India to Raise Wheat Price by 5%, Approves Additional Exports

India, the world’s second-biggest wheat producer, will raise the minimum price the government pays farmers for the grain by 5 percent next year, and also approved an additional 2.5 million metric tons of exports.

The government will increase its wheat purchase price to 1,350 rupees ($24.61) per 100 kilograms (220 pounds) for the marketing year starting April 1, from 1,285 rupees this year, Finance Minister P. Chidambaram told reporters after a cabinet meeting today.

The decision may boost local wheat prices unless the government sells more grain in the open market at subsidized rates, said Veena Sharma, secretary of Roller Flour Millers Federation of India. “Any increase in local prices will make India uncompetitive in overseas markets,” she said.

The government approved extra wheat exports from state stockpiles, Chidambaram said. India on July 3 had already allowed shipments of 2 million tons from official reserves.

Wheat exports by private traders totaled about 4 million tons and overseas sales from state reserves were 1.23 million tons as of Dec. 24, after the country scrapped a ban on exports in September 2011, according to government data.

Wheat planting for next year’s harvest fell to 25.3 million hectares (62.5 million acres) as of Dec. 21, compared with 25.7 million hectares sown a year earlier, according to the farm ministry.

To contact the reporters on this story: Prabhudatta Mishra in New Delhi at pmishra8@bloomberg.net; Pratik Parija in New Delhi at pparija@bloomberg.net

To contact the editor responsible for this story: Jake Lloyd-Smith at jlloydsmith@bloomberg.net