to extract minerals from the Dead Sea, challenged a government proposal on Monday to review state policy on royalties.
Eitan Sheshinski, an Israeli economist who played a leading role in revising tax rules for the oil and gas sector, will now head a review of policy on royalties from other natural resources, the Finance Ministry said.
ICL, which signed a deal with Israel's government in June 2012 to double its royalty payments to 10 percent, said in a statement: "ICL expects this agreement to be ... respected both in its word and its spirit. ICL considers such respect an essential part of Israel's credibility in the global economy."
Its shares have already sunk since Canada's Potash Corp's , one of the world's largest potash producers, said in April it was abandoning efforts to take over ICL because of strong opposition in Israel.
ICL shares ended 4.6 percent lower at 38.20 shekels while its parent company Israel Corp shed 6.3 percent on Monday.
The finance ministry said the new committee "will act to ensure that the government's share from taxes, royalties and other payments reflects what is due to the public as a result of the use of national natural resources".
Finance Minister Yair Lapid had said in April he would set up a committee to re-examine the state's rights to natural resources managed by private companies. He also said he opposed the sale of ICL to Potash Corp.
ICL said it pays 1 billion shekels ($278 million) a year in taxes and royalties on its potash sales from Israel, or 41 percent of its pretax profit, and expects this to rise to 59 percent in coming years.
UBS analyst Roni Biron said he sees limited scope for a meaningful royalties hike just over a year from the last accord, which was signed off by Prime Minister Benjamin Netanyahu.
"ICL is already on the higher end of international benchmarks and has been excluded from tax benefits given to other industrial companies in Israel," Biron said.
The Psagot brokerage lowered its rating on both ICL and Israel Corp to "hold" from "buy" on the risk that the royalty deal could be reopened.
The committee will submit its recommendations by June 2014.