India could export up to three million tonnes of wheat to Iran if supplies are requested, Food Minister KV Thomas said on Wednesday, as India seeks to reduce huge wheat stocks and help settle payment for a large oil import bill.

An Iranian delegation last week explored the possibility of buying wheat from India, which has huge stocks and wants to fix a trade imbalance with the oil exporter.

"They have taken the sample from here. If they agree on quality and ask for wheat, we can sell two to three million tonnes to Iran," Thomas said on phone from the southern city of Chennai.

As Iran's second-biggest crude client, India hopes to reassure Tehran on quality and secure wheat sales to help settle part of its $10 billion a year-plus oil import bill through a barter-style mechanism using rupees.

Shipments of food to Iran are not targeted under sanctions aimed at curbing its disputed nuclear programme. Arranging payments is difficult because of financial sanctions, even though India has won a waiver from Washington on the strictures.

Iran has not bought Indian wheat since the mid-1990s because of concerns about Karnal bunt, a fungal disease.

During the week-long visit, the Iranian delegation saw warehouses and laboratories in three leading wheat-producing states of India. But no deals took place at this stage.

"One expert team had gone to Iran, and their team has come to India. But there is an issue of Karnal bunt which is practically negligible," Thomas said.

Last week, the rupee trade mechanism started after New Delhi removed a hefty tax and took other steps to ease payments in its local currency, which is not globally traded.

India, the world's second biggest wheat producer, has been struggling to manage huge stocks due to record harvests in recent years.

As part of the strategy to trim stocks, a ministerial panel on Tuesday allowed the sale of three million tonnes of wheat to local commercial biscuit makers and flour millers.

On June 1, India's wheat stocks at government warehouses surged to a record 50.2 million tonnes, well above the official target of 4.0 million tonnes for the quarter ending June 30. - Reuters