The allocation is more than traders' expectations of around 2 million tonnes. The market was waiting for government permission for nearly two months as supplies dwindled at the tail end of the wheat marketing year even as demand surged.
"There's this consensus that bulk users will be allowed to buy up to 3 million tonnes of wheat from government stocks," said the official who did not wish to be named in line with official rules.
Wheat prices in India, the world's biggest consumer of the grain, are scaling new peaks, as farmers and traders have run out of stocks.
On Wednesday, wheat prices in the Indore market - a benchmark - jumped to a record ₹29,821 ($365.61) a tonne, up nearly 9% so far this month after rising 37% in 2022.
In New Delhi, wheat prices rose nearly 1.5% to a record ₹32,500.
India banned exports in May 2022 after a sudden rise in temperatures clipped output, even as exports picked up to meet the global shortfall triggered by Russia's invasion of Ukraine.
Traders say record-high wheat prices despite the export ban indicate a far bigger drop in last year's output.
According to government estimates, wheat output fell to 106.84 million tonnes in 2022 from 109.59 million tonnes a year earlier.
"In a fortnight, prices have jumped by around ₹300. The government decision could bring down prices, but a big correction is unlikely," said a New-Delhi-based dealer with a global trade house.
"Record high prices forced many flour mills to close operations, and now they would be fighting for the allocation to secure supplies from the 3 million tonnes of quota for bulk users," he said.
