India, the world's biggest producer after Brazil, imposes a 10 percent tax on overseas purchases of sugar currently.

The proposal to remove the duty on raw sugar imports is in contrast to expectations that it would be retained despite a drop in output this year due drought in some cane growing areas.

Thomas said a final call on the import duty would be taken by the cabinet after consulting farm and trade ministries.

"The cabinet may consider this in the next 10-15 days," he told reporters, after meeting visiting Malaysian farm minister Datuk Seri Noh Bin Omar.

Expectations of lower output prompted Indian mills to strike an import deal for 5,000 tonnes from Pakistan, fanning speculation that the country could waive an import tax to boost local supplies.

India, the world's biggest consumer, is likely to produce 23.5-24 million tonnes in 2012/13, down from about 26 million tonnes in the previous year.

But supply of the sweetener is unlikely to fall short of demand and India should have 6 million tonnes of carry over stocks, according to the Indian Sugar Mills Association (ISMA), helping to cover annual demand of around 22-23 million tonnes.

At 0539 GMT, the key November sugar contract on the National Commodity and Derivatives Exchange (NCDEX) was quoted at 3,336 Indian rupees ($63.1) per 100 kg, down 0.18 percent.  India has exported sugar in the last two seasons after a severe drought in 2009 forced it to turn to imports, sending global prices to 30-year highs.

Separately, Thomas said India, which has been sitting on a huge grain surplus, could sell wheat to Malaysia from government warehouses.