SANTIAGO, March 25 (Reuters) - A temporary tax

adjustment on diesel driven by the Chilean government to

mitigate rising fuel prices will hit the mining sector's

competitiveness, the top mining body in the world's largest

copper producer warned.

-- The government measure reduces the recovery of a specific

diesel tax for certain companies to finance mitigation measures

without increasing fiscal spending.

-- Chile's Mining Council, whose members include state-owned

Codelco and international miners BHP, Glencore ( GLCNF ), Freeport-McMoRan ( FCX )

and Anglo American, said the industry will pay about $100

million in just six months linked to the modification.

-- The association added that the mining sector will bear 74% of

the measure's total cost, based on the government's estimated

total revenue of $135 million.

-- The group said in a statement that altering a tax to

selectively burden strategic sectors is not equitable and will

negatively affects their competitiveness.

-- Chile's mining sector faces high operational costs and

excessive permitting bureaucracy.

CONTEXT

-- On Monday, Chile's government invoked a clause in its fuel

stabilization mechanism to rapidly align with surging

international prices.

-- To offset rising gasoline and diesel prices, the government in

Chile, one of Latin America's largest oil importers due to a

lack of domestic production, froze public transport fares and

lowered the price of kerosene.