Govt to ban exports of wheat products - report

Labourers remove dust from wheat at a grain market in the northern Indian city of Chandigarh June 22, 2010.

NEW DELHI (Reuters) - The government may ban wheat product exports in a series of measures to tame spiralling food prices that have fuelled rapid inflation and increased pressure on an embattled ruling Congress party, local media said.

India currently allows upto 650,000 tonnes of wheat product exports until March 31.

Prime Minister Manmohan Singh is expected to announce measures including banning the export of wheat products and removing essential commodities from the futures market after a cabinet meeting on Thursday, the Press Trust of India reported without naming its sources.

Traders say banning exports of wheat products would not help tame food inflation, as the country has huge wheat stocks.

On Jan. 1, India's wheat stocks were at 21.5 million tonnes against a target of 8.2 million tonnes.

Analysts say food inflation is largely stoked by soaring vegetable and dairy prices.

"Not much is happening on the wheat product export front as inconsistency in its export policy hold us from entering into long-term export contracts," Veena Sharma, secretary of the Roller Flour Millers Federation of India, told Reuters.

Food inflation in the year to Jan. 1 stood at 16.91 percent, data on Thursday showed, easing marginally from 18.3 percent recorded in late December, which was the highest in more than a year.

High food inflation is a major headache for a government already battling multi-billion dollar corruption cases that have emboldened the opposition.

Rising prices of vegetables including onions and dairy products could threaten the Congress party's chance in elections in states like West Bengal and Tamil Nadu that are key for Singh's coalition to keep a majority in parliament.

India, which has already suspended wheat exports since 2007, banned onion exports last month after prices rose by 83 percent since June, the Economic Times reported, forcing the government to request imports from neighbouring Pakistan.

(Reporting by Henry Foy and Ratnajyoti Dutta; editing by Malini Menon)