UPDATE 2-Brazil hikes mining royalties to ease budget deficit

(New throughout, adds 80 percent royalty revenue increase, Temer comment and details on royalties)

BRASILIA, July 25 (Reuters) - Brazil unveiled a sweeping plan to boost government revenues from mining royalties by 80 percent this year, the latest move to reduce a deep budget deficit amid a sluggish recovery from the country's worst recession on record.

Royalties for iron ore will rise to as much as 4 percent, depending on market prices, from 2 percent currently, according the mining ministry. The new levies, which will go into effect in November if Congress approves them, include the creation of the National Mining Agency to oversee the mining industry.

"Brazil lagged behind in the royalties it charged," Mining Minister Fernando Coelho Filho said at the event where the new rules were unveiled. These also included plans to shorten wait times for mining licenses.

"These measures will be fundamental to accelerate the speed of growth of the Brazilian economy," he added.

Brazil's President Michel Temer, at the policy launch in the presidential palace, said the mining overhaul was the latest in a series of areas where his government is seeking to modernize regulation and attract foreign investment.

Brazil's slow economic recovery has weighed on tax revenue, forcing the government to find new sources of funding. Last week, the government said it would raise taxes on fuel and increase a public spending freeze by 5.9 billion reais ($1.9 billion) this year.

The proposal requires approval by Congress within 90 days. It would jump-start changes to mining regulations dating from 1960 that have languished in the legislature.

Royalties on iron ore will increase in tandem with the price of the mineral, gradually rising from 2 percent if the market price is less than $60 per tonne to a maximum of 4 percent if the price rises above $100 per tonne.

The levies will be applied to gross sales revenue under the new rules rather than net sales, the ministry said.

The rules would also raise gold royalties to 2 percent from 1 percent, while hiking diamond levies from 2 percent to 3 percent.

The measures would also increase fines for environmental damage up to a ceiling of 30 million reais ($9.47 million) and expressly require companies to clean up degraded areas, in the wake of the Samarco mining disaster in November 2015.

In that instance, a tailings dam burst at the mine owned by Samarco, a joint venture between Vale and BHP Billiton, killing 19 people and unleashing enough mud to fill 12,000 Olympic swimming pools. (Reporting by Anthony Boadle and Jake Spring; Editing by Brad Haynes and David Gregorio)