Steel minister Ram Vilas Paswan said on Thursday exports of iron ore should be restricted and eventually banned as local demand was rising.
Exporters say India has enough iron ore reserves to meet both domestic and export demand, but steel makers argue the country should process the raw material and export value-added products.
"Iron ore exports should be banned, but slowly," Paswan told reporters on the sidelines of a business conference.
In June, a government panel recommended an export duty should be levied on high-grade ore with more than 65 per cent iron content.
Another panel of bureaucrats is examining the issue and is expected to submit its report next month, officials say.
Easy availability of iron ore and growing domestic demand have drawn global steel firms such as Mittal Steel and South Korea's POSCO to India.
Indian firms such as Tata Steel, Essar Steel and JSW Steel Ltd have announced expansion plans.