Rio Tinto plans to invest $2 billion (1.3 billion pounds) in an iron ore project in the eastern Indian state of Orissa to supply Indian and overseas clients, Sam Walsh, head of the miner's Australia-based iron ore division, told reporters.

It is a $2 billion project. We expect to ramp up quickly to 15 million tonnes per year, said Walsh, adding that the investment will be Australia's largest so far in India.

The investment would be the largest by any Australian company in India. Total foreign direct investment (FDI) from Australia from April 2000 till December 2011 stood at $486.5 million, just 0.3 percent of the country's total FDI flows, according to trade ministry data.

India's mining companies have found it difficult to expand to keep pace with rising demand, hampered by opposition from displaced locals, stringent environmental norms and a slow process for getting approvals.

We will bring the technology and environment safety system and we will obviously be using the local people in the project, said Walsh, when asked if he was confident of the project considering the various regulatory issues in the sector in India.

The country's top court had banned iron ore mining in Karnataka citing environmental degradation and illegal mining. The court has restricted the state-owned NMDC to mine only up to 1 million tonne per month.

Iron ore exports are yet resume from the southern state of Karnataka, which accounted for a quarter of shipments before the state government imposed a ban, even though the India's Supreme Court ordered the ban lifted in April last year.

(Reporting by Manoj Kumar, writing by Siddesh Mayenkar; Editing by Harish Nambiar)