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ISTANBUL, Jan 20 (Reuters) - Turkey ordered gas-fuelled power plants to slash gas use by 40% after Iran cut gas flows to Turkey for up to 10 days due to a technical failure, sector officials said on Thursday, and an industry group warned that production would be hit.

Turkish natural gas distributors were asked to reduce supply to 60% for large consumers except for gas used for heating, the Turkish sector officials said, adding that schools and hospitals will be exempt.

Iran notified Turkey of a 10-day cut to natural gas flows but talks are ongoing to start flows earlier, the officials added.

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Turkey is almost fully dependent on imported gas from Russia, Azerbaijan and Iran. Iran alone provided 16% of Turkey's natural gas needs in the first 10 months of 2021, according to the latest official data.

Energy prices have risen sharply in Turkey, driven by global increases and a 44% decline in the lira's value against the dollar last year.

Electricity prices were raised as much as 125% for high-demand commercial users this month and by around 50% for lower-demand households. read more

Natural gas prices jumped 25% for residential use and 50% for industrial use in January, national distributor BOTAS said. The price rise was 15% for power generators.

Istanbul Chamber of Industry Chairman Erdal Bahcivan said industrialists had to shoulder the biggest burden of rising costs in recent months and it was unacceptable that industry should now have to pay a price in terms of supply.

"This decision will hit our exporters' sectors and will cause very serious production and planning stress for our factories," he said in a statement.

"This problem facing our industrialists from the supply front will undoubtedly have a negative impact on productivity, output quality, delivery and many other areas," he added.

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Reporting by Orhan Coskun; Writing by Ali Kucukgocmen and Daren Butler; Editing by Dominic Evans and Jonathan Spicer

Our Standards: The Thomson Reuters Trust Principles.

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Turkey orders cuts to gas use as flow halted from Iran - Reuters