By Rajendra Jadhav
MUMBAI (Reuters) - India's rice exports are set to ease from October as the world's biggest shipper of the grain boosts guaranteed prices that farmers receive for much of their crop, making new season cargoes expensive compared to supply from rival growers.
Lower exports would mean that India loses market share in key Asian and African markets, traders and industry sources said, with exports from countries such as Thailand, Vietnam and Myanmar likely to fill any gaps.
India on Wednesday raised prices paid to local farmers for common grade paddy rice by 13 percent from a year ago to 1,750 rupees ($25.50) per 100 kg, with Prime Minister Narendra Modi looking to woo millions of rural poor ahead of a general election next year.
The government typically buys more than a third of the country's rice output at a fixed price, which also has a direct impact on prices paid by traders.
Exporters were this week offering Indian 5 percent broken parboiled rice at $388-$392 per tonne on a free on board (FOB) basis, nearly the same as prices quoted by Thai exporters.
But the hike in guaranteed price will force Indian exporters to offer the new season crop at around $430 from October, making exports uncompetitive, a dealer said. He declined to be identified as he was not authorised to speak with media.
And Indian states like Chhattisgarh could announce additional payments to farmers on top of the prices fixed by the central government, industry officials said.
"Chhattisgarh could announce a bonus of around 200 to 300 rupees (per 100kg). This will further widen the gap between local and international prices," said a Mumbai-based dealer with a global trading firm.
However, Rao of REA said that the government could eventually be forced to incentivise more overseas rice sales as its storage gets closer to capacity.
(Reporting by Rajendra Jadhav; Editing by Joseph Radford)
(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)