Mumbai: Finance minister P Chidambaram has defended the imposition of Rs300 per tonne duty on iron ore exports from India saying it will help "conserve" the country's raw materials for the domestic steel industries.

Chidambaram's defence comes amid a threat of Chinese boycott of Indian iron ore due to the measure. "There is no controversy. As I said in my budget speech, it is intended to conserve raw materials for our own steel industry and at the same time, create some revenues taking note of the fact that the prices are ruling very high," Chidambaram said after inaugurating a full-fledged branch of Bank of India, in Shenan, China. Shenan houses Communist China's first special economic zone (SEZ).

Chinese importers, however, have decided to boycott Indian iron ore in protest against Indian suppliers' attempts to increase iron ore prices. China, the world's biggest producer and consumer of steel, imported a record 325 million tonne of iron ore in 2006 and 8.3 million tonne came from India, according to media reports.

India announced a duty of Rs300 ($6.78) per tonne of iron ore exported from March 1, and the Chinese importers say Indian exporters intend to transfer the increased costs to Chinese buyers, even for contracts signed but not executed before March. The new policy, announced by Chidambaram in February in his budget speech, is regarded as the first move by India to conserve scarce national resources.