Mines in Goa were ordered to close on Tuesday after a government-backed inquiry estimated illegal trade in iron ore had cost more than $6.0 billion in five years.
The state Mines and Geology department directed in a notice that all mines suspend their operations until further notice as the government begins a probe into alleged irregularities.
Last Friday a report from an inquiry by a panel headed by former Supreme court judge Justice MB Shah claimed that 90 mines operating in Goa were illegal as they did not have the necessary environmental clearances.
The report claimed illegal iron-ore mining in Goa -- the country's main export hub -- had cost nearly 350 billion rupees ($6.25 billion) from 2006 to 2011.
The report blamed the state, central government agencies and private miners for the scandal, which Shah said plundered the natural resource and facilitated an "unrestricted, unchecked and unregulated export of iron ore to China".
The scandal echoes similar problems in where the Supreme Court imposed a ban on iron ore mining following allegations of fraud worth $3.6 billion from 2006 to 2010.
Nationally, the left-leaning Congress government is under pressure after the national auditor highlighted billions of dollars in lost revenue due to a policy of gifting away coal mining rights instead of auctioning them.
The repeated scandals in the mining sector have shone a light on the government's management of natural resources and the nexus of corruption that exists between regulators, politicians and business owners.
Mining is Goa's second-largest industry and the biggest industry after tourism, employing 75,000 people directly and in related services, particularly transport.
Goa's iron-ore mining industry largely shuts down in the June to September months due to the monsoon rains.