(Recasts with committee passage of mining rules reform)
BRASILIA, Oct 25 (Reuters) - Brazilian congressional committees approved on Wednesday proposals by President Michel Temer to raise mining royalties and streamline rules for the sector, amending the regulations to favor smaller miners before sending them on for full approval.
Temer proposed sweeping mining reforms in July in three decrees aimed at attracting foreign investment to boost the economy out of its worst recession on record. The measures, considered by separate committees, must be approved by both houses of Congress by Nov. 28 to become permanent.
The proposal to create a new mining regulatory agency passed a committee vote on Tuesday, ahead of the other two reform measures. All three decrees will next go to the lower house of Congress for a vote.
The committee on royalties amended Temer's proposal so that miners by default will pay 4 percent rate on iron ore, with a measure that allows exceptions lowering the rate to 2 percent and mainly favors smaller miners over major firms, like Vale SA .
The decree originally had proposed a rate varying from 2 percent to 4 percent based on the market price of iron ore.
The committee also amended the proposal to give 10 percent of the proceeds to municipalities affected by mining, such as through transport or shipping, rather than just those where the mining activity occurs.
"It's not a solution for everything, but those that got zero will now get around 300 million reais ($92.35 million) for the construction of viaducts (and) railway crossings to protect the population and minimize the urban impacts of railroads that sometimes have big impact on municipalities," said Deputy Marcus Pestana, who oversaw amendments for the committee. ($1 = 3.2486 Brazilian reais) (Reporting by Jake Spring; Editing by Bill Trott)