By Arpan Mukherjee

  Of DOW JONES NEWSWIRES


  NEW DELHI (Dow Jones)--India's decision to lower the floor price for exports
of basmati or aromatic rice won't affect trade volumes this fiscal year because
sales into foreign markets are commanding far higher prices, but those prices
may increase the size of the basmatic crop next year, industry officials said.

  Exports from India, a major supplier of globally-traded rice, may not rise
significantly from an earlier estimate of 2 million-2.5 million metric tons in
the current fiscal year to March 2010, they said. India exported 1.5 million
tons of basmati in fiscal 2008-09.

  The federal government late last week lowered the export floor price for
basmati rice to $800 per metric ton from $1,100/ton, but an industry official
said the request to lower the floor was made by the industry six months ago,
when rival Pakistan was selling basmati at $800-$900/ton, nearly $300 less than
Indian prices at the time.

  In the past few days, the average price of Indian basmati export contracts
was $1,275/ton, said Rajesh Paharia, a Delhi-based official with an
agricultural commodity exporter. The last recent basmati export deal from India
was signed at $1,500/ton with an importer in Iran, industry officials said.
Demand for basmati rice has picked up in the last six months from overseas
markets such as Middle East and Iran.

  Meanwhile, higher income from basmati rice sales has encouraged farmers in
Punjab, a key grain-growing state, to sow more of this variety despite lower
yields.

  Basmati output in 2009-10 could increase by a third on year to 4 million
tons, partly because the crop needs less water than non-basmati varieties, and
the monsoon rains have been weak this year. India harvested of 3 million tons
of basmati rice in fiscal 2008-09, when total rice production was 99.15 million
tons.

  Industry officials fear that lowering of the floor price may lead to some
dubious traders mixing non-basmati rice with cheaper basmati grades for export,
as it can be hard to distinguish between them. Exports of more widely consumed
non-basmati rice were banned two years ago to ensure sufficient local stocks.