US-led trade sanctions against Iran, which resulted in a 34% drop in oil exports from the Middle Eastern country to India last month, may be tested again in the coming months – with wheat.
Thanks to a bumper harvest this year, India has a massive wheat surplus, and one of the options for stopping it going to waste is to trade it with Iran.
"There is a great possibility of exporting wheat to Iran as well as other Middle East countries, and this we will strive to do in the next two months," said an Indian food ministry official.
Food Minister K.V. Thomas added that a government panel is looking into the many options.
India’s stocks of food grains, including wheat, grew to 71.1m tonnes by 1 May 2012, well above the country's total storage capacity of 63m tonnes. Surpluses are being stored in the open and are in danger of spoilage.
India, the world's second-largest producer, dropped a three-year ban on wheat exports in September. Wheat output in 2011-12 is expected to reach a new record of 90.23m tonnes.
Indian prime minister Manmohan Singh set up a panel of experts early this month to suggest ways to clear stocks more quickly, such as by earmarking more for subsidised sales to the country's poor and promoting increased exports.
He said that India is considering wheat exports to Iran and other Middle Eastern countries, Pakistan, Afghanistan and some African countries, mainly through government-to-government deals.
Provision of incentives for wheat exports by private traders is also being considered, he added.
Faced with sanctions, Iran is keen to buy wheat from India, provided the South Asian country is able to supply grain free from traces of fungal disease found in its breadbasket northern region.
An Indian team plans to visit Iran soon to address Tehran's concerns on shipments from India.
Out of around 10m tonnes of wheat that the government may consider for exports, it could look at shipping around 4m tonnes to Iran.
Private wheat shipments have been slow despite the removal of export restrictions, as the government's guaranteed minimum price is higher than prevailing international prices, which have fallen due to a global surplus.