India may export wheat as stocks bulge

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India, the world's second biggest grains producer, could export 2-3 million tonnes of wheat this year, a top government planning official said on Wednesday, cautioning that domestic inflation would be a key consideration.

India's grain holdings are double from year ago with wheat stocks at 18.4 million tonnes, sharply higher than a target of 8.2 million tonnes, while rice stocks were at 26.9 million tonnes compared with a target 11.8 million tones.

Traders say India could subsidise wheat exports to shed the massive stocks of wheat and rice and reduce storage costs -- a strategy adopted six years ago when India last exported significant quantities.

But Abhijit Sen, a member of the Planning Commission, said this would be foolhardy.

"It would be silly to export wheat with subsidy," Sen, who holds the rank of a minister and is involved in formulating farm policies, said at the Reuters Food and Agriculture Summit.

"Domestically people are complaining about high prices. You can be absolutely sure there will be huge protests if the government allows subsidised exports," he said.

Indian wheat is not competitive on the international market as local prices have risen on high government payments while Chicago wheat prices are down nearly a third from last year's peak.

Sen said the government should wait until this year's harvest was completed in May and see how much grain is purchased by official agencies before taking a decision on exports.

"I don't see more than 2-3 million tonnes of exports, even if it is allowed ... Whether to allow export or not has to be a political call," he said.

A cabinet panel, headed by Finance Minister Pranab Mukherjee, is expected to discuss the issue of lifting of grain export ban on Thursday.

STOCKS NOT ON THE AGENDA

Sen said trimming grain stocks was not on top of India's agenda. "Stocks are not so unmanageable. Reducing stocks should not be the No. 1 priority for India,"

Domestic stocks are also be needed for the government's welfare programmes such as the planned food security law, which will provide wheat and rice to the poor at very low prices, he said.

India stopped exports of wheat in early 2007 and common rice in 2008 to ensure supplies and keep prices under control.

India's headline price inflation rose to 9.89 percent in February, the highest since October 2008, mainly because of rising food prices, which climbed nearly 18 percent from a year earlier.

Rising food prices have triggered widespread protests and stalled parliament, mounting pressure on the government and the central bank to act against inflation.

India has produced more wheat than it consumes for the past three years and expects a record output 82 million from the harvest that begins in March. But rice output has suffered because monsoon rains in 2009 were the worst in 37 years.

India's government however recently approved the sale of small quantities of wheat and rice from government stocks to neighbouring countries.

"There is talk of possible wheat exports, even on private accounts," Sen said, adding that the ban on rice exports would likely continue.