India's first successful wheat delivery to Iraq since 2001 was discharging at Umm Qasar port on Wednesday, raising hopes for more shipments in the future, traders and industry officials said.

A New Delhi-based firm, Priyanka Overseas Ltd, began discharging its 22,000-tonne cargo after the Iraqi Grain Board issued a letter approving the quality of the wheat early this week, they said.

Several Indian firms won contracts in 2001 to supply 600,000 tonnes of wheat to Iraq under the UN oil-for-food programme.

But Iraq rejected the Indian cargoes until now, saying the grain did not meet quality standards. India overcame the objections by setting up cleaning facilities at some of its ports to get rid of grain impurities.

"We are discharging the cargo from today. It's a big break for Indian exporters," R K Jain, managing director of Priyanka Overseas Ltd, told Reuters.

Priyanka's vessel, which sailed from Kandla Port, had to wait nearly two weeks before Iraqi authorities approved it, he said.

"The delay was caused by a spate of holidays and some problem associated with fumigation of the wheat," Jain said.

Iraq has faced a supply squeeze after drought-curtailed exports from Australia, one of its suppliers. But that could provide Indian exporters with opportunities, traders said.

"We will be shipping another cargo in about 15 days. Our success may also prompt others to export to Iraq," Jain said. Priyanka has contracts to supply 90,000 tonnes of wheat to Iraq.

But traders said transport bottlenecks and unclear government policies on wheat could hamper shipments of any significant quantity of the grain to Iraq.

"There is no doubt sales to Iraq are lucrative. But logistics and non-availability of wheat from the government will put a spoke in the wheel," said Premdas Nair, vice president of Vishal Overseas Export Ltd.

Vishal has contracts to supply 70,000 tonnes of wheat to Iraq and Nair said the firm was already looking for a vessel to ship a small cargo of about 12,000 tonnes.

Traders said threat of a war on Iraq was not likely to discourage exporters since Iraq was paying a high price for Indian wheat.

They said the Indian deals with Iraqi Grain Board have been struck around $243 per tonne for delivery to specified silos. This compares with current Indian prices C&F Dubai of $136-$138 a tonne.