The government is considering raising import duty on sugar to 60 per cent from the current 40 per cent to restrict cheap shipments and maintain domestic prices.
Any fall in local prices will affect millers capacity to pay cane dues to growers.
In view of lower sugar output estimated during the current 2016-17 marketing year, the government had in April allowed import of 5 lakh tonnes of raw sugar at zero duty to boost domestic supply.
"We are monitoring global price movement closely. Prices in the international market are falling and some traders are keen to import even at high customs duty. So, we are considering raising import duty," a senior Food Ministry official told PTI.
Higher duty will be imposed the moment there is further fall in global sugar prices to ensure cheap imports do not put pressure on domestic retail prices, which at present are ruling steady at Rs 40-50 per kg across the country.
Already, 5 lakh tonnes of sugar have been contracted at zero duty and most of it has already arrived, the official said, adding imports were allowed to ensure there are enough supplies in the domestic market.
While the annual sugar demand is about 24-24.5 million tonnes, the domestic output in the 2016-17 season ending October is pegged at little over 21 million tonnes and there is cushion of previous years stock.
Asked about more imports being undertaken at 40 per cent customs duty, the official said there are some reports that additional 3 lakh tonne of sugar has been contracted from Brazil and is on the way.
However, the official said, "It is normally imported by refiners for re-export. I dont think it is for domestic use. If contracted for domestic consumption, the shipments will only arrive in next 45 days and whatever taxes ruling then need to be paid."
Meanwhile, the government has asked the industry to maintain the gap between global and domestic prices so that traders are not incentivised to import. "If there are more supplies, then sugar prices will come under pressure," the official said.
Global prices of raw sugar have fallen to below 13 cents per pound at present when compared with 16-17 cents per pound four months back, as per trade data.
The weak trend in international rates is because of excess supplies on account of Indias policy of not importing the sweetener plus Brazil planning not to use cane for ethanol, analysts said.
The traders who were holding sugar stocks anticipating India will import have started offloading, pulling down the prices, they added.
In India, wholesale price of sugar is ruling above Rs 32, which is viable for mills, the official said, adding that there is healthy margin for millers to make cane dues to growers.