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* Panel sought ban to battle illegal mining
* A ban not in India's interests, says mines ministry
By Krishna N Das and Jatindra Dash
NEW DELHI/BHUBANESWAR, India, Feb 12 (Reuters) - India's mines ministry has rejected suggestions by a powerful government panel to ban exports of iron ore and limit output from the eastern state of Odisha, dispelling fears the country's top producer faced curbs similar to those imposed elsewhere.
The bans in two other producing states, Karnataka and Goa, have helped spur sales by miners from Australia, Brazil and South Africa, pushing India to ninth place last year among world exporters of the steelmaking raw material to top market China.
The panel, led by Justice M.B. Shah, asked the ministry to consider the restrictions to ensure that future generations are "not required to import iron ore" and to crack down on illegal mining, after recommending the same steps for Karnataka and Goa.
Bans in these two southern states, following the findings of the Shah Commission set up in 2010, have already slashed India's exports of iron ore by about 85 percent, or 100 million tonnes, in the past two years, pushing the country from its 2011 ranking of No. 3 among world exporters to China.
"The central government is not in favour of a blanket ban on export of iron and manganese ores," the mines ministry said in reply to the suggestion of curbs in the eastern state of Odisha.
"Fixing a cap on the production of iron ore, solely on the basis of the reserves and resources identified at this point in time, will not be in the interests of the country."
Odisha has yet to hear from the federal government on a follow-up action to the Shah Commission report, the state's mines director, Deepak Kumar Mohanty, told Reuters.
He said Odisha had already taken action against illegal mining over the past years but did not expect any change in the state's forecast of a 5 percent hike in iron ore production, to more than 65 million tonnes, in the year ending March 2014.
In Karnataka, annual production remains capped at 30 million tonnes and exports are banned, although the mining ban, levied in 2011, was lifted by the Supreme Court in April last year.
The court has also set up a panel to suggest curbs on output in Goa as part of an appeal to lift a ban on mining since September 2012.
The Goa state government expects mining to resume before the monsoon season starts in June, but this may not mean an immediate resumption in shipments from what used to be the top exporter of iron ore in India. (Additional reporting by Nigam Prusty in New Delhi; Editing by Manolo Serapio Jr. and Himani Sarkar)