India to ask Iran to buy wheat at weekend meet

India will ask Iran to raise imports and buy more wheat to fix an imbalance in trade currently in favour of the sanctions-hit nation at a meeting in Tehran over the weekend, a document obtained by Reuters showed.

An Indian finance ministry delegation led by joint secretary Thomas Mathew will hold talks with Iranian officials led by Minoo Kiani Rad, vice-governor of Central Bank of Iran, ahead of Prime Minister Manmohan Singh's visit to Tehran at the end of the month to attend a summit of non-aligned nations.

Refiners in India, Iran's second-biggest oil client after China, have been settling 45 percent of oil purchases from Tehran in rupees under a new payment mechanism, while continuing to pay the remainder in euros through Turkey's Halkbank.

New Delhi scrapped a previous decades-old mechanism for paying for imports from Iran in December 2010 under pressure from the United States. Since then it has been struggling to find a lasting solution to problems caused by U.S. and European sanctions on Iranian exports.

Purchases of wheat by Iran would help India cut its huge stockpiles of grain and would save hard currency for Tehran.

The Iranian rial has lost nearly half its value in the past year, and the government has put restrictions on dollar exchanges for key sectors.

An Indian finance ministry official confirmed the visit of Indian delegation.

"We are not adverse to the idea of a wheat sale to Iran through the diplomatic channel, but this should be done only after ensuring supplies to domestic markets," said Veena Sharma, secretary of the Roller Flour Millers Federation of India.

India has plenty of wheat, with stocks of 47.5 million tonnes on Aug. 1 versus a target of 17.1 million tonnes.

Iran has imported more than 2 million tonnes of wheat in the four months beginning March 20.

The government lifted its four-year ban on wheat exports in September, but private sector shipments from the South Asian nation have picked up only in recent weeks as the rally in global prices and a weaker rupee have made Indian wheat competitive.

Iran also wants to boost non-oil exports to India through the rupee mechanism, the document showed.

Both sides aim to discuss other options for payments, using banks in third countries. India, which has secured a waiver from tough U.S. sanctions against Iran by cutting oil imports, aims to lift at least 15 percent less oil from Tehran in the current fiscal year.

"For this purpose, the Iranian side would suggest the banks with which negotiations could be held," the document said.

Iran will also ask to open an office in Mumbai for its National Iranian Oil Company (NIOC) and for Bank Parsian, which is involved in operating the rupee payments for Indian exporters.

- Reuters