MUMBAI: Indian sugar futures edged higher on Tuesday on bargain buying, driven by expectations that the government will raise tax on imports of the sweetener to protect local mills, though rising inventory and sluggish demand capped the rise.
As of 0903 GMT, the benchmark February sugar contract on the National Commodity and Derivatives Exchange was up 0.4 percent at 3,289 rupees ($60.03)per 100 kg.
"Mills are slowly cutting prices, but demand is still not improving. The demand from north Indian buyers has declined," said a Delhi-based dealer.
Sugar eased by 6 rupees to 3,257 rupees per 100 kg at the Kolhapur spot market in top-producing Maharashtra state.
Demand for sugar from bulk consumers like soft-drink and ice-cream makers usually drops during winter.
"Mills can't pay farmers the promised price for cane if sugar prices fall further.
There is a need to raise duty on imports and the government may do it soon," the dealer said.
Sugar mills' production cost rose this year after they agreed to pay farmers a higher price for cane.
Indian sugar mills produced 4.9 million tonnes between Oct. 1 and Dec. 15, up 2 percent from a year earlier.
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