India's surging rice exports are expected to be sustained by strong sales to new markets such as Iran in spite of high domestic prices, a top trader said.

Shipments are forecast to jump more than 18 percent in the fiscal year to March as the world's second-largest producer taps new Middle East markets, including Iraq.

"Iran has been the 600-pound gorilla in buying basmati. And it is hungry for more," Vijay Sethia, president of the All India Rice Exporters' Association, told Reuters in an interview.

"Our export price is also set to jump this financial year as we have found quite attractive markets in Iran and Iraq," he said.

Both Gulf nations had previously been buying top grades from Pakistan.

Officials banned exports of non-basmati rice in early October to rein in prices and help stem price pressures in the fast-growing economy, but later eased the restrictions, allowing overseas sales of rice priced above $500.

Sethia said export prices for higher grades of rice, including basmati, were likely to touch an average of $1,300 per tonne in the year to end-March, against $750 the year before, as expanding economies stoke demand for premium grades.

India has traditionally exported rice to Europe and the Middle East. The rise in rice prices is part of a wider surge in agricultural commodities that is posing problems for managing inflation in India and around the world.

Sethia said exporters had already sold around three million tonnes of rice in the first seven months to October, when the export ban was introduced.

A top exporter said basmati exports were likely to rise by 5-10 percent this financial year despite a doubling of domestic prices, which have been pushed higher by global demand.

"Normally (export) quantities drop by 5 to 10 percent when prices are very high. This year I suspect quantities will be up by 5 to 10 percent because of the worldwide shortage of rice," said R S Seshadri, director of Tilda Riceland, the largest basmati exporter.

India normally exports 4 million tonnes of rice a year, including a million tonnes of aromatic basmati, which is exclusively grown in the northern parts of India and Pakistan. It sold 1.04 million tonnes of basmati overseas in the financial year ended March 2007.

"Iran has been the single biggest influence on basmati rice exports and 250,000 to 300,000 tonnes have been contracted over the last six months out of India," Seshadri said.

Seshadri said export prices for Indian basmati rice were pegged at around $1,200 per tonne, and existing restrictions on lower grade exports were unlikely to be lifted any time soon.

"We don't believe there is any possibility of the ban on (cheaper) non-basmati rice exports being lifted. If at all the screws may be tightened more," he said.

Asia grows 90 percent of the world's rice, a staple of the poor, with India being the third-biggest exporter after Thailand and Vietnam.  India grows two rice crops in a year with production hovering around 90 million tonnes annually. The country's crop year runs from July to June.

India is likely to produce 94.08 million tonnes of rice in the crop year to June 2008, up from 93.35 million last year, P K Mishra, farm secretary, said early this month. -Reuters