The alleged fraud, detailed in a report implicating senior politicians, police, government officials and the mining lobby, is thought to have cost the local economy 40 billion rupees ($800 million) in the last five years.[break]
It is the latest claim of high-level graft in India and comes after similar allegations in the neighbouring state of Karnataka that led to the arrest of a former minister and calls for an ex-chief minister to be prosecuted.
Some 18 to 20 million tonnes of the record total 54 million tonnes exported in the last financial year was illegally mined, according to the committee, which said there had been breaches in nearly half of all mining licences.
The illegally exported ore is estimated to have been worth 11 billion rupees while the unpaid duty totalled some 1.2 billion rupees.
Goa chief minister Digambar Kamat´s ruling Congress party have rubbished the widely leaked report, claiming it is biased because the committee chairman also leads the main opposition Bharatiya Janata Party (BJP).
Kamat has denied any wrongdoing and told the assembly last week: "Ultimately the truth will prevail because there are records to support it. We have not exceeded the environment clearance limits."
But those dependent on mining fear for their livelihoods.
"Imagine what would happen to the coastal belt if the government stopped tourists from arriving here," Vinayak Gawas, from a local truck association body, told reporters.
"The same thing will happen to the rural belt if mining is stopped."
The president of the Goa Mineral Ore Exporters´ Association, Shivanand Salgaocar, warns that the state´s position as India´s leading iron ore exporter is under threat.
"We do agree that there are fly-by-night operators who are responsible for the illegal mining but you cannot paint everyone with the same brush," he said.
"The total economy of the state would collapse if the mining industry is stopped."
Mining is Goa´s second-largest industry and the biggest employer after tourism, employing 75,000 people directly and in related services, particularly transport.
Salgaocar´s organisation says that nearly half of India´s total iron ore exports come from Goa.
Major operators in the tiny western state include Sesa Goa, part of the global resources giant Vedanta Group and India´s largest private producer and exporter of iron ore.
Demand for the low-grade mineral found inland from Goa´s famous beaches took off in 2005, with fast-growing China a major recipient alongside steel-producing countries such as Japan and South Korea.
About 10 billion rupees a year are paid in royalties by companies mining government-owned land in Goa, while export duties contribute 40 billion rupees annually to the exchequer.
The public accounts committee is calling for the federal Central Bureau of Investigation to probe the alleged fraud.
In Karnataka, one of India´s top six steel-producing states, high-level state government officials are alleged to have connived with mining companies to illegally mine iron ore.
The practice is thought to have cost the public purse in Karnataka 160 billion rupees from 2006 to 2010.
The state´s former infrastructure development minister, mining baron G. Janardhana Reddy, has been arrested and there have been calls for his boss at the time, then chief minister B.S. Yeddyurappa, to be prosecuted.
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