India is likely to export 4.4 million tonnes of rice in 2007, almost the same as a year ago, the United Nation's Food and Agricultural Organisation (FAO) said in its latest outlook.

The report said Indian rice export prices were expected to increase with the state-run grain procurement agency Food Corporation of India (FCI) setting a higher rate for purchases from farmers and a supply squeeze in aromatic Basmati rice.

The rise of the rupee against the dollar will also make Indian exports dearer, the report said.

The Indian rupee has strengthened against the dollar to reach a nine-year peak of 40.28 on May 28. The rupee was 40.702/712 per dollar at 2.10pm.

India's Commission for Agricultural Costs & Prices has recommended a minimum support price (MSP) of Rs675 for 100 kg of grade 'A' paddy (un-milled rice) and Rs645 for 100 kg of common varieties during the 2007/08 (July-June) season.

This is an increase of Rs65 per 100 kg over the price offered in the 2006/07 procurement season.

The report said global Basmati rice prices are likely to rise, reflecting supply shortages of the aromatic variety in India and Pakistan.

'There is more demand this time as many buyers from the Middle East are opting for Indian basmati instead of Basmati from Pakistan, hence we are facing a shortage,' said a senior executive with Amritsar-based Lal Qilla Rice.

'The prices of traditional Indian Basmati rice are ruling at $1,400 per tonne compared with $700 a year-ago,' he added.

India produced 91.05 million tonnes of rice during the 2006/07 crop year compared with 91.79 million tonnes in the previous year, as per the latest government estimates.

The report said strong import demand is expected to drive international trade in rice to a new-high of 30.2 million tonnes in 2007, largely spurred by a return of Indonesia as a major rice importer.

FAO has revised India's wheat imports in 2007/08 to 3 million tonnes, up one million tonnes over its May forecast, but much lower than 6.5 million tonnes of imports a year ago.

But FAO said the forecast for India's wheat purchases were  tentative as much would depend on the final outcome of this year's harvest and price developments in the domestic market.

India's state-run State Trading Corporation this month scrapped a tender for one million tonnes of wheat imports on high prices.

FCI has procured 10.79 million tonnes of wheat as on June 11, compared with a total procurement of  9.23 million tonnes last year.

India's wheat production for 2006/07 is seen at 73.70 million tonnes compared with 69.35 million tonnes, as per latest government data.

India's Farm Minister Sharad Pawar recently said India would import 5 million tonnes of the grain between August and December to build large buffer stocks. Reuters