India OKs 500,000 T grain export to Bangladesh

Labourers remove dust from wheat at a grain market in the northern Indian city of Chandigarh in ths June 22, 2010 file photo.

NEW DELHI (Reuters) - India has allowed the export of 300,000 tonnes of non-basmati rice and 200,000 tonnes of wheat to Bangladesh, a government statement said on Friday, as good rainfall and higher planting have boosted crop prospects.

India, which curbed grain exports in recent years to head off domestic price rises, made the announcement after two global suppliers cancelled deals to ship some 65,000 tonnes of Black Sea wheat to Bangladesh after Russia curbed grain exports.

Wheat prices surged to a two-year high after drought-stricken Russia barred shipments, but Chicago Wheat futures declined on Friday amid end-of-week profit-taking.

Indian grain will be shipped under a diplomatic deal by state-run Food Corp of India (FCI) at its "economic cost", which includes the price paid to farmers and the cost of storage and transportation, the government said.

A Mumbai-based trader working with an international trading firm said the economic cost works out to about $340 a tonne, about the same as the current commercial rates in the neighbouring country.

On Aug. 5, Swiss firm Nibulon made the lowest offer at $319 a tonne, including cost and freight, in a Bangladesh tender to import 50,000 tonnes of wheat.

LARGE STOCKS OF GRAIN

India, one of the world's leading producers and consumers of wheat, rice, sugar and vegetable oils, banned non-basmati rice exports in 2008 and wheat shipments in 2007 to improve domestic supplies, but it allowed small quantities to be shipped to neighbouring countries including Bangladesh and Nepal.

India's grain stocks have increased after four successive strong harvests of wheat, but the government, struggling to calm inflation and facing street protests against rising prices, has not allowed free export of wheat and rice.

Its wheat stocks on July 1 had risen to 33.6 million tonnes from 17.1 million tonnes a year ago, while rice inventory jumped to 24.3 million tonnes from 9.8 million.

Government officials say if rice output from this year's summer-sown crop is good, India may further ease controls on grain exports.

In 2009, India's rice output fell as the country faced the worst drought in nearly four decades, but this year output is expected to rise as the vital June-September monsoon, which irrigates 60 percent of Indian farms, has revived in recent weeks and total seasonal rainfall is barely 2 percent below normal.

Rainfall was 16 percent below normal in the middle of July, but the monsoon has intensified significantly, wiping out the deficit in key crop regions.

This year, the planting area under rice, cane and cotton has expanded by 8-10 percent from last year.

Vijay Setia, president of the All India Rice Exporters' Association said export of grain from the stocks of the government's Food Corp. of India would not be inflationary as it would not affect the demand-supply situation in the market.

(Editing by Jane Baird)