April 23 (Bloomberg) -- India's record rice and wheat harvests may not be enough to ensure food security in the world's second-most populous nation because about 10 percent of the crop is lost to pests or rots in inadequate warehouses.

Agriculture Secretary P.K. Mishra yesterday said production of food grains may rise 4.6 percent to an estimated 227.3 million metric tons in the year ending June 30. About 20 million tons of wheat, rice and lentils, the equivalent of Canada's annual wheat crop, is eaten by rats and birds or spoils.

Governments across Asia are clamping down on exports and encouraging imports of staple foods to secure domestic supplies, prevent social tension and ease inflation which is near a three- year high in India. Rice, wheat, corn and soybeans reached records this year.

``I agree that post-harvest capacity needs to be given more focus,'' Mishra said in New Delhi after announcing crop forecasts. ``Some areas have good facilities and some areas don't.''

The lack of silos and secure warehouses in India, the world's second-biggest producer of wheat and rice, is hindering government efforts to curb inflation, which has doubled in the last four months to 7.14 percent in the week ended April 5, fueled by a global spurt in food and commodity prices.

``It's a problem of plenty and the government should modernize its warehouses and transportation system,'' said Devinder Sharma, chairman of the New Delhi-based farm lobby group Forum for Biotechnology and Food Security. ``There is a huge pressure because of international prices and now is the time to address this issue.''

Private Investments

Companies such as Adani Enterprises Ltd., the country's biggest private farm goods exporter, may seek opportunities to expand storage capacities. Adani has silos that store about 650,000 tons of wheat for state-run Food Corp. of India, the nation's biggest buyer of food grains.

``The government should encourage private investments in creating infrastructure for handling of agricultural commodities,'' Atul Chaturvedi, president of Adani Enterprises, said yesterday by phone from the western Indian city of Ahmedabad. ``In this scenario India can't afford to lose crops.''

Rice, the staple food for half the world, has more than doubled to a record in the past year after countries including Vietnam, China, Egypt and India reduced exports to ensure local supplies and to control rising food costs.

Rice Prices

Rough rice for July delivery rose as much as 2.3 percent to $24.745 per 100 pounds in after-hours electronic trading on the Chicago Board of Trade and traded at $24.48 at 12:02 p.m. Singapore time. The contract has gained 77 percent this year.

India's wheat output may climb to 76.8 million tons this year, Mishra said. That's more than the 74.8 million tons estimated in February and up from 75.8 million tons last year.

Rice output may rise to a record 95.7 million tons, from 94.1 million tons estimated on Feb. 7, he said. That's 2.5 percent more than the 93.6 million tons produced a year earlier.

State-run companies and cooperatives have a capacity to hold about 109.2 million tons and need an additional 35 million tons of space to fill the gap, according to a report prepared for India's Planning Commission.

Of India's total production, about 60 percent is retained and stored by farmers for consumption, use as seed and payment of wages to laborers, the report by the working group on agricultural marketing infrastructure and policy said.

About 30 percent of total farm produce in India is stored in the open, resulting in wastage and distress sales. The group has recommended spending 76.9 billion rupees ($1.9 billion) on creating storage capacity of 35 million tons and another 157.1 billion rupees to build a network of refrigerated stores to hold 4.5 million tons.

Grains kept by farmers are typically stored in rooms, bamboo structures, wooden or mud bins and underground structures and are prone to damage by rats and insects, the group said.

To contact the reporter on this story: Pratik Parija in New Delhi at pparija@bloomberg.net; Subramaniam Sharma in New Delhi at ssharma@bloomberg.net

Last Updated: April 23, 2008 00:15 EDT