India may turn into a net iron ore importer for the first time, benefiting suppliers such as Rio Tinto group, as restrictions on production of the steel-making material and stricter environmental norms cut output.

Higher imports will increase costs for local steel makers that don’t own mines because of freight costs and a weakening rupee, Federation of Indian Mineral Industries president H.C. Daga said on Wednesday in an interview. Imports may reach as much as 24 million metric tonnes in the year ending 31 March, an eight-fold gain from a year ago, the industry group said on Tuesday.

India, which exported 101.5 million tonnes of iron ore in the year to March 2010, banned mining in two of the nation’s biggest producing states in August 2011 and September last year as it probed charges of illegal mining. The court-ordered bans, eased partially last year, underscored the difficulties faced in securing the raw material even as the nation’s top five steel makers added new capacity amid waning demand.

The shortage situation would have been worse if steel demand was higher and plants were operating at full capacity, said A.S. Firoz, chief economist at India’s steel ministry. Steel makers in the western coast may increase iron ore imports, since the cost of purchase from local mines could be higher.

JSW Steel Ltd, India’s third largest producer of the alloy, and Essar Steel Ltd, the fourth largest, operate mills in the western part of the country, while most of India’s iron ore mines are located in the east and the south. Karnataka resumed output at a lower capacity in February.

India’s steel consumption increased in the last quarter at the slowest pace in at least five years as demand for automobiles and houses waned. Demand rose 0.2% to 17.8 million metric tonnes in the three months ended 30 June from a year earlier, according to initial steel ministry data. Output climbed 3.9% to 19.7 million tonnes, widening a glut.

Tata Steel Ltd, Steel Authority of India Ltd and JSW Steel, India’s biggest steel makers, may add about 50 million tonnes in the next eight years, half of an earlier plan, taking the nation’s total capacity to 150 million tonnes, according to the average estimate of six analysts, government officials and company executives in a Bloomberg survey.

Global seaborne iron ore supply may increase 6% this year and 15% next year, driven by increases from Rio Tinto and Fortescue Metals Group Ltd, UBS said on 9 July. The bank forecasts that prices may drop as low as $70 this quarter. That would be the lowest level since June 2009. Citigroup forecasts that prices will average $115 a tonne this half, while Macquarie Group Ltd expects an average of $120.

India’s iron ore output fell 13% to 140 million tonnes in the year ended 31 March from a year earlier, the Federation of Indian Mineral Industries said on Tuesday, without forecasting production numbers for this fiscal year. About 124 million tonnes, 85% of which are low-grade fines, are awaiting distribution at mines across India, the group said.

Production may fall further this year, as mines remain shut in Goa and Karnataka and output may further drop in Odisha, which is currently the biggest producer, said R.K. Sharma, secretary general at the industry group. Mills are turning to imports because a bulk of the domestic production is fines, which need to be processed before they are used.

The industry group’s projections may be exaggerated, given the ore inventory at the mines, the increase in capacity of pellet plants that turn low-grade iron ore fines into usable ore lumps, and the declining rupee, two analysts said.

It’s impossible, said Rahul Jain, an analyst at CIMB Securities India Pvt. Ltd in Mumbai, about the industry group’s forecast. Look at the rupee. It doesn’t make sense for most steel plants to import now.

The rupee declined 0.9% to 61.06 per dollar as of 10.04am in Mumbai, following a 1.8% slide on Tuesday, according to prices compiled by Bloomberg from local banks. It touched 61.17 earlier, just shy of the all-time low of 61.2125 on 8 July. The currency has dropped 2.7% this month, contributing to a 9.9% loss for the year.

There’s absolutely no likelihood of India turning a net importer this year, said Gunjan Aggarwal, an analyst at commodities consulting firm CRU Group. With the rupee at 60 and steel prices remaining subdued, imports don’t suit steel makers.

India’s iron ore imports may reach 5 million tons this fiscal year, Aggarwal said.

Iron ore entered a bull market on 26 July after China replenished inventories and boosted steel output. Ore with 62% iron content delivered to Tianjin gained 0.4% to $132.60 a tonne, the highest since 30 April, according to data from The Steel Index Ltd.

The price has rebounded from the low of $110.40 on 31 May, meeting the common definition of a bull market for a climb of more than 20%. The rally may be short-lived as banks from Citigroup Inc. to UBS AG forecast that prices will drop as miners ramp up supply. Morgan Stanley predicts a return to a global surplus in 2014, the first since 2010.