The source said the Indian government is "considering exports of wheat to Iran" presently.
India, one of Iran's largest oil clients, aims to cut the trade imbalance which is currently tilted towards Tehran. Exports from the South Asian nation accounted for about $2.8 billion versus imports of about $11 billion in 2010/11, according to government data.
India earlier this year decided to try to settle 45 percent of its oil trade with Tehran in the rupee by settling payment for Indian exporters without the involvement of foreign banks.
Ministers will soon meet to decide on government to government deals for wheat to other countries as well, the source said, adding the meeting will also consider giving export incentives for wheat due to lower global prices.
The source said ministers would also decide the price India will offer for its wheat.
Bumper harvests since 2007 have swelled stocks at government warehouses, forcing a state-run grain procurement agency to store extra stocks under tarpaulin.
Grains stored in open fields are vulnerable to rot and decay, inviting criticism from the opposition as hunger is endemic among the country's 500 million poor.
Despite the government's decision last September to lift a four-year old ban on wheat exports, unattractive global prices have hobbled large-scale shipments. Exporters have sold only around 830,000 tons of wheat since exports were allowed.
To sort out the issue of unmanageable stocks and agree on exports, Prime Minister Manmohan Singh early this month set up a committee under his top economic adviser C. Rangarajan who has now favored some exports with incentives.
Food Minister K. V. Thomas on May 10 said the government was considering selling wheat to states in Africa, the Middle East and neighbors such as Afghanistan and Pakistan.
Wheat stocks at government warehouses on May 1 were 38.2 million tons, more than nine times the official target of 4.0 million tons for the quarter ending June 30.
Iran has not bought Indian wheat in more than a decade over quality issues, but now the situation seems different as other buyers say they do not have any issue over the quality.